4/10/04 The Truth Does Not Cease Firing
Former Army Chief of Staff Gen. Eric Shinseki in his last year’s farewell speech: “Beware the 12-division strategy for a 10-division Army. Our soldiers and families bear the risk and the hardship of carrying a mission load that exceeds what force capabilities we can sustain, so we must alleviate risk and hardship by our willingness to resource the mission requirements.” According to Defense Department statistics, two soldiers died yesterday in Iraq. More than 200 U.S. personnel have been injured in combat in the last 24 hours. This week 42 U.S. soldiers have been killed in this war called Iraqi Freedom. This week our fighting troops incurred the biggest losses in such a short time since our March 2003 invasion. British Foreign Secretary Jack Straw stated “there is no doubt that the current situation is very serious, and it is the most serious that we have faced.” Yesterday, U.S. Central Command chief Gen. John Abizaid requested more forces for Iraq. About 3,300 U.S. troops have been wounded in combat since the war began. It was ill-advised for our Commander-in-Chief to leave mid-week for Crawford, Texas for an Easter holiday. The last time I checked the White House lawn was large enough for an Easter egg hunt.
The labor force in Santa Clara County, heart of the Silicon Valley, has declined to its lowest level in more than 8 years, according to the figures released Friday by the California EDD. Since August 2000, the latest labor pool statistics for the county shows there are 145,300 fewer people in the work force. In March, the number of people unemployed in the state of California rose by 28,000 over February.
Yesterday, Boeing stated that it reduced employment in the state of Washington by 194 in March. As of April 1, they employ 53,0333 in the state. In June 1998, Boeing employed 104,000 in the state. For close to three years, Boeing has experienced monthly employment declines.
In the past three months, non-petroleum import prices have risen at close to a 6% annual rate. Over the past year the CRB has risen by 40%. Toyota stated they would raise prices by up to $500 on certain models. In March, the Economic Cycle Research Institute’s Future Inflation Gauge increased from –2.2% to 3.3%. The one bright spot is the minimal increase in unit labor cost.
Yesterday the U.S. markets were closed. Many might have missed the new AP-Ipsos Consumer Confidence Index. From a reading of 97.7 in early March, it dropped this week to 84.8. The reading was the lowest since October, and only slightly higher than the 83.8 reading one year ago. The “jobs gauge” dropped to 100.3 in early April from 95.2 in March. Consumers’ feelings about economic expectations over the next six months fell to 90.5 in early April from 95.2 in March. April’s index reading was based on interviews with 1,000 adults about the economy.
Friday, April 09, 2004
4/9/04 Downsizing In The Workplace
William Baumol, Alan Blinder, and Edward Wolff have written a new book entitled “Downsizing in America.” The authors make some important observations. They stated that, of the 100 million men and women with full-time jobs in 2001, more than half earned less than $35,000; 84% earned under $65,000; 10% made between $65,000 and $100,000; and only 5.7% made above $100,000. In addition, they note that, in two-thirds of households with wage earners, the workers hold two or more jobs. For families with children, two-thirds of the mothers work. However, fewer than half the households have adults with two full-time jobs. There are serious implications resulting from the trends towards less full-time jobs, the average weekly work hours declining, weekly paychecks declining, and benefits dwindling.
House Democratic Leader Nancy Pelosi: “The Republican leadership in the House refuses to schedule a vote on the bipartisan Crane-Rangel manufacturing bill, which would lower taxes for American manufacturers and keep good paying jobs in the United States. The Bush Administration needs to take concrete action to level the playing field with China, give our manufacturers the tax relief they deserve, and reward those companies that create jobs here in America, rather than sending them overseas.”
The United States Senate passed a bill that did not provide meaningful relief for all pension plans. They excluded multi-employer plans covering 10 million working Americans. Only twelve Democrats and seven Republicans voted against this legislation. Why should the retirement security of union workers covered by multi-employer plans be treated differently from others in the workplace? Is this a sign of compassionate conservatism? Maybe the failure to extend unemployment benefits for millions of Americans is a sign of compassionate conservatism on the part of the administration.
Sen. Don Nickles, a Republican from Oklahoma, chairs the Senate Budget Committee. As previously discussed, Brian Roseboro, acting under secretary for domestic finance, stated in February that the nation’s debt limit of $7.384 trillion would need to be raised sometime around June or so. Nickles and his committee have been discussing a plan for a limited debate in which the debt limit would be increased by $664 billion. In other words, we can downsize the quality and the amount of jobs in the workplace while we upsize governmental spending and the nation’s debts. That sounds like a great recipe for disaster. I hope the voters have an intelligent exit strategy.
According to a new report from the business intelligence firm Cutting Edge Information, only one out of every 1,000 drug candidates that make it to pre-clinical development is deemed promising enough to advance to human clinical trials. On average, commercial spending for pre-clinical drugs reaches $1.5 million. Cutting Edge stated “marketing spending from pre-clinical through Phase IIIa comprises 21% of total commercial spending. Launch, Phase IIIb, and Phase IV account for 79% of all marketing dollars.”
According to the Association of Hispanic Advertising Agencies (AHAA), the Hispanic advertising industry grew almost 10% in 2003 and is expected to grow further in 2004. While Hispanics represent 13% of the U.S. population, the Hispanic market receives only about 3.2% of total advertising spending. However, Hispanics have a buying power estimated at more than $630 billion.
The Travel Industry Association of America’s study found that Hispanic travel increased by 20% from 200-2002 and is growing 10 times the overall rate for the traveling population as a whole. The TIAA study indicated that 33% of all Hispanic trips included three or more people from the same household. Hispanics are significantly more likely to use bus and rail transportation for travel. Approximately 15% of Hispanic households spends $1,000 or more on trips, over and beyond transportation to their destination. In addition, 34% state shopping is the favored activity for Hispanic travelers.
Microsoft CEO Steve Ballmer: “I think that as long as there are a handful or less of operating systems that are popular, hackers will figure out how to attack each and every one of them, because there will be a profit to be made, national security interests to be pursued, and mischief to be done.”
The U.S. military announced that six troops died Wednesday and yesterday, bringing to at least 36 the number killed in combat since Sunday in Iraq.
Bush received a classified briefing from the CIA on Aug. 6, 2001 entitled “Bin Laden determined to attack inside the United States.” Rice stated she was not briefed prior to 9/11 about terrorists’ plans to use airplanes as missiles before 9/11. In fact, there were 12 previous intelligence reports and one explicitly stated “Islamic terrorists might attempt to kill world leaders by crashing an airliner.” In January 2004, Rice told the 9/11 Commission she “regretted” her earlier denials and did “misspeak.” However, on March 22, Rice wrote in the Washington Post “we received no intelligence that terrorists were preparing to attack the homeland using airplanes as missiles.” Misspeaking must be a virus within administration inner circles.
Due to the upcoming merger of Giant Food and Stop & Shop Supermarket, 650 employees at Giant’s Landover headquarters will be either cut or relocated. The cuts will be completed by the end of May.
Infosys Technologies of Bangalore, a large Indian outsourcing firm, will invest $20 million to create Infosys Consulting . They plan to hire 500 workers at its Fremont, California headquarters and other locations over the next three years.
Boeing is considering selling its fuselage and cockpit assembly plant in Wichita and facilities in Tulsa and McAlaster, Oklahoma. The company employs 12,400 in this region. Boeing continues in its efforts to downsize.
William Baumol, Alan Blinder, and Edward Wolff have written a new book entitled “Downsizing in America.” The authors make some important observations. They stated that, of the 100 million men and women with full-time jobs in 2001, more than half earned less than $35,000; 84% earned under $65,000; 10% made between $65,000 and $100,000; and only 5.7% made above $100,000. In addition, they note that, in two-thirds of households with wage earners, the workers hold two or more jobs. For families with children, two-thirds of the mothers work. However, fewer than half the households have adults with two full-time jobs. There are serious implications resulting from the trends towards less full-time jobs, the average weekly work hours declining, weekly paychecks declining, and benefits dwindling.
House Democratic Leader Nancy Pelosi: “The Republican leadership in the House refuses to schedule a vote on the bipartisan Crane-Rangel manufacturing bill, which would lower taxes for American manufacturers and keep good paying jobs in the United States. The Bush Administration needs to take concrete action to level the playing field with China, give our manufacturers the tax relief they deserve, and reward those companies that create jobs here in America, rather than sending them overseas.”
The United States Senate passed a bill that did not provide meaningful relief for all pension plans. They excluded multi-employer plans covering 10 million working Americans. Only twelve Democrats and seven Republicans voted against this legislation. Why should the retirement security of union workers covered by multi-employer plans be treated differently from others in the workplace? Is this a sign of compassionate conservatism? Maybe the failure to extend unemployment benefits for millions of Americans is a sign of compassionate conservatism on the part of the administration.
Sen. Don Nickles, a Republican from Oklahoma, chairs the Senate Budget Committee. As previously discussed, Brian Roseboro, acting under secretary for domestic finance, stated in February that the nation’s debt limit of $7.384 trillion would need to be raised sometime around June or so. Nickles and his committee have been discussing a plan for a limited debate in which the debt limit would be increased by $664 billion. In other words, we can downsize the quality and the amount of jobs in the workplace while we upsize governmental spending and the nation’s debts. That sounds like a great recipe for disaster. I hope the voters have an intelligent exit strategy.
According to a new report from the business intelligence firm Cutting Edge Information, only one out of every 1,000 drug candidates that make it to pre-clinical development is deemed promising enough to advance to human clinical trials. On average, commercial spending for pre-clinical drugs reaches $1.5 million. Cutting Edge stated “marketing spending from pre-clinical through Phase IIIa comprises 21% of total commercial spending. Launch, Phase IIIb, and Phase IV account for 79% of all marketing dollars.”
According to the Association of Hispanic Advertising Agencies (AHAA), the Hispanic advertising industry grew almost 10% in 2003 and is expected to grow further in 2004. While Hispanics represent 13% of the U.S. population, the Hispanic market receives only about 3.2% of total advertising spending. However, Hispanics have a buying power estimated at more than $630 billion.
The Travel Industry Association of America’s study found that Hispanic travel increased by 20% from 200-2002 and is growing 10 times the overall rate for the traveling population as a whole. The TIAA study indicated that 33% of all Hispanic trips included three or more people from the same household. Hispanics are significantly more likely to use bus and rail transportation for travel. Approximately 15% of Hispanic households spends $1,000 or more on trips, over and beyond transportation to their destination. In addition, 34% state shopping is the favored activity for Hispanic travelers.
Microsoft CEO Steve Ballmer: “I think that as long as there are a handful or less of operating systems that are popular, hackers will figure out how to attack each and every one of them, because there will be a profit to be made, national security interests to be pursued, and mischief to be done.”
The U.S. military announced that six troops died Wednesday and yesterday, bringing to at least 36 the number killed in combat since Sunday in Iraq.
Bush received a classified briefing from the CIA on Aug. 6, 2001 entitled “Bin Laden determined to attack inside the United States.” Rice stated she was not briefed prior to 9/11 about terrorists’ plans to use airplanes as missiles before 9/11. In fact, there were 12 previous intelligence reports and one explicitly stated “Islamic terrorists might attempt to kill world leaders by crashing an airliner.” In January 2004, Rice told the 9/11 Commission she “regretted” her earlier denials and did “misspeak.” However, on March 22, Rice wrote in the Washington Post “we received no intelligence that terrorists were preparing to attack the homeland using airplanes as missiles.” Misspeaking must be a virus within administration inner circles.
Due to the upcoming merger of Giant Food and Stop & Shop Supermarket, 650 employees at Giant’s Landover headquarters will be either cut or relocated. The cuts will be completed by the end of May.
Infosys Technologies of Bangalore, a large Indian outsourcing firm, will invest $20 million to create Infosys Consulting . They plan to hire 500 workers at its Fremont, California headquarters and other locations over the next three years.
Boeing is considering selling its fuselage and cockpit assembly plant in Wichita and facilities in Tulsa and McAlaster, Oklahoma. The company employs 12,400 in this region. Boeing continues in its efforts to downsize.
Thursday, April 08, 2004
4/8/04 Back To The Future And The Present
This year the budget deficit of $521 billion will exceed 4% of the GDP. In 1988, the budget deficit was 3.1% of our GDP. In 1988, the Business Roundtable stated the budget deficit “posed a major threat to sustained economic growth.”
In the last 24 months, freight rates for the Asia-U.S.A. route have jumped 29% and rates between Asia and Europe have climbed 54% during this period.
Penny de Valk, a director of Ceridian in the UK: “Employers need to include the eldercare needs of employees in their work/life strategies now or risk a generation of workers who will cost their businesses billions in lost productivity and stress.”
Yesterday, Moody’s raised its rating on non-yen government bonds. Last month, Japan’s foreign exchange reserves rose by about $50 billion to a record $827 billion.
For the last week, the Labor Department stated 31 states and territories reported a decrease in new unemployment claims and that 22 reported an increase. It should be noted that, last week about 80,000 previously counted as unemployed, were dropped from those unemployment rolls due to the loss of benefits.
When jobs are outsourced and jobs leave our country, there are less employee tax contributions to Social Security, Medicare, workers’ compensation, and other payroll-deduction funds. Some argue that the net impact is to harm tax coffers. It should be noted, for example, that corporate profits do not make their way into Social Security. It might be wise to understand the pluses and minuses of outsourcing and offshoring.
The Citizens Against Government Waste released their annual “Pig Book” yesterday. The organization stated that 10,656 pork projects were included in the 13 appropriations bills outlining federal spending for 2004, a 13% increase over 2003. There is a record $22.9 billion spending on so-called earmarks for members. I suggest we dismember the members earmarking pork projects. The voters need to act responsibly in the voting booth.
According to an annual AAA study, the average cost of driving a new passenger car in 2004 is 56.2 cents per mile or $8,431 per year. The largest component of the vehicle cost is depreciation estimated at $3,782 per year of ownership for an average new car. The IRS tax allowance for business mileage is currently 37.5 cents per mile.
According to the Cambridge Credit Index, nearly seven out of ten Americans who already have received or anticipate receiving a tax refund this tax season plan to spend it on everyday items or pay bills, up from 59% in 2003. Only 23% plan to save their refunds in their bank accounts, down from 27% in the prior year. Only 4% plan to invest the refund in stocks, bonds, or mutual funds, the same percentage as in 2003.
There is an increasing number of workers having to settle for part-time employment. This has implications for the average weekly paycheck, the average weekly hours worked, the lack of benefits, and other critical matters. When the workplace cannot accommodate the number of workers entering the labor force, it would behoove us to re-think our structural make-up. While we make war in Iraq, Mexico is creating a trade accord with Japan, India is creating business alliances with China, and other global unions are being formed. This administration lacks business- negotiating skills and our exports are suffering. U.S. plants are constructed outside of our borders. Plants are closing within our borders. Change is required, and it must happen quickly.
This year the budget deficit of $521 billion will exceed 4% of the GDP. In 1988, the budget deficit was 3.1% of our GDP. In 1988, the Business Roundtable stated the budget deficit “posed a major threat to sustained economic growth.”
In the last 24 months, freight rates for the Asia-U.S.A. route have jumped 29% and rates between Asia and Europe have climbed 54% during this period.
Penny de Valk, a director of Ceridian in the UK: “Employers need to include the eldercare needs of employees in their work/life strategies now or risk a generation of workers who will cost their businesses billions in lost productivity and stress.”
Yesterday, Moody’s raised its rating on non-yen government bonds. Last month, Japan’s foreign exchange reserves rose by about $50 billion to a record $827 billion.
For the last week, the Labor Department stated 31 states and territories reported a decrease in new unemployment claims and that 22 reported an increase. It should be noted that, last week about 80,000 previously counted as unemployed, were dropped from those unemployment rolls due to the loss of benefits.
When jobs are outsourced and jobs leave our country, there are less employee tax contributions to Social Security, Medicare, workers’ compensation, and other payroll-deduction funds. Some argue that the net impact is to harm tax coffers. It should be noted, for example, that corporate profits do not make their way into Social Security. It might be wise to understand the pluses and minuses of outsourcing and offshoring.
The Citizens Against Government Waste released their annual “Pig Book” yesterday. The organization stated that 10,656 pork projects were included in the 13 appropriations bills outlining federal spending for 2004, a 13% increase over 2003. There is a record $22.9 billion spending on so-called earmarks for members. I suggest we dismember the members earmarking pork projects. The voters need to act responsibly in the voting booth.
According to an annual AAA study, the average cost of driving a new passenger car in 2004 is 56.2 cents per mile or $8,431 per year. The largest component of the vehicle cost is depreciation estimated at $3,782 per year of ownership for an average new car. The IRS tax allowance for business mileage is currently 37.5 cents per mile.
According to the Cambridge Credit Index, nearly seven out of ten Americans who already have received or anticipate receiving a tax refund this tax season plan to spend it on everyday items or pay bills, up from 59% in 2003. Only 23% plan to save their refunds in their bank accounts, down from 27% in the prior year. Only 4% plan to invest the refund in stocks, bonds, or mutual funds, the same percentage as in 2003.
There is an increasing number of workers having to settle for part-time employment. This has implications for the average weekly paycheck, the average weekly hours worked, the lack of benefits, and other critical matters. When the workplace cannot accommodate the number of workers entering the labor force, it would behoove us to re-think our structural make-up. While we make war in Iraq, Mexico is creating a trade accord with Japan, India is creating business alliances with China, and other global unions are being formed. This administration lacks business- negotiating skills and our exports are suffering. U.S. plants are constructed outside of our borders. Plants are closing within our borders. Change is required, and it must happen quickly.
