5/22/04 Strategies
Prince Bandar bin Sultan: “Saudi Arabia will encourage OPEC to increase its production ceiling by more than 2 million barrels per day. We have determined, after reviewing updated projections for oil supply and demand, that this increase in oil production is necessary to maintain stability in the market and growth in the world economy. Saudi Arabia has already communicated to its customers that it will produce approximately 9 million barrels per day starting in June 2004.”
In its latest fiscal year, Mitsubishi Motors lost $1.9 billion while sales fell 35% to $22 billion. For the current fiscal year, the company forecasts a $2 billion loss on $20 billion in sales. They will close 2 plants and cut 11,000 jobs, nearly 25% of its global workforce.
David McCall, director of the United Steel Workers of America District 1 in Ohio: “ Timken’s closure announcement is premature, completely unnecessary and demonstrates the company’s profound disloyalty to Canton steelworkers and the community. Timken never even put a proposal on the table. Instead they ran to the media and cried wolf in the hope of terrifying thousands of families about the loss of their jobs., which is about the only thing their strategy has succeeded in doing. It takes more than talk about ‘flexibility’ and ‘restrictive work rules’ to create a globally competitive facility. It also requires the company’s commitment to eliminate inefficiency and waste at all levels, to maintain equipment and to invest in new technologies.”
On Friday, Pentagon officials revealed they have investigated the deaths of 37 prisoners held by U.S. forces in Iraq and Afghanistan since August 2002. The nine prisoner homicides are still under investigation. In a tenth case, a soldier was punished and dismissed from the Army for using excessive force after shooting to death a man in Iraq who was throwing rocks at him. The rest are attributed to natural causes or considered justifiable homicide. The latter would describe the use of deadly force against a dangerously violent prisoner.
It has often been stated that one can tell something about a person by the company that person keeps. I wonder what that indicates about Bush and the company he has shared with Kenny Boy Lay, Ahmad Chalabi, and Prince Bandar bin Sultan?
According to a survey by the Craft Yarn Council of America, nationwide more than 38 million people knit or crochet. Of those, the number under 45 has doubled to 18% since 1996. At least two knitting cafes have opened-- one in New York City and one in West Hollywood, CA.
Manmohan Sing, India’s new PM, coined the phrase “liberalization with a human face.” In a recent interview, he revealed his strategy for India: “Development will be the key priority. The aim of reforms would be to remove poverty and increase employment through relief to decentralized sectors…we are not pursuing the privatization process as a part of a ideological commitment to dismantle the public sector. India needs a strong public sector as well. Outside these strategic sectors , wherever public enterprises can compete on an equal footing with the private sector—domestic and foreign—there is no reason why they should not be allowed to go forward. If they cannot compete and end up becoming a drag on the exchequer, then privatization will help by all means. But the interest of the worker must be protected. Foreign direct investment will be more focused on key areas like manufacturing and technology.”
Thursday, May 20, 2004
5/21/04 The Pause That May Not Refresh
In the week ended May 8, 21 states and territories reported a decrease in new unemployment claims while 32 had an increase.
The Conference Board's LEI in April rose 0.1%; however, of the ten indicators comprising the index, 4 rose while 6 declined.
The Philly Fed manufacturing index in May fell to 23.8 from 32.5 in April. Economists were expecting 30.5. New orders fell to 18.3 from 26.1 in April. Shipments fell to 20.2 from 27.7. The lone bright spot was the employment index rising to 22.6 from 12.2.
According to Autodata, Ford Expedition sales fell about 34% in April from the prior year while Chevy Suburban models declined approximately 21% in this time period.
The Fed continues to print money. The money supply in April rose to $5.81 trillion from March's $5.78 trillion.
The figures are in from the IRS for the tax refunds. A total of $184.3 billion was received through April 30 compared with the prior year's $172.3 billion. The $12 billion differnce was less than expected.