Wednesday, April 07, 2004
4/7/04 A Portfolio Addition
I often lose track of time. It’s been about two years since turning bearish on the U.S dollar and adding New Zealand dollars to the portfolio. Several months ago, we added an initial position in the rupee. I am suggesting we take a significant long-term holding in the rupee. Yesterday, some of our thoughts were reinforced by Moody’s Investors Service stating that India’s economy is likely to grow at a 6.5% rate in the coming years. Just three months ago, the credit service gave India an investment-grade rating for the first time. Their report remarked “even at ‘just’ 6.5%, India is likely to attract much more capital going forward than has been the case historically.” India’s foreign reserves topped $112 billion U.S., nearly twice the amount the country spends on funding its annual imports, according to the latest estimates from the central bank. However, a word of caution is necessary. The consolidated gross debt of India’s federal and state governments has increased to around 85% of GDP, Moody’s stated. It should also be noted that S&P, which had revised the outlook for foreign currency rating of India from “negative” to “stable” due to the country’s improved macro-economic fundamentals, however, continued to accord India only a “sub-investment” grade status.
Mumbai-based State Bank of India, the country’s largest bank, is looking to take a major step. The bank is in the process of acquiring a bank in the U.S. It would be a first for an Indian financial institution.
IBM signed a deal late last night to acquire Daksh e-services Pvt Ltd, India’s third-largest business outsourcing firm. Delhi-based Daksh employs more than 6,000 people and offers call centers. They have more than 10 clients, including Amazon.
According to a new AARP study, 40% of all people in business for themselves are older than 50. Among self-employed workers age 51 and older, 34% have employer-provided health insurance compared with 67% of wage and salary workers of the same age.
A recent CIBC World Markets report stated “not only are better quality jobs being lost, but those without them are finding it harder to get back to work.” The result, the report observed, is that U.S. workers are either turning to self-employment options or are settling for whatever they can get in terms of paid employment.
The IBD and TechnoMetrica Market Intelligence survey stated their optimism index fell to 52.8 in April from 54.5 in March, the third straight monthly drop. The president of TIPP stated “most Americans continue to be very optimistic, but in about 30% of households, someone has either lost a job in the past 12 months or fears they might lose a job in the next 12 months.” The six-month economic outlook lost 3.1 points to 50.5.
Challenger, Gray & Christmas stated planned job cuts decreased to 68,034 in March compared with 77,250 in February. John Challenger remarked “the heavy job cutting we have seen over the past three years appears to be trending down. However, the job market seems to be in a state of limbo, where companies are eager to hold on to the people they have, but many are reluctant to create any jobs. Employers know they are far better off with a seasoned, senior staff versus the cost of acquiring and training replacements in a period when the customer is king.”
Blockbuster introduced the prepaid gift card in 1996. According to TowerGroup Research, over 92% of consumers are aware of the product. In the past year, gift card dollar volume grew 50% to $45 billion in sales. TowerGroup projects significant growth for gift cards to more than $90 billion in sales in 2007.
Gasoline at the pump reached a new all-time high of $1.77 per gallon.
Nokia warned that first quarter sales would decline 2% and that earnings would come in at the low point of the previously forecast range. With Nokia the cell phone leader, their projected sales decline should create some doubt about current valuations in the industry.
Yesterday, 18 of our soldiers were killed in Iraq. The administration has dubbed our effort Iraqi Freedom. If we close down a newspaper, do we further the cause of freedom? It is not surprising to see the reactions of the insurgents. Ted Kennedy spoke at the Brookings Institution, and stated Iraq has become “George Bush’s Vietnam” and that “this president has now created the largest credibility gap since Richard Nixon. He has broken the basic bond of trust with the American people…in this administration, truth is the first casualty of policy.” We should not forget the 18 casualties from Tuesday and the 610 before them.
Hans Blix told a Danish newspaper that the costs of the Iraq war outweighed the benefits of removing Saddam Hussein and “it’s positive that Saddam and his bloody regime is gone, but when one weighs the costs, it’s clearly the negative aspects that dominate.” I concur.
The EU warned that Germany, France, Italy, the Netherlands, Portugal, and Greece, representing 80% of the $8.5 trillion euro economy, will exceed the debt limit of 3% of GDP. In the U.S. our debt has a limit but not as a percentage of GDP. As stated yesterday, our debt limit will be reached shortly. Hopefully, the Congress will vote not to raise the current level of debt. Our president does not have married children and does not have grandchildren. As such, he may not fully appreciate current debts handed to the next generation.
I often lose track of time. It’s been about two years since turning bearish on the U.S dollar and adding New Zealand dollars to the portfolio. Several months ago, we added an initial position in the rupee. I am suggesting we take a significant long-term holding in the rupee. Yesterday, some of our thoughts were reinforced by Moody’s Investors Service stating that India’s economy is likely to grow at a 6.5% rate in the coming years. Just three months ago, the credit service gave India an investment-grade rating for the first time. Their report remarked “even at ‘just’ 6.5%, India is likely to attract much more capital going forward than has been the case historically.” India’s foreign reserves topped $112 billion U.S., nearly twice the amount the country spends on funding its annual imports, according to the latest estimates from the central bank. However, a word of caution is necessary. The consolidated gross debt of India’s federal and state governments has increased to around 85% of GDP, Moody’s stated. It should also be noted that S&P, which had revised the outlook for foreign currency rating of India from “negative” to “stable” due to the country’s improved macro-economic fundamentals, however, continued to accord India only a “sub-investment” grade status.
Mumbai-based State Bank of India, the country’s largest bank, is looking to take a major step. The bank is in the process of acquiring a bank in the U.S. It would be a first for an Indian financial institution.
IBM signed a deal late last night to acquire Daksh e-services Pvt Ltd, India’s third-largest business outsourcing firm. Delhi-based Daksh employs more than 6,000 people and offers call centers. They have more than 10 clients, including Amazon.
According to a new AARP study, 40% of all people in business for themselves are older than 50. Among self-employed workers age 51 and older, 34% have employer-provided health insurance compared with 67% of wage and salary workers of the same age.
A recent CIBC World Markets report stated “not only are better quality jobs being lost, but those without them are finding it harder to get back to work.” The result, the report observed, is that U.S. workers are either turning to self-employment options or are settling for whatever they can get in terms of paid employment.
The IBD and TechnoMetrica Market Intelligence survey stated their optimism index fell to 52.8 in April from 54.5 in March, the third straight monthly drop. The president of TIPP stated “most Americans continue to be very optimistic, but in about 30% of households, someone has either lost a job in the past 12 months or fears they might lose a job in the next 12 months.” The six-month economic outlook lost 3.1 points to 50.5.
Challenger, Gray & Christmas stated planned job cuts decreased to 68,034 in March compared with 77,250 in February. John Challenger remarked “the heavy job cutting we have seen over the past three years appears to be trending down. However, the job market seems to be in a state of limbo, where companies are eager to hold on to the people they have, but many are reluctant to create any jobs. Employers know they are far better off with a seasoned, senior staff versus the cost of acquiring and training replacements in a period when the customer is king.”
Blockbuster introduced the prepaid gift card in 1996. According to TowerGroup Research, over 92% of consumers are aware of the product. In the past year, gift card dollar volume grew 50% to $45 billion in sales. TowerGroup projects significant growth for gift cards to more than $90 billion in sales in 2007.
Gasoline at the pump reached a new all-time high of $1.77 per gallon.
Nokia warned that first quarter sales would decline 2% and that earnings would come in at the low point of the previously forecast range. With Nokia the cell phone leader, their projected sales decline should create some doubt about current valuations in the industry.
Yesterday, 18 of our soldiers were killed in Iraq. The administration has dubbed our effort Iraqi Freedom. If we close down a newspaper, do we further the cause of freedom? It is not surprising to see the reactions of the insurgents. Ted Kennedy spoke at the Brookings Institution, and stated Iraq has become “George Bush’s Vietnam” and that “this president has now created the largest credibility gap since Richard Nixon. He has broken the basic bond of trust with the American people…in this administration, truth is the first casualty of policy.” We should not forget the 18 casualties from Tuesday and the 610 before them.
Hans Blix told a Danish newspaper that the costs of the Iraq war outweighed the benefits of removing Saddam Hussein and “it’s positive that Saddam and his bloody regime is gone, but when one weighs the costs, it’s clearly the negative aspects that dominate.” I concur.
The EU warned that Germany, France, Italy, the Netherlands, Portugal, and Greece, representing 80% of the $8.5 trillion euro economy, will exceed the debt limit of 3% of GDP. In the U.S. our debt has a limit but not as a percentage of GDP. As stated yesterday, our debt limit will be reached shortly. Hopefully, the Congress will vote not to raise the current level of debt. Our president does not have married children and does not have grandchildren. As such, he may not fully appreciate current debts handed to the next generation.
Tuesday, April 06, 2004
4/6/04 Micro and Macro
Almost on a daily basis, I receive emails describing my macro views and their applicability for long-term investing; however, I’m told, since I avoid micro analysis, my musings are not particularly helpful for day-to-day and hour-to-hour and minute-to-minute traders. There is probably some truth to that theory. I am not a trader. I am an investor. The problem is most money managers manage other people’s money and not their own. They feel the pressure to perform each day. I have an intense desire to perform each day to the best of my abilities. I know my daily performance. I also attempt to position myself for the long term by anticipating future happenings and trends. I try to focus on my strengths and avoid the pitfalls. There are some who are excellent at minute-to-minute trading. However, few are successful at that endeavor. Investing for the long-term generally produces more satisfying results. This discussion is timely and brings into view today’s article in the Financial Times by Francis Bator, professor emeritus of political economy at Harvard’s Kennedy School. Entitled “Tax cuts will not rescue America,” he discussed Bush’s desire to make his tax cuts permanent. Bator states “the planned future tax cuts also pose a danger in the shorter term. The tax cuts unmatched by cuts in government consumption, together with high interest rates to prevent inflation, may not be a sustainable policy combination. Because high U.S. interest rates tend to cause the dollar to appreciate, they are likely to make an already large trade deficit larger. If borrowing to pay for the resulting excess of imports over exports means that our foreign debt keeps increasing faster than gross domestic product, our creditors are likely to get nervous. Should they try to reduce their holdings of dollar debt, or even to cut back on new lending, they might inadvertently set in motion a speculative run from the dollar.” Bator makes a point I share with great enthusiasm. He observes “barring a supply-side miracle, the president’s future tax cuts will shift the composition of spending in favor of consumption and against national investment. As a result, the economy’s capacity to produce output for our own use will grow more slowly.”
Our economy is producing output for our own use more slowly. Other nations produce for us. Our imports have swelled with the rise in our consumption, and with it, our debt levels have surged. It doesn’t matter whether one believes this is a macro or a micro view. It will have short and long-term implications. Why? The nation’s growing shift to consumption has created the rise in service sector jobs. Of the 308,000 net jobs created in March, 230,000 were in the service sector. Those are jobs at Wal-Mart, Starbucks, Walgreens, McDonald’s, Marriott, Krispy Kreme, and the like. These are not jobs at GM or IBM. I am not putting down the 1.4 million associates at Wal-Mart. However, service sector jobs, in general, pay lower wages, provide less benefits, contain less weekly hours worked, and often are characterized by greater turnover. Service sector jobs comprise 75 to 80 percent of our nation’s employment. Does this fact have an impact on micro investing? Think about it. How does it create pressures to perform? It leads to cost cutting. It leads to lower levels of investment. Wal-Mart invests heavily in IT but not in store infrastructure. They are described as big box stores. Let’s look at Arkansas in March. The state’s manufacturing base continued to decline; however, overall, the number of unemployed was down 700 from February. Of the net jobs created, food services accounted for 65% of that jump. Leisure and hospitality were also strong.
I often talk about the lack of pricing power. You have a bad situation in the auto industry. The automakers reported a March surge in buying by consumers. The companies need to rid themselves of inflated inventories. So far this year, incentives are up 35% while sales are up 4%. Would you want to own a business like that? If you invest in GM, Ford, or Chrysler, you are an owner. According to Autodata Corp., GM’s average incentives rose 42% to $4,226 per vehicle. In the first three months of 2002, GM’s market share was 28.3%. Today it is 26.8%. Toyota offers much less incentives and their market share has consistently been rising.
I write often of the budget gaps experienced by our states. California has the largest budget gap at $14 billion. I write about teacher layoffs. Today we have something a bit different. The 45-year-old School of Engineering program at SF State University has grown by nearly 50% since fall 2001 to 700 students with 17 faculty members. The University has a $14 million budget gap. Nothing has been decided, but there is a proposal by administrators to close the engineering program. The School of Business is also facing cuts. As one of the school officials stated, “we are going through unprecedented times…it is very painful. We are not used to cutting programs. We are used to adding programs.” Do unprecedented times have an impact on minute-to-minute trading? If we graduate less engineers and business professionals, will that impact the S&P futures? Why should a Wall Street broker worry when they earn $150,000 a year from commissions? Why should a mutual fund manager worry? It won’t impact his or her continued lack of performance. They rarely get replaced.
Drugstores control 46% of the pharmacy industry. Walgreens and CVS are the two giants. If you look at the record for Walgreens over the past 25 years, you would think they are a growth tech stock. With uninterrupted multi-decade growth, the company is one of the under appreciated investment vehicles. Wal-Mart has learned to appreciate the value of its pharmacy operations and the profitability of generics. With the aging of the population, this sector has a promising future. Will it impact today’s trading? That’s another story.
As an investor, should you care that unemployment in Germany rose by 44,000 in March, and that it was the third consecutive monthly rise? One of the Chancellor’s advisors stated “I don’t see any reason why companies should feel inclined to resume hiring.” I don’t see any reason why manufacturers in the U.S. should resume hiring. It’s been almost four years since that happened. On the other hand, we produced a great many service sector jobs in March. I call them paycheck to paycheck jobs. It beats the unemployment rolls.
I hope everyone cares that 5 more American soldiers were killed today in the Anbar province of Iraq. The killing is escalating. Does this impact the Nasdaq futures? Does anyone care that, in the next few days, there will be $50 to $100 million in budget cuts in the metro Atlanta school system? Atlanta does not have an approved budget for their new fiscal year beginning July 1. By the way, in another 30 to 60 days our government will need to raise the debt limit for the third year in succession. Wouldn’t it be great if the government offices ground to a halt. It probably wouldn’t impact the S&P.
Almost on a daily basis, I receive emails describing my macro views and their applicability for long-term investing; however, I’m told, since I avoid micro analysis, my musings are not particularly helpful for day-to-day and hour-to-hour and minute-to-minute traders. There is probably some truth to that theory. I am not a trader. I am an investor. The problem is most money managers manage other people’s money and not their own. They feel the pressure to perform each day. I have an intense desire to perform each day to the best of my abilities. I know my daily performance. I also attempt to position myself for the long term by anticipating future happenings and trends. I try to focus on my strengths and avoid the pitfalls. There are some who are excellent at minute-to-minute trading. However, few are successful at that endeavor. Investing for the long-term generally produces more satisfying results. This discussion is timely and brings into view today’s article in the Financial Times by Francis Bator, professor emeritus of political economy at Harvard’s Kennedy School. Entitled “Tax cuts will not rescue America,” he discussed Bush’s desire to make his tax cuts permanent. Bator states “the planned future tax cuts also pose a danger in the shorter term. The tax cuts unmatched by cuts in government consumption, together with high interest rates to prevent inflation, may not be a sustainable policy combination. Because high U.S. interest rates tend to cause the dollar to appreciate, they are likely to make an already large trade deficit larger. If borrowing to pay for the resulting excess of imports over exports means that our foreign debt keeps increasing faster than gross domestic product, our creditors are likely to get nervous. Should they try to reduce their holdings of dollar debt, or even to cut back on new lending, they might inadvertently set in motion a speculative run from the dollar.” Bator makes a point I share with great enthusiasm. He observes “barring a supply-side miracle, the president’s future tax cuts will shift the composition of spending in favor of consumption and against national investment. As a result, the economy’s capacity to produce output for our own use will grow more slowly.”
Our economy is producing output for our own use more slowly. Other nations produce for us. Our imports have swelled with the rise in our consumption, and with it, our debt levels have surged. It doesn’t matter whether one believes this is a macro or a micro view. It will have short and long-term implications. Why? The nation’s growing shift to consumption has created the rise in service sector jobs. Of the 308,000 net jobs created in March, 230,000 were in the service sector. Those are jobs at Wal-Mart, Starbucks, Walgreens, McDonald’s, Marriott, Krispy Kreme, and the like. These are not jobs at GM or IBM. I am not putting down the 1.4 million associates at Wal-Mart. However, service sector jobs, in general, pay lower wages, provide less benefits, contain less weekly hours worked, and often are characterized by greater turnover. Service sector jobs comprise 75 to 80 percent of our nation’s employment. Does this fact have an impact on micro investing? Think about it. How does it create pressures to perform? It leads to cost cutting. It leads to lower levels of investment. Wal-Mart invests heavily in IT but not in store infrastructure. They are described as big box stores. Let’s look at Arkansas in March. The state’s manufacturing base continued to decline; however, overall, the number of unemployed was down 700 from February. Of the net jobs created, food services accounted for 65% of that jump. Leisure and hospitality were also strong.
I often talk about the lack of pricing power. You have a bad situation in the auto industry. The automakers reported a March surge in buying by consumers. The companies need to rid themselves of inflated inventories. So far this year, incentives are up 35% while sales are up 4%. Would you want to own a business like that? If you invest in GM, Ford, or Chrysler, you are an owner. According to Autodata Corp., GM’s average incentives rose 42% to $4,226 per vehicle. In the first three months of 2002, GM’s market share was 28.3%. Today it is 26.8%. Toyota offers much less incentives and their market share has consistently been rising.
I write often of the budget gaps experienced by our states. California has the largest budget gap at $14 billion. I write about teacher layoffs. Today we have something a bit different. The 45-year-old School of Engineering program at SF State University has grown by nearly 50% since fall 2001 to 700 students with 17 faculty members. The University has a $14 million budget gap. Nothing has been decided, but there is a proposal by administrators to close the engineering program. The School of Business is also facing cuts. As one of the school officials stated, “we are going through unprecedented times…it is very painful. We are not used to cutting programs. We are used to adding programs.” Do unprecedented times have an impact on minute-to-minute trading? If we graduate less engineers and business professionals, will that impact the S&P futures? Why should a Wall Street broker worry when they earn $150,000 a year from commissions? Why should a mutual fund manager worry? It won’t impact his or her continued lack of performance. They rarely get replaced.
Drugstores control 46% of the pharmacy industry. Walgreens and CVS are the two giants. If you look at the record for Walgreens over the past 25 years, you would think they are a growth tech stock. With uninterrupted multi-decade growth, the company is one of the under appreciated investment vehicles. Wal-Mart has learned to appreciate the value of its pharmacy operations and the profitability of generics. With the aging of the population, this sector has a promising future. Will it impact today’s trading? That’s another story.
As an investor, should you care that unemployment in Germany rose by 44,000 in March, and that it was the third consecutive monthly rise? One of the Chancellor’s advisors stated “I don’t see any reason why companies should feel inclined to resume hiring.” I don’t see any reason why manufacturers in the U.S. should resume hiring. It’s been almost four years since that happened. On the other hand, we produced a great many service sector jobs in March. I call them paycheck to paycheck jobs. It beats the unemployment rolls.
I hope everyone cares that 5 more American soldiers were killed today in the Anbar province of Iraq. The killing is escalating. Does this impact the Nasdaq futures? Does anyone care that, in the next few days, there will be $50 to $100 million in budget cuts in the metro Atlanta school system? Atlanta does not have an approved budget for their new fiscal year beginning July 1. By the way, in another 30 to 60 days our government will need to raise the debt limit for the third year in succession. Wouldn’t it be great if the government offices ground to a halt. It probably wouldn’t impact the S&P.
Monday, April 05, 2004
4/5/04 A Multimedia Super Corridor
The world’s largest twin towers, Petronas, are located in Kuala Lumpur in Malaysia. The government hopes to create 60,000 jobs in Malaysia’s Multimedia Super Corridor by 2008. Shell Information Technology International chose this location over eight other alternative sites, including Singapore and Hong Kong. Shell has moved 600 IT services personnel here. HSBC has made this one of five worldwide back-office data-processing centers, and in 2004, the bank plans to add another 2,500 staff members to service clients in the U.K., Australia, and New Zealand. Within the Multimedia Super Corridor we can find Ericcson, Fujitsu, NTT, DHL, BAT, Prudential, EDS, IBM, Nokia, Western Union, HP, Intel, Standard Chartered Bank, BMW, Microsoft, Sun, Oracle, and a long list of world-class companies who see this as an emerging regional hi-tech outsourcing center. Motorola arrived here in 1999, and employs more than 250 software engineers, of which over 98% are Malaysians. Their focus includes solutions in 2G, 2.5G, and 3G as well as embedded test software applications for portable wireless devices. Employee turnover is less than 10%. Japan’s NTT employs 75 engineers, of which 90% are Malaysians. They are developing software and content for third-generation mobile phones. The average cost of employing a software engineer in Malaysia is one-fifth of that in the United States. The operating costs of companies in Malaysia are lower than in New Delhi or Mumbai. The President and CEO of NTT Malaysia stated “the quality of engineers available in Malaysia is very good. When we wanted to set up operations outside Japan, we found that Malaysia was the best market to offer our services within the ASEAN Region.” This region is forecast to have one of the strongest long-term growth trends in the coming decades. Between now and 2008, the twin towers of Kuala Lumpur will become more crowded with sophisticated software and embedded engineers. I am not certain the same statement would hold true for the Silicon Valley.
Tony Crescenzi, chief bond market strategist at Miller Tabak: “The current divergence between beans and bonds suggests that any future gain in the bond market could be limited.”
A study by the National Employment Law Institute and the EPI found that the number of college graduates without a job for six months or longer increased in the past twelve months by 32% to 369,115. Among professionals the rise was 38%. Overall, in 2003, only 76% of college-educated workers had jobs, the lowest level in 25 years. So much for the emphasis on education and landing a job. It’s right up there with no child left behind as teacher layoffs increase.
Kroger is beginning to remind me of Toys R Us. Kroger has offered workers in Houston higher wages and improved health care as the workers’ union contract is set to expire on Saturday. The contract covers 10,800 workers in the Texas market. Kroger stated health care costs in the region have risen 67% in the past four years. Presently, the company picks up full cost for employees covered under labor contracts. Kroger stated a number of major contracts are scheduled to expire in 2004, in Cincinnati, Seattle, Louisville, Nashville, Detroit, Denver, and Las Vegas. Kroger’s vice chairman stated the company “is committed to achieving a cost structure that enables us to grow our business while providing competitive wages and benefits to our associates.” I think that’s a great commitment; however, with rising employee and healthcare cost hurdles, how will the company compete with Wal-Mart?
Yesterday, there were riots in four Iraqi cities, and 8 American soldiers died and many were injured. Since the war began last March, the death toll has risen to at least 610. Mark LeVine writes from Baghdad and Amman that “Iraq is sliding toward chaos; a state that many Iraqis increasingly believe is exactly where the U.S. wants them to be. A prominent Iraqi psychiatrist who has worked with the Coalition Provisional Authority and the U.S. military explained to me that ‘there is no way the United States can be this incompetent. The chaos here has to be at least partly deliberate.’ The main question on most people’s minds is not if his assertion is true, but why?” I don’t know the answer to the question, but I would tell the psychiatrist that our government is clearly capable of being this incompetent.
The Union Pacific has a rail system covering 33,000 miles or roughly twice the size of the National Railways of Mexico. Frequently, we kid about fiestas taken south of border and business being transacted on a tomorrow basis. The Union Pacific can hold its own. They are unable to handle the volume of freight business in the LA area and on many of the routes to the Southwest. Consequently, they are asking some customers to cool it and reduce their level of business with the railroad. Is this any way to run a railroad?
The world’s largest twin towers, Petronas, are located in Kuala Lumpur in Malaysia. The government hopes to create 60,000 jobs in Malaysia’s Multimedia Super Corridor by 2008. Shell Information Technology International chose this location over eight other alternative sites, including Singapore and Hong Kong. Shell has moved 600 IT services personnel here. HSBC has made this one of five worldwide back-office data-processing centers, and in 2004, the bank plans to add another 2,500 staff members to service clients in the U.K., Australia, and New Zealand. Within the Multimedia Super Corridor we can find Ericcson, Fujitsu, NTT, DHL, BAT, Prudential, EDS, IBM, Nokia, Western Union, HP, Intel, Standard Chartered Bank, BMW, Microsoft, Sun, Oracle, and a long list of world-class companies who see this as an emerging regional hi-tech outsourcing center. Motorola arrived here in 1999, and employs more than 250 software engineers, of which over 98% are Malaysians. Their focus includes solutions in 2G, 2.5G, and 3G as well as embedded test software applications for portable wireless devices. Employee turnover is less than 10%. Japan’s NTT employs 75 engineers, of which 90% are Malaysians. They are developing software and content for third-generation mobile phones. The average cost of employing a software engineer in Malaysia is one-fifth of that in the United States. The operating costs of companies in Malaysia are lower than in New Delhi or Mumbai. The President and CEO of NTT Malaysia stated “the quality of engineers available in Malaysia is very good. When we wanted to set up operations outside Japan, we found that Malaysia was the best market to offer our services within the ASEAN Region.” This region is forecast to have one of the strongest long-term growth trends in the coming decades. Between now and 2008, the twin towers of Kuala Lumpur will become more crowded with sophisticated software and embedded engineers. I am not certain the same statement would hold true for the Silicon Valley.
Tony Crescenzi, chief bond market strategist at Miller Tabak: “The current divergence between beans and bonds suggests that any future gain in the bond market could be limited.”
A study by the National Employment Law Institute and the EPI found that the number of college graduates without a job for six months or longer increased in the past twelve months by 32% to 369,115. Among professionals the rise was 38%. Overall, in 2003, only 76% of college-educated workers had jobs, the lowest level in 25 years. So much for the emphasis on education and landing a job. It’s right up there with no child left behind as teacher layoffs increase.
Kroger is beginning to remind me of Toys R Us. Kroger has offered workers in Houston higher wages and improved health care as the workers’ union contract is set to expire on Saturday. The contract covers 10,800 workers in the Texas market. Kroger stated health care costs in the region have risen 67% in the past four years. Presently, the company picks up full cost for employees covered under labor contracts. Kroger stated a number of major contracts are scheduled to expire in 2004, in Cincinnati, Seattle, Louisville, Nashville, Detroit, Denver, and Las Vegas. Kroger’s vice chairman stated the company “is committed to achieving a cost structure that enables us to grow our business while providing competitive wages and benefits to our associates.” I think that’s a great commitment; however, with rising employee and healthcare cost hurdles, how will the company compete with Wal-Mart?
Yesterday, there were riots in four Iraqi cities, and 8 American soldiers died and many were injured. Since the war began last March, the death toll has risen to at least 610. Mark LeVine writes from Baghdad and Amman that “Iraq is sliding toward chaos; a state that many Iraqis increasingly believe is exactly where the U.S. wants them to be. A prominent Iraqi psychiatrist who has worked with the Coalition Provisional Authority and the U.S. military explained to me that ‘there is no way the United States can be this incompetent. The chaos here has to be at least partly deliberate.’ The main question on most people’s minds is not if his assertion is true, but why?” I don’t know the answer to the question, but I would tell the psychiatrist that our government is clearly capable of being this incompetent.
The Union Pacific has a rail system covering 33,000 miles or roughly twice the size of the National Railways of Mexico. Frequently, we kid about fiestas taken south of border and business being transacted on a tomorrow basis. The Union Pacific can hold its own. They are unable to handle the volume of freight business in the LA area and on many of the routes to the Southwest. Consequently, they are asking some customers to cool it and reduce their level of business with the railroad. Is this any way to run a railroad?
Sunday, April 04, 2004
4/4/04 Some Statistics Cannot Be Manipulated
At the beginning of each quarter I like to check my list of items I believe hold true for the present and the future. At the top is the aging of the population and its impact on the ability to fund Social Security, Medicare, Medicaid, escalating medical expenses, and budget gaps as well as coping with the growing disparity between the haves and havenots. At times I will get an idea from this list. One such thought is the surging medical construction industry. As Tim Hess, director of preconstruction services for Hensel Phelps Construction observed, “not only is it hot now. It will be hot for a long period of time, with aging baby boomers and new technology advances coming.” The graying of the population and new technology form a unique platform for the medical construction business, including hospitals, cancer centers, and managed care facilities. According to U.S. census data, construction spending at hospitals increased to nearly $14 billion in 2003, up 10.7% from the previous year.
Laurence Kotlikoff, chairman of Boston University’s economics department, in discussing government accounting, stated “We hide our bills the way Enron did.”
The U.S. Conference of Mayors expects family requests from emergency food will increase in 91% of the nation’s cities this year, and that last year 56% of these cities turned away hungry families because resources ran out. A recent survey of 25 cities showed requests for emergency food increased 19% from 2001 to 2002.
Iowa is first in the nation in the production of pork, corn, and eggs; second in soybeans and red meat production; and third in total agricultural exports. The Des Moines Area Religious Council’s Emergency Food Pantry sites served a record 34,264 central Iowans in 2003. The number of Iowans receiving emergency food assistance from pantries and soup kitchens increased from 721,869 in 2000 to 934,382 in 2002. The final figures in 2003 will show a further increase. The U.S. Department of Agriculture stated that one in eleven Iowans or 260,000 lack the money to adequately feed themselves or their families. The agency describes this situation as “food insecure.” Last year, about 154,000 Iowans participated in the food stamp program. In 2003, the cost of feeding low-income Americans keeps climbing, and reached $45 billion.
Rev. Chris Rohwer of the Des Moines St. Mary’s Family Center stated “we’re seeing bigger families, families that haven’t had to use the food pantry system before. The cost of living keeps going up. If they are employed, which most of them are, it’s part time and they just can’t make ends meet. Maybe half get food stamps.”
Gertrude Cloutier is an 82-year-old volunteer who lives in Des Moines. She observed “you learn from people who have to struggle in life.” How many politicians have had to suffer? Maybe that’s why they rarely learn about life on Main Street. As Paul Kolikoff remarked, “politicians are lower life forms.”
California represents over 12% of this nation’s population. They have a $14 billion budget gap. Last year they had to layoff 9,300 government workers. This year the news is much better. The firings will be reduced to about 2,000.
In Illinois, it was reported this weekend that 80% of the school districts are in a budget crunch. The state has 2.2 million school children. While no child will be left behind, many teachers will be. There is a legal requirement to warn teachers of layoffs in advance. Those warning notices were just sent by certified mail. With the near doubling of school districts on the state’s financial watch list, the size of the layoffs can be expected to increase. Chicago officials have recently announced plans to close about 1,000 school-based positions.
Colin Powell, in describing the intelligence on Iraq’s biological and chemical weaponry capability prior to the invasion of that country: “It appears not to be the case that it was that solid.” In other words, the multi-sourced intelligence sucked. As Powell stated, “now, if the sources fell apart we need to find out how we’ve gotten ourselves in that position.” If there is a will, there is a way. I feel confident not much will be forthcoming prior to the November election. In Washington, few feel the urgency to unearth the truth.
At the beginning of each quarter I like to check my list of items I believe hold true for the present and the future. At the top is the aging of the population and its impact on the ability to fund Social Security, Medicare, Medicaid, escalating medical expenses, and budget gaps as well as coping with the growing disparity between the haves and havenots. At times I will get an idea from this list. One such thought is the surging medical construction industry. As Tim Hess, director of preconstruction services for Hensel Phelps Construction observed, “not only is it hot now. It will be hot for a long period of time, with aging baby boomers and new technology advances coming.” The graying of the population and new technology form a unique platform for the medical construction business, including hospitals, cancer centers, and managed care facilities. According to U.S. census data, construction spending at hospitals increased to nearly $14 billion in 2003, up 10.7% from the previous year.
Laurence Kotlikoff, chairman of Boston University’s economics department, in discussing government accounting, stated “We hide our bills the way Enron did.”
The U.S. Conference of Mayors expects family requests from emergency food will increase in 91% of the nation’s cities this year, and that last year 56% of these cities turned away hungry families because resources ran out. A recent survey of 25 cities showed requests for emergency food increased 19% from 2001 to 2002.
Iowa is first in the nation in the production of pork, corn, and eggs; second in soybeans and red meat production; and third in total agricultural exports. The Des Moines Area Religious Council’s Emergency Food Pantry sites served a record 34,264 central Iowans in 2003. The number of Iowans receiving emergency food assistance from pantries and soup kitchens increased from 721,869 in 2000 to 934,382 in 2002. The final figures in 2003 will show a further increase. The U.S. Department of Agriculture stated that one in eleven Iowans or 260,000 lack the money to adequately feed themselves or their families. The agency describes this situation as “food insecure.” Last year, about 154,000 Iowans participated in the food stamp program. In 2003, the cost of feeding low-income Americans keeps climbing, and reached $45 billion.
Rev. Chris Rohwer of the Des Moines St. Mary’s Family Center stated “we’re seeing bigger families, families that haven’t had to use the food pantry system before. The cost of living keeps going up. If they are employed, which most of them are, it’s part time and they just can’t make ends meet. Maybe half get food stamps.”
Gertrude Cloutier is an 82-year-old volunteer who lives in Des Moines. She observed “you learn from people who have to struggle in life.” How many politicians have had to suffer? Maybe that’s why they rarely learn about life on Main Street. As Paul Kolikoff remarked, “politicians are lower life forms.”
California represents over 12% of this nation’s population. They have a $14 billion budget gap. Last year they had to layoff 9,300 government workers. This year the news is much better. The firings will be reduced to about 2,000.
In Illinois, it was reported this weekend that 80% of the school districts are in a budget crunch. The state has 2.2 million school children. While no child will be left behind, many teachers will be. There is a legal requirement to warn teachers of layoffs in advance. Those warning notices were just sent by certified mail. With the near doubling of school districts on the state’s financial watch list, the size of the layoffs can be expected to increase. Chicago officials have recently announced plans to close about 1,000 school-based positions.