When it comes to those on the Bush team, it's either their way or the highway. The latest example is House Speaker Dennis Hastert, R-Ill, who asked reporters if Sen. John McCain, R-Ariz., was a Republican. McCain, Olympia Snowe, Susan Collins, and Lincoln Chafee- all Republicans- are blocking the approval of Bush's budget plan and the Senate vote on the budget has been delayed due to insufficent votes for it. It appears that McCain and the other dissenting Republicans want any tax cuts and/or benefit increases to be offset by tax increases and/or spending cuts. The basic problem is that, during the past 3 1/2 Bush years, his budget has simply been a spending plan. It has combined with the Fed's printing press to produce irrational fiscal stimulus. I salute McCain and the three other Republican senators. Not all politicians have their heads where the sun doesn't shine.
Novartis' Sandoz division opened its third generic drug plant in India, and stated "it most likely will be the best cost competitive plant we will have worldwide."
In the week ended May 8, 21 states and territories reported a decrease in new unemployment claims while 32 had an increase.
The Conference Board's LEI in April rose 0.1%; however, of the ten indicators comprising the index, 4 rose while 6 declined.
The Philly Fed manufacturing index in May fell to 23.8 from 32.5 in April. Economists were expecting 30.5. New orders fell to 18.3 from 26.1 in April. Shipments fell to 20.2 from 27.7. The lone bright spot was the employment index rising to 22.6 from 12.2.
According to Autodata, Ford Expedition sales fell about 34% in April from the prior year while Chevy Suburban models declined approximately 21% in this time period.
The Fed continues to print money. The money supply in April rose to $5.81 trillion from March's $5.78 trillion.
The figures are in from the IRS for the tax refunds. A total of $184.3 billion was received through April 30 compared with the prior year's $172.3 billion. The $12 billion differnce was less than expected.
When it comes to those on the Bush team, it's either their way or the highway. The latest example is House Speaker Dennis Hastert, R-Ill, who asked reporters if Sen. John McCain, R-Ariz., was a Republican. McCain, Olympia Snowe, Susan Collins, and Lincoln Chafee- all Republicans- are blocking the approval of Bush's budget plan and the Senate vote on the budget has been delayed due to insufficent votes for it. It appears that McCain and the other dissenting Republicans want any tax cuts and/or benefit increases to be offset by tax increases and/or spending cuts. The basic problem is that, during the past 3 1/2 Bush years, his budget has simply been a spending plan. It has combined with the Fed's printing press to produce irrational fiscal stimulus. I salute McCain and the three other Republican senators. Not all politicians have their heads where the sun doesn't shine.
Novartis' Sandoz division opened its third generic drug plant in India, and stated "it most likely will be the best cost competitive plant we will have worldwide."
5/20/04 A Mid-Week Special
There are two types of court martials-- a special and a general. There is a big difference and one large similarity. The big difference is that in a special the maximum penalty is one year while a general carries no limitation. In both, anyone who knew of the crime, and did not act to undo that crime, is subject to a court martial. I only know what I have read and heard in the media about Spc. Jeremy Sivits. Even though Sivits received a felony conviction with a one year term, the fact that this was not a general court martial leads me to believe our government could be pursuing a whitewashing of this matter. If so, the world is watching and it won't work.
It's been 21 years since there has been a strike at SBC Communications. Approximately 100,000 union workers in 13 states will go on strike at 12:01 AM Friday and return to work at 12:01 AM May 25. The main grievances surround wages, healthcare benefits, and outsourcing. The latter has cost 29,000 SBC workers their jobs in the last three years.
In a recent informal survey, 9 out of 10 Iraqis see U.S. troops as occupiers. Muqtada al-Sadr is now seen as the second most popuklar Iraqi politician after al-Sistani.
Brocade Communications will cut 9% of its workforce.
India's Prime Minister-elect Manmohan Singh: "The time has come for India to emerge as an economic power...we are not pursuing privatization as part of our ideological commitment. India needs a srong private sector as also a public sector. We will not do anything which will throw large pools of workers jobless."
In the most recent week U.S. jobless claims rose 12,000 to 345,000 versus expectations of a decline to 328,000. The four week moving average did fall 2,750 to 333,500.