Colin Powell, in describing the intelligence on Iraq’s biological and chemical weaponry capability prior to the invasion of that country: “It appears not to be the case that it was that solid.” In other words, the multi-sourced intelligence sucked. As Powell stated, “now, if the sources fell apart we need to find out how we’ve gotten ourselves in that position.” If there is a will, there is a way. I feel confident not much will be forthcoming prior to the November election. In Washington, few feel the urgency to unearth the truth.
Saturday, April 03, 2004
4/3/04 Jorge Luis Borges: “Democracy Is An Abuse Of Statistics”
Kelvin Throop: “If people behaved like governments, you’d call the cops.”
Margaret Thatcher: “We should back the workers, not the shirkers.”
Edward Langley: “What this country needs is more unemployed politicians.”
Yesterday was a disappointing day for our country. I realize few are willing to pay the price to pursue the truth. There is even a greater revelation—when the truth is uncovered, millions turn from it. The United States went to war over weapons of mass destruction that existed- not in March 2003 but in March 1991. In the past year, 600 American soldiers have died, thousands have been injured, and many wait in hospitals for medical treatment. I have received many nasty (greatly understated) phone calls and emails complaining about my writings of one year ago, and the suggestion that the administration was not telling the truth about WMD. The point is not that I was right. There are some who see a statement of vindication as a form of gloating. Maybe those thoughts better reflect images closer to the observation deck. The core of our minds is to search for the truth. The truth can and does have predictive value for the present and future. To turn from the truth is to turn into a loser.
I started by stating that yesterday was a disappointing day for our country. A reader might ask how that could be possible when 308,000 nonfarm payroll jobs were created in March. The disappointment lies in the errors of omission. Just as WMD existed in 1991, the 308,000 were created in March 2004. Unfortunately, that job creation is but a small part of the story. Yesterday, Bush stated “the policies are working.” Let’s take a closer look. There were 182,000 more American workers stated by the BLS as unemployed in March than in February. There were 514,000 discouraged workers in March, the highest monthly number since September 1994. Those workers are not included as unemployed. The 320,000 unemployed Americans who lost their unemployment benefits in March were not included in the unemployment numbers. They were dropped into a black hole. As far as the government statistics indicate, they don’t exist. Nearly one in four unemployed workers has been out of work for more than a half-year. That is the highest level of long-term unemployment in two decades, and the number was greater in March than in February. There were about 4.7 million Americans working part-time in March because they could not find full-time employment, and this number was up from the prior month. Economists point out that the unemployment rate rose to 5.7% in March because an additional 179,000 people entered the workforce and began looking for employment. That 179,000 was dwarfed by the 514,000 discouraged workers and the 320,000 who lost their benefits. The fact is the jobless rate for blacks rose to 10.2% from 9.8%, for whites to 5.1% from 4.9%, and for Hispanics the number was unchanged at 7.4%. You think the policies are working? As Sung Won Sohn, chief economist at Wells Fargo Bank, observed “the average duration of unemployment has been lengthening, persuading unemployed workers to accept part-time jobs.”
It is time that Americans began to question the headlines. In March, according to the BLS, the number of Americans employed remained unchanged. According to the BLS, the civilian labor force remained unchanged, and that’s not counting the 514,000 discouraged workers and the 320,000 who lost their unemployment benefits. The hours worked in the month fell. The average workweek fell. Average weekly earnings dropped. Michael Donihue, professor and forecaster at Maine’s Colby College stated “employers don’t feel like they have to pay a lot to keep people on board.”
Yesterday the BLS statistics indicated that total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percentage of the civilian labor force, plus all marginally attached workers was 10.4% in March, up from the prior month’s 10.3%, and unchanged from a year ago. However, this March did not include the 1.1 million unemployed Americans who lost their benefits between 12/21/03 and 3/31/04. In the latest BLS report, almost 76 million Americans were indicated as not in the labor force, up slightly from February and up about 600,000 from January. In other words, the labor participation rate has continued to trend downward. It is the labor participation rate and the unit labor costs the Fed will focus on and not the unemployment rate. Since the end of the recession in November 2001, the labor participation rate has fallen 0.8%, and presently, the rate is at its lowest point since November 2001. In this economic cycle, the labor participation rate has been exceptionally weak. As was pointed out by Haseeb Ahmed of Economy.com, “this marked drop in the labor participation rate compares quite unfavorably with the average 0.3 point increase by the 27th month of the previous five expansions.” The unit labor costs have had the weakest two years in a post-war period. Companies have been able to meet rising demand outside our borders mainly through gains in productivity.
One should further question the need to hire permanent workers. If the hours worked are declining and the benefit costs are rising, there is little incentive to hire full-time employees. In analyzing the net hires in March, a fair percentage were part-timers, about 15,000 were accounted for by supermarket workers returning from a strike, and 71,000 were added construction workers due in part to warmer weather. From experience, we know that many construction workers are laid off during the year as the weather becomes more inclement. The remaining hires were the usual suspects in retail, government, leisure, healthcare, etc. In other words, it marked a continuation of the growth in lower wage-paying jobs. There was one small item for the buyers of tech stocks. March employment in the IT sector dropped by 1,000 jobs. That decline is inconsistent with the forecast for near-term expansion at Nasdaq 100 companies.
There has been one area of the economy helping the employment picture during the Bush years. Since winning a Pentagon contract in 2001 to build the F-35, Lockheed has added more than 5,000 employees to its payroll. The company’s Lockheed Martin Aeronautics Co. division has about 16,300 workers and more than 600 contract workers. Lockheed has about 5,700 workers on the F-16 program. Lockheed is about to reverse its three-year hiring boom. The F-35 joint strike fighter is behind schedule and unable to absorb a large number of jobs. A spokesperson for Lockheed stated “a substantial number of workers will be taken off the F-16 program before midyear.” This will lead to job losses.
Kelvin Throop: “If people behaved like governments, you’d call the cops.”
Margaret Thatcher: “We should back the workers, not the shirkers.”
Edward Langley: “What this country needs is more unemployed politicians.”
Yesterday was a disappointing day for our country. I realize few are willing to pay the price to pursue the truth. There is even a greater revelation—when the truth is uncovered, millions turn from it. The United States went to war over weapons of mass destruction that existed- not in March 2003 but in March 1991. In the past year, 600 American soldiers have died, thousands have been injured, and many wait in hospitals for medical treatment. I have received many nasty (greatly understated) phone calls and emails complaining about my writings of one year ago, and the suggestion that the administration was not telling the truth about WMD. The point is not that I was right. There are some who see a statement of vindication as a form of gloating. Maybe those thoughts better reflect images closer to the observation deck. The core of our minds is to search for the truth. The truth can and does have predictive value for the present and future. To turn from the truth is to turn into a loser.
I started by stating that yesterday was a disappointing day for our country. A reader might ask how that could be possible when 308,000 nonfarm payroll jobs were created in March. The disappointment lies in the errors of omission. Just as WMD existed in 1991, the 308,000 were created in March 2004. Unfortunately, that job creation is but a small part of the story. Yesterday, Bush stated “the policies are working.” Let’s take a closer look. There were 182,000 more American workers stated by the BLS as unemployed in March than in February. There were 514,000 discouraged workers in March, the highest monthly number since September 1994. Those workers are not included as unemployed. The 320,000 unemployed Americans who lost their unemployment benefits in March were not included in the unemployment numbers. They were dropped into a black hole. As far as the government statistics indicate, they don’t exist. Nearly one in four unemployed workers has been out of work for more than a half-year. That is the highest level of long-term unemployment in two decades, and the number was greater in March than in February. There were about 4.7 million Americans working part-time in March because they could not find full-time employment, and this number was up from the prior month. Economists point out that the unemployment rate rose to 5.7% in March because an additional 179,000 people entered the workforce and began looking for employment. That 179,000 was dwarfed by the 514,000 discouraged workers and the 320,000 who lost their benefits. The fact is the jobless rate for blacks rose to 10.2% from 9.8%, for whites to 5.1% from 4.9%, and for Hispanics the number was unchanged at 7.4%. You think the policies are working? As Sung Won Sohn, chief economist at Wells Fargo Bank, observed “the average duration of unemployment has been lengthening, persuading unemployed workers to accept part-time jobs.”
It is time that Americans began to question the headlines. In March, according to the BLS, the number of Americans employed remained unchanged. According to the BLS, the civilian labor force remained unchanged, and that’s not counting the 514,000 discouraged workers and the 320,000 who lost their unemployment benefits. The hours worked in the month fell. The average workweek fell. Average weekly earnings dropped. Michael Donihue, professor and forecaster at Maine’s Colby College stated “employers don’t feel like they have to pay a lot to keep people on board.”
Yesterday the BLS statistics indicated that total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percentage of the civilian labor force, plus all marginally attached workers was 10.4% in March, up from the prior month’s 10.3%, and unchanged from a year ago. However, this March did not include the 1.1 million unemployed Americans who lost their benefits between 12/21/03 and 3/31/04. In the latest BLS report, almost 76 million Americans were indicated as not in the labor force, up slightly from February and up about 600,000 from January. In other words, the labor participation rate has continued to trend downward. It is the labor participation rate and the unit labor costs the Fed will focus on and not the unemployment rate. Since the end of the recession in November 2001, the labor participation rate has fallen 0.8%, and presently, the rate is at its lowest point since November 2001. In this economic cycle, the labor participation rate has been exceptionally weak. As was pointed out by Haseeb Ahmed of Economy.com, “this marked drop in the labor participation rate compares quite unfavorably with the average 0.3 point increase by the 27th month of the previous five expansions.” The unit labor costs have had the weakest two years in a post-war period. Companies have been able to meet rising demand outside our borders mainly through gains in productivity.
One should further question the need to hire permanent workers. If the hours worked are declining and the benefit costs are rising, there is little incentive to hire full-time employees. In analyzing the net hires in March, a fair percentage were part-timers, about 15,000 were accounted for by supermarket workers returning from a strike, and 71,000 were added construction workers due in part to warmer weather. From experience, we know that many construction workers are laid off during the year as the weather becomes more inclement. The remaining hires were the usual suspects in retail, government, leisure, healthcare, etc. In other words, it marked a continuation of the growth in lower wage-paying jobs. There was one small item for the buyers of tech stocks. March employment in the IT sector dropped by 1,000 jobs. That decline is inconsistent with the forecast for near-term expansion at Nasdaq 100 companies.
There has been one area of the economy helping the employment picture during the Bush years. Since winning a Pentagon contract in 2001 to build the F-35, Lockheed has added more than 5,000 employees to its payroll. The company’s Lockheed Martin Aeronautics Co. division has about 16,300 workers and more than 600 contract workers. Lockheed has about 5,700 workers on the F-16 program. Lockheed is about to reverse its three-year hiring boom. The F-35 joint strike fighter is behind schedule and unable to absorb a large number of jobs. A spokesperson for Lockheed stated “a substantial number of workers will be taken off the F-16 program before midyear.” This will lead to job losses.
Friday, April 02, 2004
4/2/04 The Numbers Game
In a little over two hours the BLS will release their March jobs report. When they revise their February numbers downward, it will no longer be the case that February was the first month in two and a half years where employment was positive compared to the same month in the prior year. The estimate for today is the creation of 140,000+ new jobs and the unemployment rate holding steady at 5.6%. There will be scant mention of the number attempting to enter the labor market in March or the latest labor participation rate. I guarantee that no one else will mention the devastating number of job losses announced in the last two days. Because of huge funding shortfalls, Detroit Public Schools will lay off 900 teachers and 2,300 other employees by July 1. The positions represent 13% of the 23,800 employees in the district, Wayne County’s second-largest employer. In Clay County, Florida auto finance company AmeriCredit shuttered its call center yesterday and 225 employees lost their jobs. The day before Household International shut its Jacksonville call center and put 119 people out of work. Terra Industries cut 65 to 70 jobs. Everyone by now read that Gateway is closing its 188 company-operated retail stores on April 9 and that 2,500 retail positions will be eliminated. DHL Express announced that 1,000 former Airborne Express workers will lose their jobs in Seattle over the next 12 months. Sun Micro will cut 3,300 jobs. Yesterday, the Labor Department reported that the number continuing to receive state jobless benefits rose by 32,000 to 3.06 million in the week ending March 20. Not everyone was so lucky to receive jobless benefits. In Iowa, 8,300 workers lost unemployment benefits in the first three months of 2004. Another 8,800 could lose their benefits over the next three months if benefits are not extended, and that looks improbable at this time.
Yesterday, it was reported that the price of basic raw materials rose a record 5.5% and that February intermediate goods rose 0.9%, the biggest gain in 9 years. There was a piece of news on the inflation front that did not make Wall Street headlines. At Broad and Wall traders have champagne tastes. They ignore the basics, such as, milk. Between now and May 1, the government will adjust milk prices to reflect a worldwide shortage of dairy products. It has been suggested that the price of a gallon of milk is likely to rise by at least 70 cents in Colorado and neighboring states in the next 30 days. Shoppers will also pay more for cheese, ice cream, and other dairy items. Australia and New Zealand, two of the world’s biggest milk-product exporters, have experienced an on-going drought. Colorado is in its fifth year of drought. The statewide snowpack measured just 65% of average yesterday. March was the driest in Denver since 1908. One thing is certain. The rise in dairy prices, particularly milk, will inflate grocery bills. Last year consumers were faced with rising egg prices. The one plus in basics is the falling price of bread due to slack demand.
Donald Kohn: “Some households and firms probably harbor unrealistic expectations about the future based on extrapolations of recent interest rates or trends in asset prices, and they run the risk of experiencing serious difficulties as a result.”
Xu Zhongbo, head of Beijing Metal Consulting: “A lot of projects in Beijing have not got under way as scheduled and steel inventory is building up in the warehouses.” As the Chinese central banks pulls back from lending, growth in that nation has begun to fall sharply. In future quarters the change will be apparent. The sudden shift will be an unpleasant surprise to many sectors of our nation. Economists and Wall Street are not prepared for this eventuality.
Precious metals continue their multi-year rise. Gold, silver, platinum, and palladium advance to new price levels not seen in some time.
Yesterday, the EU boosted tariffs on $4 billion of U.S. products from 5% to 6%. They have vowed to raise the tariffs by one percent a month. As Winston Churchill once said, the U.S. does the right thing after exhausting all other possibilities.
The growth in our GDP has been helped by the auto industry’s high vehicle output. Yesterday GM, Ford, and Chrysler announced a new round of incentives. In the meantime, as profit margins decline, Toyota eats into their market share. The Big Three have three months’ supply of vehicles. Maybe they are attempting to achieve a new stockpiling record. Goodwill Industries could always use the cars.
In a little over two hours the BLS will release their March jobs report. When they revise their February numbers downward, it will no longer be the case that February was the first month in two and a half years where employment was positive compared to the same month in the prior year. The estimate for today is the creation of 140,000+ new jobs and the unemployment rate holding steady at 5.6%. There will be scant mention of the number attempting to enter the labor market in March or the latest labor participation rate. I guarantee that no one else will mention the devastating number of job losses announced in the last two days. Because of huge funding shortfalls, Detroit Public Schools will lay off 900 teachers and 2,300 other employees by July 1. The positions represent 13% of the 23,800 employees in the district, Wayne County’s second-largest employer. In Clay County, Florida auto finance company AmeriCredit shuttered its call center yesterday and 225 employees lost their jobs. The day before Household International shut its Jacksonville call center and put 119 people out of work. Terra Industries cut 65 to 70 jobs. Everyone by now read that Gateway is closing its 188 company-operated retail stores on April 9 and that 2,500 retail positions will be eliminated. DHL Express announced that 1,000 former Airborne Express workers will lose their jobs in Seattle over the next 12 months. Sun Micro will cut 3,300 jobs. Yesterday, the Labor Department reported that the number continuing to receive state jobless benefits rose by 32,000 to 3.06 million in the week ending March 20. Not everyone was so lucky to receive jobless benefits. In Iowa, 8,300 workers lost unemployment benefits in the first three months of 2004. Another 8,800 could lose their benefits over the next three months if benefits are not extended, and that looks improbable at this time.
Yesterday, it was reported that the price of basic raw materials rose a record 5.5% and that February intermediate goods rose 0.9%, the biggest gain in 9 years. There was a piece of news on the inflation front that did not make Wall Street headlines. At Broad and Wall traders have champagne tastes. They ignore the basics, such as, milk. Between now and May 1, the government will adjust milk prices to reflect a worldwide shortage of dairy products. It has been suggested that the price of a gallon of milk is likely to rise by at least 70 cents in Colorado and neighboring states in the next 30 days. Shoppers will also pay more for cheese, ice cream, and other dairy items. Australia and New Zealand, two of the world’s biggest milk-product exporters, have experienced an on-going drought. Colorado is in its fifth year of drought. The statewide snowpack measured just 65% of average yesterday. March was the driest in Denver since 1908. One thing is certain. The rise in dairy prices, particularly milk, will inflate grocery bills. Last year consumers were faced with rising egg prices. The one plus in basics is the falling price of bread due to slack demand.
Donald Kohn: “Some households and firms probably harbor unrealistic expectations about the future based on extrapolations of recent interest rates or trends in asset prices, and they run the risk of experiencing serious difficulties as a result.”
Xu Zhongbo, head of Beijing Metal Consulting: “A lot of projects in Beijing have not got under way as scheduled and steel inventory is building up in the warehouses.” As the Chinese central banks pulls back from lending, growth in that nation has begun to fall sharply. In future quarters the change will be apparent. The sudden shift will be an unpleasant surprise to many sectors of our nation. Economists and Wall Street are not prepared for this eventuality.
Precious metals continue their multi-year rise. Gold, silver, platinum, and palladium advance to new price levels not seen in some time.
Yesterday, the EU boosted tariffs on $4 billion of U.S. products from 5% to 6%. They have vowed to raise the tariffs by one percent a month. As Winston Churchill once said, the U.S. does the right thing after exhausting all other possibilities.
The growth in our GDP has been helped by the auto industry’s high vehicle output. Yesterday GM, Ford, and Chrysler announced a new round of incentives. In the meantime, as profit margins decline, Toyota eats into their market share. The Big Three have three months’ supply of vehicles. Maybe they are attempting to achieve a new stockpiling record. Goodwill Industries could always use the cars.
Thursday, April 01, 2004
4/1/04 Hiring Costs
The number of workers holding jobs approximates 138.3 million. Of that number, about 2.5 million are temporary workers, 15 million are in the retail sector, 14.3 million in manufacturing, and 6.85 million in construction. Although the average hourly earnings rose 1.6% year-on-year in 2003, benefits continue to rise at a significantly higher rate. According to the Labor Department, of the $22.92 per hour paid, on average, to workers, $6.43 per hour was expended on benefits. Health insurance alone cost $1.50 per hour and items comprised by social security, workers’ compensation, etc. another $1.96. Employers must think hard before hiring permanent workers. The added benefits can sting the bottom line. It is no wonder that private and public companies alike look to contract workers, temporary workers, and outsourcing for alternatives. With the average workweek under 34 hours, it is difficult to anticipate much near-term improvement in the labor participation rate.
The Washington State Employment Security Department stated yesterday that a 2003 law reducing to 26 from 30 the number of weeks a person may collect unemployment benefits will take effect April 4.
Wells Fargo Bank issued layoff notices to 84 employees in Oak Harbor, Washington that take effect April 28. The employees work at an operations center that Wells Fargo acquired along with Pacific Northwest Bank last year. Norcross, Georgia-based Novoste, a developer of advanced medical treatments for coronary and vascular diseases, will cut 86 employees or about 40% of its current work force. Radio Flyer, the 87-year-old company that makes red metal wagons for children, will close its Chicago plant and move production to China, eliminating about half of its 90 jobs. Textiles maker Dan River Inc. filed for Chapter 11 bankruptcy. Axciom announced cutting 230 jobs.
According to Challenger, Gray & Christmas, the number of service sector jobs shifted overseas is expected to reach 588,000 by 2005, up from 100,000 in 2000.
Wisconsin’s exports of medical equipment to China increased 60% in 2003 to $155.6 million This was the state’s single-biggest export business to the mainland, state figures show. GE Medical had $700 million in sales in China in 2003 and expects double-digit increases for years to come. It is estimated that 60 million Chinese have disabilities. There are 66,000 hospitals in China.
William Winkenwerder Jr., assistant secretary of defense for health affairs, stated that, through March 13, in the first year of war in Iraq, the military made 18,004 medical evacuations. He told a separate House panel on Feb. 25 that, as of Feb. 5, there were only 11,200 total medical evacuations. Spc. Timothy McMichael, who is on medical hold at Fort Knox, Ky., told the Congressional panel “I can only say that the uniform consensus is one of frustration, disappointment, and anger. I have had soldiers with 15, 20, even 25 years in the military tell me they are disgusted. The Army cannot afford to lose the number of senior non-commissioned officers it is losing every day.”
The NAPM-Chicago stated its manufacturing index dropped to 57.6 in March from 63.6 in February, the largest decline since March 2001. Excluding transportation equipment, orders fell 1.2%. The Federal Reserve Bank of Chicago stated this region produces 40% of the country’s motor vehicles, 35% of its steel, and approximately 50% of its farm equipment. In March, the survey’s employment index fell to 49.2 from February’s 54.8, a most disappointing result. In addition, the production index and the new orders index both dropped significantly. The Midwest continues to have difficult business conditions. Chris Low, chief economist at FTN Financial, remarked “this is not the first place we have seen indications the economy is slowing, but it is a report that is widely followed. It underscores the fact this slowdown is pretty wide-spread.”
Lynn Franco, director of the Conference Board’s Consumer Research Center: “The labor market not only continues to dampen consumers’ present day spirits, but it is also making them less optimistic about the short term outlook.”
Raghavan Mayur, president of TechnoMetrica Market Intelligence: “25 to 30 per cent of the households are ‘job sensitives’- those who have lost a job in the past 12 months or are afraid of losing one in the next 12.”
Starting today, OPEC agreed to reduce oil production quotas by 4.1% or by 1 million barrels to 23.5 million barrels a day. OPEC is the source of approximately one-third of the world’s oil.
The yen rose to a four-high high versus the dollar and traded up to 103.40, the third straight quarterly increase. In March, Japan sold $45.2 billion yen, a sharp slowing from the prior two months. Finance Minister Sadakazu Tanigaki stated “it’s desirable that foreign exchange rates move in a manner reflecting fundamentals of economies.”
Yesterday, J.C. Penney reduced the value of its Eckerd Drug division to $4.37 billion. It has been suggested that the Jean Coutu Group of Canada, current owner of Brooks Pharmacy, would purchase about 1,400 Eckerd locations in the Northeast and CVS the remaining 1,200 Eckerd stores in the Southeast.
The ECB decided to leave its benchmark lending rate at a six-decade low of 2%. With the unemployment rate in the euro region at a three-year high of 8.8% for the past year, a June rate cut of 50 basis points might provide a welcome psychological boost.
The number of workers holding jobs approximates 138.3 million. Of that number, about 2.5 million are temporary workers, 15 million are in the retail sector, 14.3 million in manufacturing, and 6.85 million in construction. Although the average hourly earnings rose 1.6% year-on-year in 2003, benefits continue to rise at a significantly higher rate. According to the Labor Department, of the $22.92 per hour paid, on average, to workers, $6.43 per hour was expended on benefits. Health insurance alone cost $1.50 per hour and items comprised by social security, workers’ compensation, etc. another $1.96. Employers must think hard before hiring permanent workers. The added benefits can sting the bottom line. It is no wonder that private and public companies alike look to contract workers, temporary workers, and outsourcing for alternatives. With the average workweek under 34 hours, it is difficult to anticipate much near-term improvement in the labor participation rate.
The Washington State Employment Security Department stated yesterday that a 2003 law reducing to 26 from 30 the number of weeks a person may collect unemployment benefits will take effect April 4.
Wells Fargo Bank issued layoff notices to 84 employees in Oak Harbor, Washington that take effect April 28. The employees work at an operations center that Wells Fargo acquired along with Pacific Northwest Bank last year. Norcross, Georgia-based Novoste, a developer of advanced medical treatments for coronary and vascular diseases, will cut 86 employees or about 40% of its current work force. Radio Flyer, the 87-year-old company that makes red metal wagons for children, will close its Chicago plant and move production to China, eliminating about half of its 90 jobs. Textiles maker Dan River Inc. filed for Chapter 11 bankruptcy. Axciom announced cutting 230 jobs.
According to Challenger, Gray & Christmas, the number of service sector jobs shifted overseas is expected to reach 588,000 by 2005, up from 100,000 in 2000.
Wisconsin’s exports of medical equipment to China increased 60% in 2003 to $155.6 million This was the state’s single-biggest export business to the mainland, state figures show. GE Medical had $700 million in sales in China in 2003 and expects double-digit increases for years to come. It is estimated that 60 million Chinese have disabilities. There are 66,000 hospitals in China.
William Winkenwerder Jr., assistant secretary of defense for health affairs, stated that, through March 13, in the first year of war in Iraq, the military made 18,004 medical evacuations. He told a separate House panel on Feb. 25 that, as of Feb. 5, there were only 11,200 total medical evacuations. Spc. Timothy McMichael, who is on medical hold at Fort Knox, Ky., told the Congressional panel “I can only say that the uniform consensus is one of frustration, disappointment, and anger. I have had soldiers with 15, 20, even 25 years in the military tell me they are disgusted. The Army cannot afford to lose the number of senior non-commissioned officers it is losing every day.”
The NAPM-Chicago stated its manufacturing index dropped to 57.6 in March from 63.6 in February, the largest decline since March 2001. Excluding transportation equipment, orders fell 1.2%. The Federal Reserve Bank of Chicago stated this region produces 40% of the country’s motor vehicles, 35% of its steel, and approximately 50% of its farm equipment. In March, the survey’s employment index fell to 49.2 from February’s 54.8, a most disappointing result. In addition, the production index and the new orders index both dropped significantly. The Midwest continues to have difficult business conditions. Chris Low, chief economist at FTN Financial, remarked “this is not the first place we have seen indications the economy is slowing, but it is a report that is widely followed. It underscores the fact this slowdown is pretty wide-spread.”
Lynn Franco, director of the Conference Board’s Consumer Research Center: “The labor market not only continues to dampen consumers’ present day spirits, but it is also making them less optimistic about the short term outlook.”
Raghavan Mayur, president of TechnoMetrica Market Intelligence: “25 to 30 per cent of the households are ‘job sensitives’- those who have lost a job in the past 12 months or are afraid of losing one in the next 12.”
Starting today, OPEC agreed to reduce oil production quotas by 4.1% or by 1 million barrels to 23.5 million barrels a day. OPEC is the source of approximately one-third of the world’s oil.
The yen rose to a four-high high versus the dollar and traded up to 103.40, the third straight quarterly increase. In March, Japan sold $45.2 billion yen, a sharp slowing from the prior two months. Finance Minister Sadakazu Tanigaki stated “it’s desirable that foreign exchange rates move in a manner reflecting fundamentals of economies.”
Yesterday, J.C. Penney reduced the value of its Eckerd Drug division to $4.37 billion. It has been suggested that the Jean Coutu Group of Canada, current owner of Brooks Pharmacy, would purchase about 1,400 Eckerd locations in the Northeast and CVS the remaining 1,200 Eckerd stores in the Southeast.
The ECB decided to leave its benchmark lending rate at a six-decade low of 2%. With the unemployment rate in the euro region at a three-year high of 8.8% for the past year, a June rate cut of 50 basis points might provide a welcome psychological boost.
Wednesday, March 31, 2004
3/31/04 Window Dressing And Japan’s Fiscal Year-end
Welcome to the end of the quarter and to the last day of window dressing- hopefully, for some time. I trust all the mutual funds engaged in this activity had a nice time. What a bunch of losers! Today is the fiscal year-end for Japan, and we will undo the hedge created exactly nine months ago. With the aging of the population, you might not remember. We went long the Nikkei and short the Nasdaq. The hotshots thought we were out of our minds. With Passover and Easter right around the corner, we can become consumers with our profits and buy some nice gifts. I think we’ll do a bit of that and keep the largest portion of the profits for a rainy day. It might even rain in Colorado. You can never tell.
In 2003, corporate income taxes dropped to 7.4% of total tax receipts. Something tells me this inequity is not long for this world.
The 447,000 bpd BP refinery in Texas City was hit by an explosion and a fire. It is the third-largest refinery in the United States. Tomorrow OPEC has its meeting. I’m sure it’s only a coincidence that the FBI had recently warned Texas oil refiners of possible terror attacks.
The March Conference Board’s Consumer Confidence Index reflected the continuation of near-term job worries. The survey certainly was right. Yesterday was not a good day for employment. Johnson Controls announced moving 885 jobs to Mexico. Worldcom continued their layoffs. This time it was 4,000 workers to be cut. Because of Iowa’s budget problems, 2,000 teachers could lose their jobs in that state. EMI announced cutting 1,500 jobs, and will exit manufacturing in Europe and the U.S.
Bill Gates: “Many of the holy grails of computing that have been worked on over the last 30 years will be solved within this 10-year period, with speech being in every device and having a device that’s like a tablet that you just carry around.” Gates is focusing on the power of the servers and their impact on the network not being a limiting factor. I believe servers will not be required for speech recognition. While Gates is headed towards the tablet, in my view the cell phone and the PDA will become your venue for text messaging via speech recognition, and it will arrive in your neighborhood shortly.
The new overtime-pay rules go into effect tomorrow. The U.S. Department of Labor has found another way to screw you—thanks to the efforts of the Administration and the Congress.
The EU told Germany it must scrap a law that protects Volkswagen from hostile takeovers or face court action.
Nissan, Japan’s third largest auto maker, stated it had not set profit forecasts for the coming year, partly due to volatility in the currency markets.
Toyota stated it expected its production of biodegradable plastics to grow into a $38 billion business by 2020 when the company hopes to control two-thirds of the world’s supply.
Elliott Janeway: “When the President is in trouble, the economy is in trouble.”
Bush’s remarks on the economy yesterday at the Fox Cities Performing Art Center in Appleton, Wisconsin: “Some in our Nation’s Capital respond a little differently than I will. They want to increase federal spending dramatically. The problem with that plan is somebody has to pay for it…it’s possible to grow our economy and not have people find new jobs. And that’s the problem we face today for some workers. This is called a period of transition. That’s an economist’s word for things aren’t going too well for you. And I understand that. I understand that people are worried about the job they have.”
Bush wants to blame others for the rise in federal spending. He wants to blame increases in productivity for the loss of jobs. While he’s laying blame, he might as well blame Saddam for not having the WMD. Losers fail to accept responsibility. The words ‘I was wrong’ never touch Bush’s lips.
Starbucks, on the other hand, has outstanding management. They are a credit to their stockholders, their employees, and to the communities they serve. Their global chain of more than 7,600 stores is growing at about 3.5 per day. Their CEO told the annual meeting that this rate would begin to increase probably around midsummer. The company is evaluating dozens of new drinks.
Charles Dow: “The one fact pertaining to all conditions is that they will change.”
Welcome to the end of the quarter and to the last day of window dressing- hopefully, for some time. I trust all the mutual funds engaged in this activity had a nice time. What a bunch of losers! Today is the fiscal year-end for Japan, and we will undo the hedge created exactly nine months ago. With the aging of the population, you might not remember. We went long the Nikkei and short the Nasdaq. The hotshots thought we were out of our minds. With Passover and Easter right around the corner, we can become consumers with our profits and buy some nice gifts. I think we’ll do a bit of that and keep the largest portion of the profits for a rainy day. It might even rain in Colorado. You can never tell.
In 2003, corporate income taxes dropped to 7.4% of total tax receipts. Something tells me this inequity is not long for this world.
The 447,000 bpd BP refinery in Texas City was hit by an explosion and a fire. It is the third-largest refinery in the United States. Tomorrow OPEC has its meeting. I’m sure it’s only a coincidence that the FBI had recently warned Texas oil refiners of possible terror attacks.
The March Conference Board’s Consumer Confidence Index reflected the continuation of near-term job worries. The survey certainly was right. Yesterday was not a good day for employment. Johnson Controls announced moving 885 jobs to Mexico. Worldcom continued their layoffs. This time it was 4,000 workers to be cut. Because of Iowa’s budget problems, 2,000 teachers could lose their jobs in that state. EMI announced cutting 1,500 jobs, and will exit manufacturing in Europe and the U.S.
Bill Gates: “Many of the holy grails of computing that have been worked on over the last 30 years will be solved within this 10-year period, with speech being in every device and having a device that’s like a tablet that you just carry around.” Gates is focusing on the power of the servers and their impact on the network not being a limiting factor. I believe servers will not be required for speech recognition. While Gates is headed towards the tablet, in my view the cell phone and the PDA will become your venue for text messaging via speech recognition, and it will arrive in your neighborhood shortly.
The new overtime-pay rules go into effect tomorrow. The U.S. Department of Labor has found another way to screw you—thanks to the efforts of the Administration and the Congress.
The EU told Germany it must scrap a law that protects Volkswagen from hostile takeovers or face court action.
Nissan, Japan’s third largest auto maker, stated it had not set profit forecasts for the coming year, partly due to volatility in the currency markets.
Toyota stated it expected its production of biodegradable plastics to grow into a $38 billion business by 2020 when the company hopes to control two-thirds of the world’s supply.
Elliott Janeway: “When the President is in trouble, the economy is in trouble.”
Bush’s remarks on the economy yesterday at the Fox Cities Performing Art Center in Appleton, Wisconsin: “Some in our Nation’s Capital respond a little differently than I will. They want to increase federal spending dramatically. The problem with that plan is somebody has to pay for it…it’s possible to grow our economy and not have people find new jobs. And that’s the problem we face today for some workers. This is called a period of transition. That’s an economist’s word for things aren’t going too well for you. And I understand that. I understand that people are worried about the job they have.”
Bush wants to blame others for the rise in federal spending. He wants to blame increases in productivity for the loss of jobs. While he’s laying blame, he might as well blame Saddam for not having the WMD. Losers fail to accept responsibility. The words ‘I was wrong’ never touch Bush’s lips.
Starbucks, on the other hand, has outstanding management. They are a credit to their stockholders, their employees, and to the communities they serve. Their global chain of more than 7,600 stores is growing at about 3.5 per day. Their CEO told the annual meeting that this rate would begin to increase probably around midsummer. The company is evaluating dozens of new drinks.
Charles Dow: “The one fact pertaining to all conditions is that they will change.”