There are two types of court martials-- a special and a general. There is a big difference and one large similarity. The big difference is that in a special the maximum penalty is one year while a general carries no limitation. In both, anyone who knew of the crime, and did not act to undo that crime, is subject to a court martial. I only know what I have read and heard in the media about Spc. Jeremy Sivits. Even though Sivits received a felony conviction with a one year term, the fact that this was not a general court martial leads me to believe our government could be pursuing a whitewashing of this matter. If so, the world is watching and it won't work.
It's been 21 years since there has been a strike at SBC Communications. Approximately 100,000 union workers in 13 states will go on strike at 12:01 AM Friday and return to work at 12:01 AM May 25. The main grievances surround wages, healthcare benefits, and outsourcing. The latter has cost 29,000 SBC workers their jobs in the last three years.
In a recent informal survey, 9 out of 10 Iraqis see U.S. troops as occupiers. Muqtada al-Sadr is now seen as the second most popuklar Iraqi politician after al-Sistani.
Brocade Communications will cut 9% of its workforce.
India's Prime Minister-elect Manmohan Singh: "The time has come for India to emerge as an economic power...we are not pursuing privatization as part of our ideological commitment. India needs a srong private sector as also a public sector. We will not do anything which will throw large pools of workers jobless."
In the most recent week U.S. jobless claims rose 12,000 to 345,000 versus expectations of a decline to 328,000. The four week moving average did fall 2,750 to 333,500.
Wednesday, May 19, 2004
5/19/04 Someone Has To Pay
Continental Airlines Chairman and CEO Bethune: "None of us can afford to operate with these high fuel costs. If we are not successful in passing along these exorbitant fuel costs through higher fares, we will ultimately be forced to seek significant wage and benefit concessions and furloughs." It is the first time Continental has raised the possibility of cutting wages. The proposed wage increase is $10 eachway for flights up to 100 miles, and $20 each way for flights of more than 1,000 miles.
According to AAA, the average statewide cost of regular unleaded gasoline in California is $2.31 per gallon, up 44 cents from a year ago. California requires cleaner-burning fuel than other states, and this is one reason for the higher price.
Edmunds.com reported that the average manufacturer incentive per vehicle sold in the U.S. was $2,367 in April 2004, up $80 from April 2003, and down $12 from March 2004. In April 2004 Chrysler cut incentives by $659 to $2,944 per vehicle. GM increased incentives by $226 to $3,620 per vehicle, and Ford increased incentives by $107 to $2,914 per vehicle. This morning all three announced greater incentives for SUVs and other high gas consumption vehicles.
Keebler will move its cookie and cracker business to Battle Creek from its Elmhurst, Ill. location and cut 300 jobs.
According to a new study by the Center for Labor Market Studies at Norhteastern University, since November 2001, "almost none of the productivity gains ended up in wages and salaries. Combine that with the fact that firms didn't add new workers to their payrolls, and that's what made this recovery so unique." The study indicated that, for the first time in any economic recovery since the end of World War II, corporate profits received a larger share of the growth than labor did." Unfortunately, when inflation mounts in gasoline, natural gas, eggs, milk, meat, and other foodstuffs,something has to give. The average wage earner, those on Main Street, cannot live on love alone. Bethune needs to consider that his team of workers is facing some of the same problems Continental is. There is only one pie. There has to be enough food to go around for everyone. Mr. and Mrs. Public can't pass along the gas price increases. They have to absorb them. They're screwed. Forty four cents a gallon in one year hurts when wages and benefits don't keep up with productivity gains and/or the rise in inflation.
Continental Airlines Chairman and CEO Bethune: "None of us can afford to operate with these high fuel costs. If we are not successful in passing along these exorbitant fuel costs through higher fares, we will ultimately be forced to seek significant wage and benefit concessions and furloughs." It is the first time Continental has raised the possibility of cutting wages. The proposed wage increase is $10 eachway for flights up to 100 miles, and $20 each way for flights of more than 1,000 miles.