Tuesday, March 30, 2004
3/30/04 Tomorrow’s Workforce
Mark Marsters is Cigna’s disability claims operations leader. Recently, he spoke at the national Disability Consulting Group Conference. He described tomorrow’s workforce as older, heavier, and unable to retire. Marsters stated “health care will continue to drive costs, a problem that will become even more urgent with the aging workforce. The aging workforce will drive greater incidences of disability. The economy may force companies to push their employees even further to boost productivity, which may in turn result in greater stress-related disability. All these trends will make integration of disability and health care more critical, as chronic disease management will become increasingly important along with programs that focus on lowering incidence and coordinating health, stress management and disability benefits.” It should be noted that, by 2008, 40% of the labor force will be 45 or older. Older workers are up to 5 times more likely to submit claims for short or long-term disability, and are absent longer than younger employees. A recent AARP study showed that nearly 70% of workers who have not yet retired report that they plan to work into their retirement years or never retire. One might also take note of a study by the Economic Policy Institute that found overtime costs industry as much as $300 billion in stress and fatigue-related problems.
In 2003, GM’s four joint-venture plants in China sold 386,710 vehicles for $875 million. One half of the profits went to GM. In sum, GM realized $2,267 per vehicle sold in China versus only $145 on each vehicle sold in North America. If you were running GM, would you expand in China or in the U.S.?
Kenneth Liebenthal is a University of Michigan professor and China expert who was senior director for Asian affairs on the National Security Council under Clinton. He observed “most of the jobs lost to Asia were lost years ago. Now they’re moving around Asia.”
The Navy canceled the overhaul of an aging supply ship. Todd Pacific Shipyards had anticipated that the work on the USS Sacramento would take about three months and hundreds of workers would be needed. Without the contract, Todd is temporarily laying off about 500 workers.
Saudi oil Minister Ali al-Naimi stated “as far as Saudi Arabia is concerned, April 1 has been implemented and I believe others have done so as well. Throwing more oil on the market, because of prices where they are today, would be destructive. That would make a glut and there is already a surplus on the market.” The fact is other countries, such as neighboring Mexico, will export more oil. It’s the least they can do. Mexico expropriated the oil properties from U.S. interests in 1937. They renamed the properties Pemex. We have earned the right to pay for what was once our interests and where not one penny was received in return. There are many robber baron countries out there in the world. Our government calls many “friends.” No one accused our government of being adept in the character evaluation department. Isn’t that right, Kenny Boy?
David Fyse of the International Energy Agency stated “Russia is a key component of OPEC’s problems over the next two to three years.”
Jeremy Siegel: “The bond is saying, Yes, I know that current GDP growth is quite good, but I don’t believe it will last.”
Mark Marsters is Cigna’s disability claims operations leader. Recently, he spoke at the national Disability Consulting Group Conference. He described tomorrow’s workforce as older, heavier, and unable to retire. Marsters stated “health care will continue to drive costs, a problem that will become even more urgent with the aging workforce. The aging workforce will drive greater incidences of disability. The economy may force companies to push their employees even further to boost productivity, which may in turn result in greater stress-related disability. All these trends will make integration of disability and health care more critical, as chronic disease management will become increasingly important along with programs that focus on lowering incidence and coordinating health, stress management and disability benefits.” It should be noted that, by 2008, 40% of the labor force will be 45 or older. Older workers are up to 5 times more likely to submit claims for short or long-term disability, and are absent longer than younger employees. A recent AARP study showed that nearly 70% of workers who have not yet retired report that they plan to work into their retirement years or never retire. One might also take note of a study by the Economic Policy Institute that found overtime costs industry as much as $300 billion in stress and fatigue-related problems.
In 2003, GM’s four joint-venture plants in China sold 386,710 vehicles for $875 million. One half of the profits went to GM. In sum, GM realized $2,267 per vehicle sold in China versus only $145 on each vehicle sold in North America. If you were running GM, would you expand in China or in the U.S.?
Kenneth Liebenthal is a University of Michigan professor and China expert who was senior director for Asian affairs on the National Security Council under Clinton. He observed “most of the jobs lost to Asia were lost years ago. Now they’re moving around Asia.”
The Navy canceled the overhaul of an aging supply ship. Todd Pacific Shipyards had anticipated that the work on the USS Sacramento would take about three months and hundreds of workers would be needed. Without the contract, Todd is temporarily laying off about 500 workers.
Saudi oil Minister Ali al-Naimi stated “as far as Saudi Arabia is concerned, April 1 has been implemented and I believe others have done so as well. Throwing more oil on the market, because of prices where they are today, would be destructive. That would make a glut and there is already a surplus on the market.” The fact is other countries, such as neighboring Mexico, will export more oil. It’s the least they can do. Mexico expropriated the oil properties from U.S. interests in 1937. They renamed the properties Pemex. We have earned the right to pay for what was once our interests and where not one penny was received in return. There are many robber baron countries out there in the world. Our government calls many “friends.” No one accused our government of being adept in the character evaluation department. Isn’t that right, Kenny Boy?
David Fyse of the International Energy Agency stated “Russia is a key component of OPEC’s problems over the next two to three years.”
Jeremy Siegel: “The bond is saying, Yes, I know that current GDP growth is quite good, but I don’t believe it will last.”
Monday, March 29, 2004
3/29/04 Extortion
Joshua Shapiro: “This is a different business cycle. To the extent that companies can squeeze another drop of blood out of their existing work force, they’re doing it. Eventually you reach the point where there’s no more blood to be given, but we haven’t reached it yet.”
For a few years I have written about the limited pricing power of companies. At the same time, as real wages have declined and work hours have been reduced, the American worker’s bargaining position with its employer weakened. A new low was recently reached. Not surprisingly, Boeing was the instigator. The incident occurred within the company’s Shared Services Group, which provides support to Boeing’s other business units. The division employs close to 16,000 and is based in Bellevue, Washington. The company’s desktop-computer support staff in Washington and Kansas was given an ultimatum—either at least match Dell’s bid to do their work or else be fired. An audit by Gartner Group indicated that Dell could provide computer support for 37% less than the current in-house cost. The 200 people impacted have until April 16 to at least match Dell’s proposals. Boeing spokesperson Bob Jorgenson stated “the Boeing group is outstanding. The quality of their service is equal to the best in the market that we can find externally. However, the cost of delivery is significantly higher.” The head of the Shared Services Group has ordered cost studies in every department. Jorgensen observed that the division’s performance would be judged against standards set by the marketplace. Ultimately, the in-house Boeing support group will provide more efficiencies; however, to compete against Dell, fewer people would be employed. Charles Bofferding, executive director of the Society of Professional Engineering Employees in Aerospace stated “absent a commitment to employees to retrain them and find them other jobs, this feels an awful like extortion.” It is necessary to realize that costs are important. Having run many companies, I fully realize this. On the other hand, loyalty, seniority, and sense of security play an important part in the workplace. The Boeing situation should have been handled entirely differently. The workers should have been made a strategic part of the decision-making process on how to best reduce costs. Often the workers themselves have better ideas than those in managerial positions. You don’t have to look for employment for 20 months to be a discouraged worker. You can work for Boeing and be given an ultimatum.
While we are on the subject of Boeing, let’s look at their participation in bidding on an Air Force contract for 100 aerial refueling tankers. An audit report of the bidding process will be released shortly. It will show that the Air Force had requested 26 capabilities for the refueling tankers. Boeing, during the negotiating process, eliminated 19 of the 26 capabilities. On the other hand, Airbus complied with 20 of the 26 capabilities. Air Force Undersecretary for Acquisitions Marvin Sambur stated “this was not a competitive process. The Air Force was ordered by Congress to work with Boeing on the new tanker program.” Bush’s chief of staff, Andrew Card, was the point man on the deal. Boeing emails indicate that Card was mainly interested in the jobs the contract would create. Boeing claimed 28,000 new jobs would be added to the payroll. Roche, the Air Force secretary, claimed the number would be 39,000. The audit indicated the negotiations reflected “unsound acquisition and procurement practices.” Maybe the Congress should give an ultimatum to Boeing—change your ways or be barred from bidding on future government contracts. We are talking about $23.5 billion of taxpayer money.
The Philadelphia Metro area has been hit by two plat closings. Gross-Given Manufacturing, a vending machine company, will close its plant this month and lay off 113 workers. Mail-Well Envelope Co. will close its doors in May and eliminate 125 jobs.
From July 2000 until August 2003, Maine lost 17,800 manufacturing jobs, a loss of 22.1% and a greater percentage reduction than any other state in the nation, stated Maine AFL-CIO President Edward Gorham. This loss does not take into account the hundreds of paper employees who lost their jobs through the recent closing of the Eastern Pulp and Paper mills in Brewer and Lincoln, Maine. These two mills employed more than 750 people. Over all, in the last two years, there has been a 3% decline in New England employment, including 150,000 jobs lost in manufacturing.
When viewing March’s employment numbers, at least one sector will not be mentioned. There are a growing number of “underemployed” workers, those that take any job they could get rather than risk unemployment. According to various studies, they have too much experience or education and receive wages often far below their previous employment. In addition, it would be wise to focus on the number of people participating in the work force. Over the past three years, there has been a 1% drop in the participation rate due to the weak labor market. That rate is understated with the 1million+ unemployed having lost their benefits since December 21. In sum, there are less people in the workplace. That is a fact.
James Chanos: “One of the biggest components of a car’s costs are the legacy healthcare and pension benefits for people who don’t even work there any more.”
Marc Faber: “In the past I have had the tendency to dismiss the deflationist views of some reputed economists and strategists as unlikely. I now feel the current universal asset inflation and overheated Chinese economy will be followed by a serious bust and asset deflation, which will kill consumption in the U.S. The only question is when.”
Personal savings increased to 1.9% of disposable income in February, up from January’s 1.8%.
Bruce Karatz, chairman and chief executive of KB Home: “Industry seems to have gotten very used to the idea of hiring slowly.”
Joshua Shapiro: “This is a different business cycle. To the extent that companies can squeeze another drop of blood out of their existing work force, they’re doing it. Eventually you reach the point where there’s no more blood to be given, but we haven’t reached it yet.”
For a few years I have written about the limited pricing power of companies. At the same time, as real wages have declined and work hours have been reduced, the American worker’s bargaining position with its employer weakened. A new low was recently reached. Not surprisingly, Boeing was the instigator. The incident occurred within the company’s Shared Services Group, which provides support to Boeing’s other business units. The division employs close to 16,000 and is based in Bellevue, Washington. The company’s desktop-computer support staff in Washington and Kansas was given an ultimatum—either at least match Dell’s bid to do their work or else be fired. An audit by Gartner Group indicated that Dell could provide computer support for 37% less than the current in-house cost. The 200 people impacted have until April 16 to at least match Dell’s proposals. Boeing spokesperson Bob Jorgenson stated “the Boeing group is outstanding. The quality of their service is equal to the best in the market that we can find externally. However, the cost of delivery is significantly higher.” The head of the Shared Services Group has ordered cost studies in every department. Jorgensen observed that the division’s performance would be judged against standards set by the marketplace. Ultimately, the in-house Boeing support group will provide more efficiencies; however, to compete against Dell, fewer people would be employed. Charles Bofferding, executive director of the Society of Professional Engineering Employees in Aerospace stated “absent a commitment to employees to retrain them and find them other jobs, this feels an awful like extortion.” It is necessary to realize that costs are important. Having run many companies, I fully realize this. On the other hand, loyalty, seniority, and sense of security play an important part in the workplace. The Boeing situation should have been handled entirely differently. The workers should have been made a strategic part of the decision-making process on how to best reduce costs. Often the workers themselves have better ideas than those in managerial positions. You don’t have to look for employment for 20 months to be a discouraged worker. You can work for Boeing and be given an ultimatum.
While we are on the subject of Boeing, let’s look at their participation in bidding on an Air Force contract for 100 aerial refueling tankers. An audit report of the bidding process will be released shortly. It will show that the Air Force had requested 26 capabilities for the refueling tankers. Boeing, during the negotiating process, eliminated 19 of the 26 capabilities. On the other hand, Airbus complied with 20 of the 26 capabilities. Air Force Undersecretary for Acquisitions Marvin Sambur stated “this was not a competitive process. The Air Force was ordered by Congress to work with Boeing on the new tanker program.” Bush’s chief of staff, Andrew Card, was the point man on the deal. Boeing emails indicate that Card was mainly interested in the jobs the contract would create. Boeing claimed 28,000 new jobs would be added to the payroll. Roche, the Air Force secretary, claimed the number would be 39,000. The audit indicated the negotiations reflected “unsound acquisition and procurement practices.” Maybe the Congress should give an ultimatum to Boeing—change your ways or be barred from bidding on future government contracts. We are talking about $23.5 billion of taxpayer money.
The Philadelphia Metro area has been hit by two plat closings. Gross-Given Manufacturing, a vending machine company, will close its plant this month and lay off 113 workers. Mail-Well Envelope Co. will close its doors in May and eliminate 125 jobs.
From July 2000 until August 2003, Maine lost 17,800 manufacturing jobs, a loss of 22.1% and a greater percentage reduction than any other state in the nation, stated Maine AFL-CIO President Edward Gorham. This loss does not take into account the hundreds of paper employees who lost their jobs through the recent closing of the Eastern Pulp and Paper mills in Brewer and Lincoln, Maine. These two mills employed more than 750 people. Over all, in the last two years, there has been a 3% decline in New England employment, including 150,000 jobs lost in manufacturing.
When viewing March’s employment numbers, at least one sector will not be mentioned. There are a growing number of “underemployed” workers, those that take any job they could get rather than risk unemployment. According to various studies, they have too much experience or education and receive wages often far below their previous employment. In addition, it would be wise to focus on the number of people participating in the work force. Over the past three years, there has been a 1% drop in the participation rate due to the weak labor market. That rate is understated with the 1million+ unemployed having lost their benefits since December 21. In sum, there are less people in the workplace. That is a fact.
James Chanos: “One of the biggest components of a car’s costs are the legacy healthcare and pension benefits for people who don’t even work there any more.”
Marc Faber: “In the past I have had the tendency to dismiss the deflationist views of some reputed economists and strategists as unlikely. I now feel the current universal asset inflation and overheated Chinese economy will be followed by a serious bust and asset deflation, which will kill consumption in the U.S. The only question is when.”
Personal savings increased to 1.9% of disposable income in February, up from January’s 1.8%.
Bruce Karatz, chairman and chief executive of KB Home: “Industry seems to have gotten very used to the idea of hiring slowly.”
Sunday, March 28, 2004
3/28/04 Surimi
For all you chefs, surimi is imitation crabmeat. Nichiro, a company based in Japan, employs about 700 people in Washington, Oregon, and Alaska. They process frozen seafood products under the Peter Pan Saefoods and SeaBlends labels. In May, the company is closing its Seattle facility and laying off 63 workers. Maybe the market for the imitation is waning. Maybe people want the real McCoy. That would prove to be a welcome change.
I know life on Wall Street rarely reflects the paycheck-to-paycheck life on Main Street. Money managers have almost no sense of reality when it comes to a life built around layoffs, fear of layoffs, strangling credit card debts, and the losing battle to make ends meet. Wall Street traders listen to the latest terrorist rumors and the whisper numbers making the rounds of the white shoe boiler rooms. I’ve been there. I’ve seen the rows of losers manning the phones with the latest gospel stories on the most closely watched stories. I’ve fired many of those soothsayers. Afterwards, my firms ran more efficiently and with greater honesty.
This week we will find out whether OPEC will reduce the production quota limit to 23.5 million barrels per day starting April 1. At the least, I expect that reduction to be delayed. However, there is the possibility that the quota could be increased. Much of the decision will focus on the global supply and demand situation, the price direction for the dollar, and the impact of higher crude prices on the world economy, particularly the U.S. economy. Just as Japan and China set our interest rates, OPEC’s oil pricing affects our growing trade deficit and the level of domestic inflation. OPEC cares about OPEC. Our nation’s financial well being is truly secondary. In dollar terms, the $38 per barrel price is not that encouraging to the producers. On the other hand, OPEC must keep a watchful eye on sources of oil from non-OPEC producing nations. Those with cash needs will settle for lower prices. Wal-Mart knows something about that. In the end, higher prices create more supply. Falsified supply and demand cannot fool every consumer on every street corner. Before you know it, more supply will bring layoffs. The OPEC nations may learn the world of paycheck-to-paycheck.
At the end of this week, you will read the headline that more jobs were added in March than at any time since December 2000. The jobs created are real. They are lower paying jobs that barely provide paychecks to cover week-to-week expenses. Many are contracting jobs. Many are part-time jobs. If you believe the labor market has turned the corner, then your brain has imitation gray matter. Every day I have provided examples of how the job market continues to exhibit weak knees. There is no stability and no substance. Keep your eye on the ball. Watch the ball’s rotation. Watch the spin. You’ll have a better chance to connect with the truth.
For all you chefs, surimi is imitation crabmeat. Nichiro, a company based in Japan, employs about 700 people in Washington, Oregon, and Alaska. They process frozen seafood products under the Peter Pan Saefoods and SeaBlends labels. In May, the company is closing its Seattle facility and laying off 63 workers. Maybe the market for the imitation is waning. Maybe people want the real McCoy. That would prove to be a welcome change.
I know life on Wall Street rarely reflects the paycheck-to-paycheck life on Main Street. Money managers have almost no sense of reality when it comes to a life built around layoffs, fear of layoffs, strangling credit card debts, and the losing battle to make ends meet. Wall Street traders listen to the latest terrorist rumors and the whisper numbers making the rounds of the white shoe boiler rooms. I’ve been there. I’ve seen the rows of losers manning the phones with the latest gospel stories on the most closely watched stories. I’ve fired many of those soothsayers. Afterwards, my firms ran more efficiently and with greater honesty.