According to AAA, the average statewide cost of regular unleaded gasoline in California is $2.31 per gallon, up 44 cents from a year ago. California requires cleaner-burning fuel than other states, and this is one reason for the higher price.
Edmunds.com reported that the average manufacturer incentive per vehicle sold in the U.S. was $2,367 in April 2004, up $80 from April 2003, and down $12 from March 2004. In April 2004 Chrysler cut incentives by $659 to $2,944 per vehicle. GM increased incentives by $226 to $3,620 per vehicle, and Ford increased incentives by $107 to $2,914 per vehicle. This morning all three announced greater incentives for SUVs and other high gas consumption vehicles.
Keebler will move its cookie and cracker business to Battle Creek from its Elmhurst, Ill. location and cut 300 jobs.
According to a new study by the Center for Labor Market Studies at Norhteastern University, since November 2001, "almost none of the productivity gains ended up in wages and salaries. Combine that with the fact that firms didn't add new workers to their payrolls, and that's what made this recovery so unique." The study indicated that, for the first time in any economic recovery since the end of World War II, corporate profits received a larger share of the growth than labor did." Unfortunately, when inflation mounts in gasoline, natural gas, eggs, milk, meat, and other foodstuffs,something has to give. The average wage earner, those on Main Street, cannot live on love alone. Bethune needs to consider that his team of workers is facing some of the same problems Continental is. There is only one pie. There has to be enough food to go around for everyone. Mr. and Mrs. Public can't pass along the gas price increases. They have to absorb them. They're screwed. Forty four cents a gallon in one year hurts when wages and benefits don't keep up with productivity gains and/or the rise in inflation.
Tuesday, May 18, 2004
5/18/04 The Hummer Economy
When the history books are opened by the next generation, they will read how the Bush policies transformed a combat vehicle into a family car. Who better to accomplish this feat other than a wartime president? Through the passage of new tax legislation for farm vehicles weighing at least 6,000 pounds, demand for the Hummer was generated. This vehicle qualified in that "weight class." As such, by purchasing the Hummer, the buyer was eligible to receive a tax deduction of $100,000. The purchase had to be accomplished through a business enterprise and for such business. That was a lay-up. Sales for the Hummer moved along briskly thru December 2003. Of course, now came the question of whether the tax breaks would be extended. Hummer sales hit a brick wall. The demand was never truly real. Inventory is building on the dealer lots for this gas-devouring family off-the-road vehicle. It has poor ratings from every testing service. GM has no idea what to do with the inventory. They are bringing out new models. Hopefully, there is space out in the Mojave next to all the mothballed jets.
What is real? According to the Federal Reserve, household debt climbed at twice the pace of household incomes from the beginning of 2000 through the end of 2003. During this period, new mortgage debt increased about 50% or $2.3 trillion while consumer debt rose by 33% to $2 trillion during this period.
OPEC President Prnomo Yusgiantoro: "High oil prices can cause recession. We are not happy with high oil prices." U.S. crude settled at $41.55 per barrel and gas at the pump exceeds $2 per gallon on average.
Timkin on June 1 will raise prices on high speed steel products by 5%.
Descartes to cut 35% of its workforce or 130 employees.
According to economist Allen Smith, every penny of the $1.5 trillion generated by the 1983 Social Security tax increase is gone. Smith stated "this is the greatest fraud ever perpetuated on the American people."
According to Forrester Research, the number of U.S. business service and software jobs moving offshore will rise to 588,000 in 2004 from 315,000 in 2003. The loss of software programming, customer call-center and even legal paperwork positions should increase 40% in 2005 to 830,000 jobs over the number reached this year. They expect the 1 million mark to be eclipsed in 2006.
In the upcoming Illinois U.S. Senate race, Democrat Obama leads Republic Ryan 48 to 40 in the latest polls. The survey indicates that Obama is gaining more support from Republicans than Ryan is with Democrats. Could this be something to watch for in the November presidential election?
When the history books are opened by the next generation, they will read how the Bush policies transformed a combat vehicle into a family car. Who better to accomplish this feat other than a wartime president? Through the passage of new tax legislation for farm vehicles weighing at least 6,000 pounds, demand for the Hummer was generated. This vehicle qualified in that "weight class." As such, by purchasing the Hummer, the buyer was eligible to receive a tax deduction of $100,000. The purchase had to be accomplished through a business enterprise and for such business. That was a lay-up. Sales for the Hummer moved along briskly thru December 2003. Of course, now came the question of whether the tax breaks would be extended. Hummer sales hit a brick wall. The demand was never truly real. Inventory is building on the dealer lots for this gas-devouring family off-the-road vehicle. It has poor ratings from every testing service. GM has no idea what to do with the inventory. They are bringing out new models. Hopefully, there is space out in the Mojave next to all the mothballed jets.
What is real? According to the Federal Reserve, household debt climbed at twice the pace of household incomes from the beginning of 2000 through the end of 2003. During this period, new mortgage debt increased about 50% or $2.3 trillion while consumer debt rose by 33% to $2 trillion during this period.
OPEC President Prnomo Yusgiantoro: "High oil prices can cause recession. We are not happy with high oil prices." U.S. crude settled at $41.55 per barrel and gas at the pump exceeds $2 per gallon on average.
Timkin on June 1 will raise prices on high speed steel products by 5%.
Descartes to cut 35% of its workforce or 130 employees.
According to economist Allen Smith, every penny of the $1.5 trillion generated by the 1983 Social Security tax increase is gone. Smith stated "this is the greatest fraud ever perpetuated on the American people."
According to Forrester Research, the number of U.S. business service and software jobs moving offshore will rise to 588,000 in 2004 from 315,000 in 2003. The loss of software programming, customer call-center and even legal paperwork positions should increase 40% in 2005 to 830,000 jobs over the number reached this year. They expect the 1 million mark to be eclipsed in 2006.
In the upcoming Illinois U.S. Senate race, Democrat Obama leads Republic Ryan 48 to 40 in the latest polls. The survey indicates that Obama is gaining more support from Republicans than Ryan is with Democrats. Could this be something to watch for in the November presidential election?
Monday, May 17, 2004
5/17/04 Careful
As an investor, there are times when you can get impacted by an event which appears to come out of the blue. This just took place in India. The economy has been moving along smartly at a brisk pace. One of the mutual funds that invests in India companies was up 117% in the year that ended in Feb. 2004. The rupee has been gaining in value. Outsourcing continues in strong fashion. Foreign investment is gaining traction in India. The election came into focus. The change to Ms. Gandhi has unnerved the investment community. India's Bombay Stock 30 dropped 15% overnight. The rupee got trampled versus the U.S. dollar. It was a very expensive election. Hardly anyone saw the reaction coming. It had been up, up, and away for the economy, profits, stock prices, and the currency. There are times when one cannot be careful enough. There was no place to hide. As I have stated in the past, when they raid the whorehouse, they take all the girls.
The Nikkei is beginning to run into some headwinds. It is still up 50% from the lows; however, there is increasing concern about how a potentially-slowing economy in China could harm Japan's exports. I would be more worried about China having a hard landing rather than simply putting a soft brake pedal to its economy.
I have written many times how China's goods have created deflated pricing in the U.S. China has begun the export of autos and SUVs into our country. Some critics will quickly dismiss them as the next coming of the Jugo. The vehicles are made in brand new high-tech factories. The costs average about $7,000 per vehicle. Do you remember the first VW bug? Most everyone laughed at it. I still see them on the road. If I were GM, I wouldn't laugh too hard. GM might try avoiding recalls rather than laughing.