This week we will find out whether OPEC will reduce the production quota limit to 23.5 million barrels per day starting April 1. At the least, I expect that reduction to be delayed. However, there is the possibility that the quota could be increased. Much of the decision will focus on the global supply and demand situation, the price direction for the dollar, and the impact of higher crude prices on the world economy, particularly the U.S. economy. Just as Japan and China set our interest rates, OPEC’s oil pricing affects our growing trade deficit and the level of domestic inflation. OPEC cares about OPEC. Our nation’s financial well being is truly secondary. In dollar terms, the $38 per barrel price is not that encouraging to the producers. On the other hand, OPEC must keep a watchful eye on sources of oil from non-OPEC producing nations. Those with cash needs will settle for lower prices. Wal-Mart knows something about that. In the end, higher prices create more supply. Falsified supply and demand cannot fool every consumer on every street corner. Before you know it, more supply will bring layoffs. The OPEC nations may learn the world of paycheck-to-paycheck.
At the end of this week, you will read the headline that more jobs were added in March than at any time since December 2000. The jobs created are real. They are lower paying jobs that barely provide paychecks to cover week-to-week expenses. Many are contracting jobs. Many are part-time jobs. If you believe the labor market has turned the corner, then your brain has imitation gray matter. Every day I have provided examples of how the job market continues to exhibit weak knees. There is no stability and no substance. Keep your eye on the ball. Watch the ball’s rotation. Watch the spin. You’ll have a better chance to connect with the truth.
3/27/04 The American Dream Down Payment Act
This is the beginning of a two-day posting focusing on Main Street. Since I am not running for political office, I have an advantage. I can and do tell the truth- not as I want you to see it, but the truth reflecting the facts. I doubt whether any of you have heard of the American Dream Down Payment Act. You will. Bush just signed it into law. The President is asking Congress to provide an annual $200 million for this program. Bush stated “that additional money would help an estimated $40,000 low-income families every year become first-time homeowners. I’m proposing that we make zero down payment loans available to first-time buyers whose mortgages are guaranteed by the FHA. And this will help about $150,000 families buy homes in the first year alone.”
The headlines will describe how compassionate the second coming of Bush as a president truly is. Rather than buy this bullshit on the Administration’s attempt to close the home ownership gap, one should pay close attention to those who talk out of both sides of their mouth and smile while doing it. The same person who gave you The American Dream Down Payment Act also gave you the nightmare on Main Street. On December 21 Bush made no attempt to extend the unemployment benefits for millions of Americans. This Friday you will read how more jobs were created in America. The headlines will ignore that hundreds of thousands of unemployed Americans who ceased to be counted as unemployed because they lost their benefits in March. I am not running for office. The American dream is in the voting booth. Pull the lever that provides reality.
This is the beginning of a two-day posting focusing on Main Street. Since I am not running for political office, I have an advantage. I can and do tell the truth- not as I want you to see it, but the truth reflecting the facts. I doubt whether any of you have heard of the American Dream Down Payment Act. You will. Bush just signed it into law. The President is asking Congress to provide an annual $200 million for this program. Bush stated “that additional money would help an estimated $40,000 low-income families every year become first-time homeowners. I’m proposing that we make zero down payment loans available to first-time buyers whose mortgages are guaranteed by the FHA. And this will help about $150,000 families buy homes in the first year alone.”
The headlines will describe how compassionate the second coming of Bush as a president truly is. Rather than buy this bullshit on the Administration’s attempt to close the home ownership gap, one should pay close attention to those who talk out of both sides of their mouth and smile while doing it. The same person who gave you The American Dream Down Payment Act also gave you the nightmare on Main Street. On December 21 Bush made no attempt to extend the unemployment benefits for millions of Americans. This Friday you will read how more jobs were created in America. The headlines will ignore that hundreds of thousands of unemployed Americans who ceased to be counted as unemployed because they lost their benefits in March. I am not running for office. The American dream is in the voting booth. Pull the lever that provides reality.
Thursday, March 25, 2004
2/26/04 Jobless Claims
As we know, a mass layoff is defined as 50 jobs lost from a single employer within 30 days. California reported the most initial claims for unemployment in February, with 29,895, followed by Ohio, Illinois, and Texas. These four states accounted for 50% of the nation’s initial claim for unemployment in February, according to the BLS. It is worthwhile noting that Ohio employers initiated 46 mass layoffs in February resulting in 4,142 initial claims. In the year earlier period, there were the same 46 mass layoffs with 4,097 lost jobs. Yesterday, we discussed that the employment picture in Illinois is stuck in neutral, and the same can be stated for Ohio.
It is also worth noting that the Conference Board’s Help-Wanted Index is also stuck in neutral. The Index registered 40 last month and in the year earlier period it was 41. As the Conference Board’s chief economist Ken Goldstein noted, “consumers have grown more concerned about why continued increases in industrial production and GDP have generated only meager job increases.
There needs to be an analysis focusing on the differentiation between job creation and the decline in jobless claims. As the Center on Budget and Policy Priorities observed, the decline in jobless claims is the result of unemployed workers exhausting their eligibility for benefits. This is a topic we have discussed since December 21. The Center’s report indicated that 1.1 million unemployed workers will have exhausted their benefits in the period from December 21 through the end of March. Therefore, they were dropped from the unemployment rolls. We know that 1.1 million jobs have not been created in this period. In sum, taking into account layoffs, mass layoffs, individuals losing their unemployment benefits, and discouraged workers leaving the labor force, there has been a net job loss at least since December 21. Whether the BLS states 1 employee, 100 employees, 1,000 employees, 100,000 employees, or even 1 million workers are added to the payrolls, the economy has still experienced rising unemployment. You can listen to the spins by members of the Administration, Congress, and the BLS. The numbers will not change with the bullshit. Isaac Shapiro of the Center on Budget and Policy Priorities stated “in no other comparable period on record have so many individuals exhausted their regular benefits and gone without additional aid.”
New York Federal Reserve President Timothy Geithner: “The current deterioration in the U.S. fiscal position and the acute decline in the net national savings rate represent risks to the financial system and the economy as a whole.”
For the fourth quarter, the personal consumption expenditure (PCE) price deflator was revised from 0.7% annual rate to 1%.
Forecasts for the gain in March payrolls range from a low of 100,000 to a high of 225,000. Of course, no one seems to be concerned by the hundreds of thousands dropping off the unemployment rolls in March due to the loss of benefits. This is worse than looking at the world through rose-colored glasses. It’s creating numbers that have no basis in fact. One could say they are on the order of the perceived threat from WMD that ceased to exist in the early 1990s. Jobs have been destroyed and eliminated and so were the WMD. Many will take issue with this analogy; however, those that do probably have a job and most likely don’t have a family member or a friend who’ve been killed in the war in Iraq.
Fed Governor Donald Kohn: “Slack in resource utilization will probably be eliminated only gradually, so competition for jobs and for market share should remain intense…I think policy action can await convincing evidence that labor market slack is on a declining trend and that inflation is no longer decreasing.”
As we know, a mass layoff is defined as 50 jobs lost from a single employer within 30 days. California reported the most initial claims for unemployment in February, with 29,895, followed by Ohio, Illinois, and Texas. These four states accounted for 50% of the nation’s initial claim for unemployment in February, according to the BLS. It is worthwhile noting that Ohio employers initiated 46 mass layoffs in February resulting in 4,142 initial claims. In the year earlier period, there were the same 46 mass layoffs with 4,097 lost jobs. Yesterday, we discussed that the employment picture in Illinois is stuck in neutral, and the same can be stated for Ohio.
It is also worth noting that the Conference Board’s Help-Wanted Index is also stuck in neutral. The Index registered 40 last month and in the year earlier period it was 41. As the Conference Board’s chief economist Ken Goldstein noted, “consumers have grown more concerned about why continued increases in industrial production and GDP have generated only meager job increases.
There needs to be an analysis focusing on the differentiation between job creation and the decline in jobless claims. As the Center on Budget and Policy Priorities observed, the decline in jobless claims is the result of unemployed workers exhausting their eligibility for benefits. This is a topic we have discussed since December 21. The Center’s report indicated that 1.1 million unemployed workers will have exhausted their benefits in the period from December 21 through the end of March. Therefore, they were dropped from the unemployment rolls. We know that 1.1 million jobs have not been created in this period. In sum, taking into account layoffs, mass layoffs, individuals losing their unemployment benefits, and discouraged workers leaving the labor force, there has been a net job loss at least since December 21. Whether the BLS states 1 employee, 100 employees, 1,000 employees, 100,000 employees, or even 1 million workers are added to the payrolls, the economy has still experienced rising unemployment. You can listen to the spins by members of the Administration, Congress, and the BLS. The numbers will not change with the bullshit. Isaac Shapiro of the Center on Budget and Policy Priorities stated “in no other comparable period on record have so many individuals exhausted their regular benefits and gone without additional aid.”
New York Federal Reserve President Timothy Geithner: “The current deterioration in the U.S. fiscal position and the acute decline in the net national savings rate represent risks to the financial system and the economy as a whole.”
For the fourth quarter, the personal consumption expenditure (PCE) price deflator was revised from 0.7% annual rate to 1%.
Forecasts for the gain in March payrolls range from a low of 100,000 to a high of 225,000. Of course, no one seems to be concerned by the hundreds of thousands dropping off the unemployment rolls in March due to the loss of benefits. This is worse than looking at the world through rose-colored glasses. It’s creating numbers that have no basis in fact. One could say they are on the order of the perceived threat from WMD that ceased to exist in the early 1990s. Jobs have been destroyed and eliminated and so were the WMD. Many will take issue with this analogy; however, those that do probably have a job and most likely don’t have a family member or a friend who’ve been killed in the war in Iraq.
Fed Governor Donald Kohn: “Slack in resource utilization will probably be eliminated only gradually, so competition for jobs and for market share should remain intense…I think policy action can await convincing evidence that labor market slack is on a declining trend and that inflation is no longer decreasing.”
3/25/04 Stuck In Neutral
Michigan’s 6.6% unemployment rate remained unchanged in February. In visiting with Bruce Weaver, acting director of the Michigan Department of Labor and Economic Growth’s Office of Labor Market Information, I quickly learned that Michigan’s labor market is stuck in neutral. Bruce stated “most of our indicators show the job market remains pretty flat and hasn’t shown any signs of accelerating. We haven’t had much change from this time a year ago. It’s clear that employers across most industries appear to still be remaining cautious about adding additional workers to their payrolls.” In the latest survey of companies, the number of payroll jobs in Michigan declined by 8,000 to about 4.37 million. Even when looking at the more optimistic household survey, the number of working people rose by just 1,000 in February. Peter Morici is a business professor at the University of Maryland and a former chief economist for the U.S. International Trade Commission. Morici observed “a lot of people are sitting at home. A lot of people have evaporated into the gray economy. We’ve had a decline in real wages last year. So I would say that the job market is kind of sick.”
According to the California State Employment Development Department, from January 2001 through January 2004, the Bay Area lost 391,000 jobs, nearly equal to the entire population of Oakland. That represents an 11% decline in the job totals for the nine-county region. By comparison, from January 1990 through January 1993, the Los Angeles area lost 408,000 jobs, a drop of 9.9% according to the EDD data. Dan Van Dyke, an economist with Berkeley-based Rosen Consulting Group, stated “the Bay Area is certainly having one of the worst regional declines anywhere in the United States since the end of World War II. It’s hard to really comprehend how severe the decline has been in the Bay Area.”
According to the latest UCLA Anderson Forecast, California’s payroll growth within the next two or three months should run around 100,000 to 200,000 new jobs a month. That would be welcome news. There has been a net outflow of people moving from California to other states. The weak job market has been the main reason for the exodus. I believe the California economy has begun to level out, and is now in the neutral zone. That improvement does not equate to a sharp upturn in employment. Bruce Weaver could probably tell UCLA economists a thing or two.
Fiesta Food is closing 4 Wisconsin grocery stores and laying off 194 people on April 1. Arista Records is being folded into RCA Records. About 110 staffers were let go yesterday. Manulife Financial’s acquisition of John Hancock Financial will close this Spring. After the merger, there will be about 2,000 job losses worldwide, and a great portion of Hancock’s flagship tower in Boston’s Copley Square will be leased. Boston attorney Jason Adkins stated “it’s going to mean a lot of professional jobs will be lost, and a primary financial institution will be lost. That hub of activity is gone.” Human Genome Sciences plans to lay off 200 workers, or 20% of its workforce.
Working America has 125,000 members. It is a recently formed advocacy group for non-union workers, and it is one of 64 affiliates with the AFL-CIO. They are co-sponsoring with the AFL-CIO a bus tour throughout the U.S. to highlight the plight of workers who have been passed over by the economic recovery. Karen Nussbaum, director of Working America, stated “life is getting harder for most working people and that part of the story just was not getting told.”
April 1 is traditionally April Fool’s Day. This April 1 will have another side to it. The organization called Democracy Means You announced that more than 100,000 Americans are projected to participate in the National “I’m Embarrassed By My President” Day on April 1. They will be wearing brown ribbons, arm bands , or clothing to protest the spin, lies, manipulations, misrepresentations, and mismanagement of the Bush administration, stated the founder of Democracy Means You.
According to a recent poll by the Cherenson Group, 85% of Americans are more concerned with trust and honesty than with political viewpoint when considering for whom to vote. In addition, they view trust as more important than price and quality when deciding with whom to do business or invest.
The ECB will consider an interest rate cut at their April 1 meeting.
The Bundesbank president stated the German economic recovery this year is “somewhat weaker” than expected.
The State Street Investor Confidence Index dropped 1.7 points to 92.2 in March. The high point was 109 in December. The Index has fallen for three consecutive months.
According to Consolidated Credit Counseling Services, household debt grew 10.4% in 2003, the biggest increase since 1987. Net savings in the economy fell 38%. According to this organization’s latest survey, 63% of the 5,000 respondents stated debts are making their home lives unhappy and 43% have a debt to income ratio of 50% or more. In addition, 58% state their credit cards are at or near their maximum credit limit, 62% do not have a savings account, 37% took cash advances from one card to make payments on another card, and 59% only pay the minimum amount due on credit cards each month.
In February, demand for military aircraft surged 61% and for civilian aircraft about 34% and for autos 5%. Excluding the transportation sector, durable goods orders declined 0.3% in February, the first decline in three months. Mat Johnson, chief economist at Quantit Economic Group, stated “business investment spending will be moderate this quarter.”
Residential construction accounts for 5% of domestic GDP. Purchases of new homes have exceeded an annual rate of 1 million for 18 of the past 19 months.
Michigan’s 6.6% unemployment rate remained unchanged in February. In visiting with Bruce Weaver, acting director of the Michigan Department of Labor and Economic Growth’s Office of Labor Market Information, I quickly learned that Michigan’s labor market is stuck in neutral. Bruce stated “most of our indicators show the job market remains pretty flat and hasn’t shown any signs of accelerating. We haven’t had much change from this time a year ago. It’s clear that employers across most industries appear to still be remaining cautious about adding additional workers to their payrolls.” In the latest survey of companies, the number of payroll jobs in Michigan declined by 8,000 to about 4.37 million. Even when looking at the more optimistic household survey, the number of working people rose by just 1,000 in February. Peter Morici is a business professor at the University of Maryland and a former chief economist for the U.S. International Trade Commission. Morici observed “a lot of people are sitting at home. A lot of people have evaporated into the gray economy. We’ve had a decline in real wages last year. So I would say that the job market is kind of sick.”
According to the California State Employment Development Department, from January 2001 through January 2004, the Bay Area lost 391,000 jobs, nearly equal to the entire population of Oakland. That represents an 11% decline in the job totals for the nine-county region. By comparison, from January 1990 through January 1993, the Los Angeles area lost 408,000 jobs, a drop of 9.9% according to the EDD data. Dan Van Dyke, an economist with Berkeley-based Rosen Consulting Group, stated “the Bay Area is certainly having one of the worst regional declines anywhere in the United States since the end of World War II. It’s hard to really comprehend how severe the decline has been in the Bay Area.”
According to the latest UCLA Anderson Forecast, California’s payroll growth within the next two or three months should run around 100,000 to 200,000 new jobs a month. That would be welcome news. There has been a net outflow of people moving from California to other states. The weak job market has been the main reason for the exodus. I believe the California economy has begun to level out, and is now in the neutral zone. That improvement does not equate to a sharp upturn in employment. Bruce Weaver could probably tell UCLA economists a thing or two.
Fiesta Food is closing 4 Wisconsin grocery stores and laying off 194 people on April 1. Arista Records is being folded into RCA Records. About 110 staffers were let go yesterday. Manulife Financial’s acquisition of John Hancock Financial will close this Spring. After the merger, there will be about 2,000 job losses worldwide, and a great portion of Hancock’s flagship tower in Boston’s Copley Square will be leased. Boston attorney Jason Adkins stated “it’s going to mean a lot of professional jobs will be lost, and a primary financial institution will be lost. That hub of activity is gone.” Human Genome Sciences plans to lay off 200 workers, or 20% of its workforce.
Working America has 125,000 members. It is a recently formed advocacy group for non-union workers, and it is one of 64 affiliates with the AFL-CIO. They are co-sponsoring with the AFL-CIO a bus tour throughout the U.S. to highlight the plight of workers who have been passed over by the economic recovery. Karen Nussbaum, director of Working America, stated “life is getting harder for most working people and that part of the story just was not getting told.”