As an investor, there are times when you can get impacted by an event which appears to come out of the blue. This just took place in India. The economy has been moving along smartly at a brisk pace. One of the mutual funds that invests in India companies was up 117% in the year that ended in Feb. 2004. The rupee has been gaining in value. Outsourcing continues in strong fashion. Foreign investment is gaining traction in India. The election came into focus. The change to Ms. Gandhi has unnerved the investment community. India's Bombay Stock 30 dropped 15% overnight. The rupee got trampled versus the U.S. dollar. It was a very expensive election. Hardly anyone saw the reaction coming. It had been up, up, and away for the economy, profits, stock prices, and the currency. There are times when one cannot be careful enough. There was no place to hide. As I have stated in the past, when they raid the whorehouse, they take all the girls.
The Nikkei is beginning to run into some headwinds. It is still up 50% from the lows; however, there is increasing concern about how a potentially-slowing economy in China could harm Japan's exports. I would be more worried about China having a hard landing rather than simply putting a soft brake pedal to its economy.
I have written many times how China's goods have created deflated pricing in the U.S. China has begun the export of autos and SUVs into our country. Some critics will quickly dismiss them as the next coming of the Jugo. The vehicles are made in brand new high-tech factories. The costs average about $7,000 per vehicle. Do you remember the first VW bug? Most everyone laughed at it. I still see them on the road. If I were GM, I wouldn't laugh too hard. GM might try avoiding recalls rather than laughing.
Saturday, May 15, 2004
5/15/04 Bush, China, BLS, Oracle, And Non-Reality
Bush is at it again. Few are buying the line. In Bridgeton, Missouri he stated “we knew Saddam had terrorist ties. The person responsible for the Berg death, Zarqawi, was in and out of Baghdad prior to our arrival, for example.” In a new Zogby poll, 58% disapproved of Bush’s overall performance; 64% are critical of his handling of the Iraq war; and 54% state that the U.S. is headed in the wrong direction.
China’s inflation rate rose to a 7-year high of 3.8% in April. Grain prices rose 34%. Retail sales increased 13%. China’s government is confident that it can cool GDP growth from the present 9 plus percent to 7 percent. Finance Minister Jin Renquing stated “we are confident that the government has the ability to realize a soft landing of the economy and smooth and sustained growth.” Despite their best efforts, steel investment surged 173% in the first two months of 2004. The Chinese economy is headed for a landing, but there isn’t a seat belt made today that can withstand the shock of a 747 landing on a rice patty. Much of the world’s recent export growth has been due to buying from China. That is true of Japan, the U.S., Germany, and many ASEAN economies.
Oracle lowered its bid for PeopleSoft from $26 to $21. This bid is going nowhere. I have stated this from day one. Our government will not approve it and the EU will not approve it. Oracle’s stock has proven a disappointment from the first announcement of this proposed acquisition. Yesterday, Oracle’s CFO stated “our revised offer reflects changes in market conditions and in PeopleSoft’s market valuation.” Maybe they should be more concerned about Oracle’s market valuation for their own shareholders.
The BLS has seen milk, eggs, butter, and gas jump in price over the past year. With higher inflation and the unemployment situation, there has been added pressure on food pantries. Yesterday, Ronald Guzick, regional economist at the BLS, stated “nobody buys everything in the market basket every month. Some things are going up, but other things are not going up and some things actually go down..” Guzick is a government employee. I am certain his wages and benefits have not actually gone down.
According to the BLS, real average weekly earnings increased by 0.2% from March to April after seasonal adjustment. However, a 0,3% increase in average hourly earnings was partially offset by a 0.2% increase in the CPI for urban wage earners and clerical workers. Average weekly hours were unchanged. Before adjustment for seasonal change and inflation, average weekly earnings were $520.71 in April 2004 compared with $510.02 a year earlier. In other words, for those lucky enough to be employed, it’s pretty damn tough to offset price increases for gas, milk, eggs, and butter. No wonder so many folks on Main Street think they are worse off today than in January 2001.
International Brotherhood of Police Officers voted for Bush in 2000 and yesterday endorsed Kerry. They stated "after three and a half years of disappointing leadership under George Bush, we need to change course in November and elect a President with a real record of supporting police officers and a lifetime of standing with law enforcement.”
The AAA stated on Thursday that gas prices hit another record high in the latest week at an average of $1.95 per gallon.
Japanese firms are eyeing India for its market and low cost of production. Yuzo Kawamori, general manager at Kansai Paint Co., remarked “I think we’ve come to the point where you can’t avoid India’s market. (Kansai is building its fifth pant in India.) Incomes are set to rise and potential buyers of goods could increase… I think there is that kind of growth attraction.” KDDI, Japan’s second largest telecom operator, inaugurated service in India in January. Dentsu, Japan’s largest ad agency, opened a second subsidiary in India in February. Toyota will begin production of car transmissions in India next month for exports to its affiliates around the world.
Kevin Rollins will become CEO of Dell in July. He stated that, in the latest quarter, overseas revenue increased 29% and that the company would continue to focus on sales outside the U.S.
By July 12, Material Sciences Corp. will close its steel coil coating facility in Middletown, Ohio and 87 jobs will be eliminated. The plant has been operating there for 11 years. The company maintains that the plant does not provide an adequate return to shareholders.
Bush is at it again. Few are buying the line. In Bridgeton, Missouri he stated “we knew Saddam had terrorist ties. The person responsible for the Berg death, Zarqawi, was in and out of Baghdad prior to our arrival, for example.” In a new Zogby poll, 58% disapproved of Bush’s overall performance; 64% are critical of his handling of the Iraq war; and 54% state that the U.S. is headed in the wrong direction.
China’s inflation rate rose to a 7-year high of 3.8% in April. Grain prices rose 34%. Retail sales increased 13%. China’s government is confident that it can cool GDP growth from the present 9 plus percent to 7 percent. Finance Minister Jin Renquing stated “we are confident that the government has the ability to realize a soft landing of the economy and smooth and sustained growth.” Despite their best efforts, steel investment surged 173% in the first two months of 2004. The Chinese economy is headed for a landing, but there isn’t a seat belt made today that can withstand the shock of a 747 landing on a rice patty. Much of the world’s recent export growth has been due to buying from China. That is true of Japan, the U.S., Germany, and many ASEAN economies.
Oracle lowered its bid for PeopleSoft from $26 to $21. This bid is going nowhere. I have stated this from day one. Our government will not approve it and the EU will not approve it. Oracle’s stock has proven a disappointment from the first announcement of this proposed acquisition. Yesterday, Oracle’s CFO stated “our revised offer reflects changes in market conditions and in PeopleSoft’s market valuation.” Maybe they should be more concerned about Oracle’s market valuation for their own shareholders.
The BLS has seen milk, eggs, butter, and gas jump in price over the past year. With higher inflation and the unemployment situation, there has been added pressure on food pantries. Yesterday, Ronald Guzick, regional economist at the BLS, stated “nobody buys everything in the market basket every month. Some things are going up, but other things are not going up and some things actually go down..” Guzick is a government employee. I am certain his wages and benefits have not actually gone down.
According to the BLS, real average weekly earnings increased by 0.2% from March to April after seasonal adjustment. However, a 0,3% increase in average hourly earnings was partially offset by a 0.2% increase in the CPI for urban wage earners and clerical workers. Average weekly hours were unchanged. Before adjustment for seasonal change and inflation, average weekly earnings were $520.71 in April 2004 compared with $510.02 a year earlier. In other words, for those lucky enough to be employed, it’s pretty damn tough to offset price increases for gas, milk, eggs, and butter. No wonder so many folks on Main Street think they are worse off today than in January 2001.
International Brotherhood of Police Officers voted for Bush in 2000 and yesterday endorsed Kerry. They stated "after three and a half years of disappointing leadership under George Bush, we need to change course in November and elect a President with a real record of supporting police officers and a lifetime of standing with law enforcement.”
The AAA stated on Thursday that gas prices hit another record high in the latest week at an average of $1.95 per gallon.