April 1 is traditionally April Fool’s Day. This April 1 will have another side to it. The organization called Democracy Means You announced that more than 100,000 Americans are projected to participate in the National “I’m Embarrassed By My President” Day on April 1. They will be wearing brown ribbons, arm bands , or clothing to protest the spin, lies, manipulations, misrepresentations, and mismanagement of the Bush administration, stated the founder of Democracy Means You.
According to a recent poll by the Cherenson Group, 85% of Americans are more concerned with trust and honesty than with political viewpoint when considering for whom to vote. In addition, they view trust as more important than price and quality when deciding with whom to do business or invest.
The ECB will consider an interest rate cut at their April 1 meeting.
The Bundesbank president stated the German economic recovery this year is “somewhat weaker” than expected.
The State Street Investor Confidence Index dropped 1.7 points to 92.2 in March. The high point was 109 in December. The Index has fallen for three consecutive months.
According to Consolidated Credit Counseling Services, household debt grew 10.4% in 2003, the biggest increase since 1987. Net savings in the economy fell 38%. According to this organization’s latest survey, 63% of the 5,000 respondents stated debts are making their home lives unhappy and 43% have a debt to income ratio of 50% or more. In addition, 58% state their credit cards are at or near their maximum credit limit, 62% do not have a savings account, 37% took cash advances from one card to make payments on another card, and 59% only pay the minimum amount due on credit cards each month.
In February, demand for military aircraft surged 61% and for civilian aircraft about 34% and for autos 5%. Excluding the transportation sector, durable goods orders declined 0.3% in February, the first decline in three months. Mat Johnson, chief economist at Quantit Economic Group, stated “business investment spending will be moderate this quarter.”
Residential construction accounts for 5% of domestic GDP. Purchases of new homes have exceeded an annual rate of 1 million for 18 of the past 19 months.
Wednesday, March 24, 2004
3/24/04 Walking The Plank
Yesterday, the ABA announced that credit card delinquencies jumped to 4.43% in the fourth quarter of 2003, up from 4.09% in the third quarter. According to Federal Reserve data, consumers have built up about $745 billion in credit debt. A survey by Consumer Action indicated that time penalty fees are rising while minimum payment requirements are falling. In addition, the survey showed that consumers who only make the minimum payment end up paying more interest. About one month ago, Greenspan provided reassuring rhetoric to Americans about their increasing debt load. Unfortunately, those words reflected a lack of reality. One cannot focus on the decline in consumer lending delinquencies while ignoring the rise in credit card delinquencies. In addition, nearly one-third of households saw the debt ratio for renters rise to 29% of their fourth-quarter income in 2003 from 22% a year earlier. According to cardweb.com, average U.S. credit card debt is $9,205 and 42% of Americans are making minimum or no payments on their credit-card balances. Too many Americans are walking the plank. Fortunately, you won’t have to listen to Greenspan’s advice much longer. Last year about 9 million people sought help with debt. That number grows yearly.
In a February public opinion poll conducted by Harris Interactive and the Reputation Institute, 74% of those surveyed described the image of big companies as “not good” or “terrible.” Joy Marie Sever, senior vice president at Harris Interactive, stated “collectively and individually, corporate reputations are declining—a decline that stems from a lack of trust.” A growing number on Main Street see this as a very big problem.
According to the AFL-CIO, Colorado has lost 36,600 manufacturing jobs during the past three years. Steve Adams, president of the AFL-CIO in Colorado, stated “people are getting laid off and they can’t find work, and I think that’s a travesty.”
Washington, D.C.-based American Electronics Association represents 3,000 companies with 1.8 million workers. Their recent report concludes that companies are forced to outsource because of increased global competition. It stated “unfortunately, some workers will be hurt as they lose their jobs in the short run; however, offshore outsourcing is in the long-term competitive interest of the United States, increasing productivity, profits, and GDP.” On the other hand, state Sen. Terry Phillips of Colorado remarked “it’s easy to say it’s a short-term problem. But tell that to the worker who lost his job. Is it a short-term problem for someone who can’t make rent or pay the mortgage?”
Today, PriceWaterhouseCoopers will release its survey of 120 large investors. It will indicate that these investors have a raised concern about potential price drops for commercial buildings, in particular, office properties.
Lewis Platt, former HP CEO: “Formally successful companies did not make gigantic mistakes… the only real mistake they made was to keep doing whatever it was that made them successful for a little to long.”
Houston-based Reliant Resources has eliminated 277 jobs so far this year. In a letter sent this week to the Texas Workforce Commission, the company stated it planned to shut down its operations at a complex where various services are provided to power plants. Reliant expects 194 employees could expect to lose their jobs in late May.
Yesterday, the ABA announced that credit card delinquencies jumped to 4.43% in the fourth quarter of 2003, up from 4.09% in the third quarter. According to Federal Reserve data, consumers have built up about $745 billion in credit debt. A survey by Consumer Action indicated that time penalty fees are rising while minimum payment requirements are falling. In addition, the survey showed that consumers who only make the minimum payment end up paying more interest. About one month ago, Greenspan provided reassuring rhetoric to Americans about their increasing debt load. Unfortunately, those words reflected a lack of reality. One cannot focus on the decline in consumer lending delinquencies while ignoring the rise in credit card delinquencies. In addition, nearly one-third of households saw the debt ratio for renters rise to 29% of their fourth-quarter income in 2003 from 22% a year earlier. According to cardweb.com, average U.S. credit card debt is $9,205 and 42% of Americans are making minimum or no payments on their credit-card balances. Too many Americans are walking the plank. Fortunately, you won’t have to listen to Greenspan’s advice much longer. Last year about 9 million people sought help with debt. That number grows yearly.
In a February public opinion poll conducted by Harris Interactive and the Reputation Institute, 74% of those surveyed described the image of big companies as “not good” or “terrible.” Joy Marie Sever, senior vice president at Harris Interactive, stated “collectively and individually, corporate reputations are declining—a decline that stems from a lack of trust.” A growing number on Main Street see this as a very big problem.
According to the AFL-CIO, Colorado has lost 36,600 manufacturing jobs during the past three years. Steve Adams, president of the AFL-CIO in Colorado, stated “people are getting laid off and they can’t find work, and I think that’s a travesty.”
Washington, D.C.-based American Electronics Association represents 3,000 companies with 1.8 million workers. Their recent report concludes that companies are forced to outsource because of increased global competition. It stated “unfortunately, some workers will be hurt as they lose their jobs in the short run; however, offshore outsourcing is in the long-term competitive interest of the United States, increasing productivity, profits, and GDP.” On the other hand, state Sen. Terry Phillips of Colorado remarked “it’s easy to say it’s a short-term problem. But tell that to the worker who lost his job. Is it a short-term problem for someone who can’t make rent or pay the mortgage?”
Today, PriceWaterhouseCoopers will release its survey of 120 large investors. It will indicate that these investors have a raised concern about potential price drops for commercial buildings, in particular, office properties.
Lewis Platt, former HP CEO: “Formally successful companies did not make gigantic mistakes… the only real mistake they made was to keep doing whatever it was that made them successful for a little to long.”
Houston-based Reliant Resources has eliminated 277 jobs so far this year. In a letter sent this week to the Texas Workforce Commission, the company stated it planned to shut down its operations at a complex where various services are provided to power plants. Reliant expects 194 employees could expect to lose their jobs in late May.
Tuesday, March 23, 2004
3/23/04 Maintaining Balance
All investing eyes will be focused on this morning?s higher opening for equity prices. It is not for me to suggest what is important to each individual. At the same time, it might be appropriate to turn our attention to yesterday?s speech given by Michael Moskow, president to the Federal Reserve Bank of Chicago, to risk managers in the Windy City. He remarked that, while the dollar?s decline and increase in raw material costs may cause prices to rise, these forces would be offset by an ?elevated? unemployment level and spare capacity at factories. He stated ?we believe the effect of slack resources remains predominant at this time, and we expect inflation to remain low this year?inflation rates are unlikely to increase significantly.? He is not worried about higher fuel costs hurting companies or consumers because ?energy is a smaller and smaller percentage of our GDP each year.? In the past 7 weeks oil prices have increased 15%. That?s nothing to be ignored.
If flat-rolled and other types of steel have more than doubled in price in the past year, who is to pay for these increases? Delphi Corp., the world?s largest auto parts manufacturer, won a TRO this month against a major supplier from passing along increased steel costs. Not every company has this clout. Up to this point, manufacturers have absorbed most of the increased prices. This cannot continue forever. Richard Yamarone, director of economic research at Argus Rresearch, stated ultimately, cutting jobs and increasing productivity is the only way many companies can survive in the effort to offset rising costs.
In a recent report, Cutting Edge Information reported that more than 90% of U.S. companies outsource at least one activity, turning to trusted suppliers to reduce overhead and exposure-shifting spending from riskier internal divisions and capital budgets to external contracts.
Because of declining production rates in the 747 and 767 lines in Everett, Washington, Boeing sent out more than 300 layoff notices on Friday. The company had a workforce of 80,000 in Washington in 2001. That number is now just above the 53,000 level. Boeing is in for more labor trouble. By a 3 to 1 margin, the technical and professional workers at Boeing?s Wichita plant voted yesterday to turn down the company?s latest contract offer. About 3,450 union workers at the Wichita facility have been working under an extension since a 3-year contract expired Feb. 19.
Microsoft faces a $613 million fine from the EU plus additional remedies requiring the company to share more information, including intellectual property, and to curb anti-competitive practices in violation of EU law. This is not a black and white situation. There will be give and take and everyone will get their pound of flesh. Right now it?s fuel for the media. Microsoft stockholders have seen the value of their shares dip to new yearly lows. For long term holders, this is but one more buying opportunity. The company will be around long after the EU is emasculated.
Siemens reported yesterday that they are planning on shifting more than 10,000 jobs in Germany to lower-cost countries in Asia and Eastern Europe.
All investing eyes will be focused on this morning?s higher opening for equity prices. It is not for me to suggest what is important to each individual. At the same time, it might be appropriate to turn our attention to yesterday?s speech given by Michael Moskow, president to the Federal Reserve Bank of Chicago, to risk managers in the Windy City. He remarked that, while the dollar?s decline and increase in raw material costs may cause prices to rise, these forces would be offset by an ?elevated? unemployment level and spare capacity at factories. He stated ?we believe the effect of slack resources remains predominant at this time, and we expect inflation to remain low this year?inflation rates are unlikely to increase significantly.? He is not worried about higher fuel costs hurting companies or consumers because ?energy is a smaller and smaller percentage of our GDP each year.? In the past 7 weeks oil prices have increased 15%. That?s nothing to be ignored.
If flat-rolled and other types of steel have more than doubled in price in the past year, who is to pay for these increases? Delphi Corp., the world?s largest auto parts manufacturer, won a TRO this month against a major supplier from passing along increased steel costs. Not every company has this clout. Up to this point, manufacturers have absorbed most of the increased prices. This cannot continue forever. Richard Yamarone, director of economic research at Argus Rresearch, stated ultimately, cutting jobs and increasing productivity is the only way many companies can survive in the effort to offset rising costs.
In a recent report, Cutting Edge Information reported that more than 90% of U.S. companies outsource at least one activity, turning to trusted suppliers to reduce overhead and exposure-shifting spending from riskier internal divisions and capital budgets to external contracts.
Because of declining production rates in the 747 and 767 lines in Everett, Washington, Boeing sent out more than 300 layoff notices on Friday. The company had a workforce of 80,000 in Washington in 2001. That number is now just above the 53,000 level. Boeing is in for more labor trouble. By a 3 to 1 margin, the technical and professional workers at Boeing?s Wichita plant voted yesterday to turn down the company?s latest contract offer. About 3,450 union workers at the Wichita facility have been working under an extension since a 3-year contract expired Feb. 19.
Microsoft faces a $613 million fine from the EU plus additional remedies requiring the company to share more information, including intellectual property, and to curb anti-competitive practices in violation of EU law. This is not a black and white situation. There will be give and take and everyone will get their pound of flesh. Right now it?s fuel for the media. Microsoft stockholders have seen the value of their shares dip to new yearly lows. For long term holders, this is but one more buying opportunity. The company will be around long after the EU is emasculated.
Siemens reported yesterday that they are planning on shifting more than 10,000 jobs in Germany to lower-cost countries in Asia and Eastern Europe.
3/23/04 Maintaining Balance
All investing eyes will be focused on this morning’s higher opening for equity prices. It is not for me to suggest what is important to each individual. At the same time, it might be appropriate to turn our attention to yesterday’s speech given by Michael Moskow, president to the Federal Reserve Bank of Chicago, to risk managers in the Windy City. He remarked that, while the dollar’s decline and increase in raw material costs may cause prices to rise, these forces would be offset by an “elevated” unemployment level and spare capacity at factories. He stated “we believe the effect of slack resources remains predominant at this time, and we expect inflation to remain low this year…inflation rates are unlikely to increase significantly.” He is not worried about higher fuel costs hurting companies or consumers because “energy is a smaller and smaller percentage of our GDP each year.” In the past 7 weeks oil prices have increased 15%. That’s nothing to be ignored.
If flat-rolled and other types of steel have more than doubled in price in the past year, who is to pay for these increases? Delphi Corp., the world’s largest auto parts manufacturer, won a TRO this month against a major supplier from passing along increased steel costs. Not every company has this clout. Up to this point, manufacturers have absorbed most of the increased prices. This cannot continue forever. Richard Yamarone, director of economic research at Argus Rresearch, stated ultimately, cutting jobs and increasing productivity is the only way many companies can survive in the effort to offset rising costs.
In a recent report, Cutting Edge Information reported that more than 90% of U.S. companies outsource at least one activity, turning to trusted suppliers to reduce overhead and exposure-shifting spending from riskier internal divisions and capital budgets to external contracts.
Because of declining production rates in the 747 and 767 lines in Everett, Washington, Boeing sent out more than 300 layoff notices on Friday. The company had a workforce of 80,000 in Washington in 2001. That number is now just above the 53,000 level. Boeing is in for more labor trouble. By a 3 to 1 margin, the technical and professional workers at Boeing’s Wichita plant voted yesterday to turn down the company’s latest contract offer. About 3,450 union workers at the Wichita facility have been working under an extension since a 3-year contract expired Feb. 19.
Microsoft faces a $613 million fine from the EU plus additional remedies requiring the company to share more information, including intellectual property, and to curb anti-competitive practices in violation of EU law. This is not a black and white situation. There will be give and take and everyone will get their pound of flesh. Right now it’s fuel for the media. Microsoft stockholders have seen the value of their shares dip to new yearly lows. For long term holders, this is but one more buying opportunity. The company will be around long after the EU is emasculated.
Siemens reported yesterday that they are planning on shifting more than 10,000 jobs in Germany to lower-cost countries in Asia and Eastern Europe.
All investing eyes will be focused on this morning’s higher opening for equity prices. It is not for me to suggest what is important to each individual. At the same time, it might be appropriate to turn our attention to yesterday’s speech given by Michael Moskow, president to the Federal Reserve Bank of Chicago, to risk managers in the Windy City. He remarked that, while the dollar’s decline and increase in raw material costs may cause prices to rise, these forces would be offset by an “elevated” unemployment level and spare capacity at factories. He stated “we believe the effect of slack resources remains predominant at this time, and we expect inflation to remain low this year…inflation rates are unlikely to increase significantly.” He is not worried about higher fuel costs hurting companies or consumers because “energy is a smaller and smaller percentage of our GDP each year.” In the past 7 weeks oil prices have increased 15%. That’s nothing to be ignored.
If flat-rolled and other types of steel have more than doubled in price in the past year, who is to pay for these increases? Delphi Corp., the world’s largest auto parts manufacturer, won a TRO this month against a major supplier from passing along increased steel costs. Not every company has this clout. Up to this point, manufacturers have absorbed most of the increased prices. This cannot continue forever. Richard Yamarone, director of economic research at Argus Rresearch, stated ultimately, cutting jobs and increasing productivity is the only way many companies can survive in the effort to offset rising costs.
In a recent report, Cutting Edge Information reported that more than 90% of U.S. companies outsource at least one activity, turning to trusted suppliers to reduce overhead and exposure-shifting spending from riskier internal divisions and capital budgets to external contracts.
Because of declining production rates in the 747 and 767 lines in Everett, Washington, Boeing sent out more than 300 layoff notices on Friday. The company had a workforce of 80,000 in Washington in 2001. That number is now just above the 53,000 level. Boeing is in for more labor trouble. By a 3 to 1 margin, the technical and professional workers at Boeing’s Wichita plant voted yesterday to turn down the company’s latest contract offer. About 3,450 union workers at the Wichita facility have been working under an extension since a 3-year contract expired Feb. 19.
Microsoft faces a $613 million fine from the EU plus additional remedies requiring the company to share more information, including intellectual property, and to curb anti-competitive practices in violation of EU law. This is not a black and white situation. There will be give and take and everyone will get their pound of flesh. Right now it’s fuel for the media. Microsoft stockholders have seen the value of their shares dip to new yearly lows. For long term holders, this is but one more buying opportunity. The company will be around long after the EU is emasculated.
Siemens reported yesterday that they are planning on shifting more than 10,000 jobs in Germany to lower-cost countries in Asia and Eastern Europe.
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