Japanese firms are eyeing India for its market and low cost of production. Yuzo Kawamori, general manager at Kansai Paint Co., remarked “I think we’ve come to the point where you can’t avoid India’s market. (Kansai is building its fifth pant in India.) Incomes are set to rise and potential buyers of goods could increase… I think there is that kind of growth attraction.” KDDI, Japan’s second largest telecom operator, inaugurated service in India in January. Dentsu, Japan’s largest ad agency, opened a second subsidiary in India in February. Toyota will begin production of car transmissions in India next month for exports to its affiliates around the world.
Kevin Rollins will become CEO of Dell in July. He stated that, in the latest quarter, overseas revenue increased 29% and that the company would continue to focus on sales outside the U.S.
By July 12, Material Sciences Corp. will close its steel coil coating facility in Middletown, Ohio and 87 jobs will be eliminated. The plant has been operating there for 11 years. The company maintains that the plant does not provide an adequate return to shareholders.
Friday, May 14, 2004
5/14/04 Crisis Or Opportunity?
Commerzbank’s Nick Parsons: “Experience, though, teaches us never to underestimate the markets’ ability to panic.”
In its report on Outsourcing in Financial Services, TowerGroup estimates that the financial services industry’s global IT spending on outsourcing services will grow from $27.8 billion in 2003 to $38.2 billion in 2006, representing a compound annual growth rate of more than 11%. The offshore component of this will grow 28% annually during the same time period.
Jerry Rao, the newly elected chairman of India’s IT industry alliance, NASSCOM, stated “the size of the entire Indian IT industry is less than the Accenture topline, forget the Microsofts.”
The intermediate goods index, part of the PPI, climbed 1.4% in April compared with March’s gain of 0.7%. Excluding food and energy, the rise was 1.1% versus 0.6%. Manufacturers of crude goods received prices that were 3% higher in April versus March’s rise of 0.7%. The crude oil energy portion of the index increased 6.3% in April following a 6.1% decline in March. Natural gas rose 7.9% in April after a 14% drop in March.
As of May 13, according to the Department of Defense, 456 U.S. soldiers and marines had been killed in action in Iraq since Bush declared an end to major combat operations on May 1, 2003. As of May 13, more than 770 U.S. service members have died since the beginning of the Iraq war.
The Rocket is 7-0 with an ERA of 1.99.
The miracle in San Antonio: Derek Fisher’s shot with 0.4 seconds on the clock. The near-miracle in San Antonio: Tim Duncan’s shot with one second remaining in the game. It’s not over until the fat lady sings.
Retail sales were down in April, the first drop in 7 months. The biggest culprit was the slowdown in auto sales. You can expect more where that came from.
Seventy four percent of emergency physicians surveyed stated that their uninsured patients are more likely to die prematurely. With at least 44 million uninsured Americans, why should Congress worry? They have been provided health coverage.
In the latest quarter, WalMart’s international sales rose 22.1% and the operating profit increased a whopping 46.6%. That’s where the action is at WalMart.
China’s consumer prices rose in April at their fastest pace in 7 years. Led by food, the increase was 3.8% compare with March’s rise of 3%. The government’s average inflation target is 3%. According to the People’s Bank of China, consumption accounts for less than 60% of China’s GDP.
China ran a $2.26 billion trade deficit in April. A year ago they had a $1 billion trade surplus. Year to date, China’s imports rose nearly 43% while exports rose 32%. For the first four months of 2004, China has a trade deficit of $10.76 billion compared to a $93 million surplus in the same four months of 2003. The trend is not encouraging.
A Kaiser Family Foundation study released this week estimated that caring for the 44 million uninsured Americans will cost the U.S.$41 billion in 2004.
Richard Myers, chairman of the Joint Chief s of Staff: “There is no way to militarily lose in Iraq. There is also no way to militarily win in Iraq.” Too bad he didn’t provide that advice prior to March 20, 2003.
Commerzbank’s Nick Parsons: “Experience, though, teaches us never to underestimate the markets’ ability to panic.”
In its report on Outsourcing in Financial Services, TowerGroup estimates that the financial services industry’s global IT spending on outsourcing services will grow from $27.8 billion in 2003 to $38.2 billion in 2006, representing a compound annual growth rate of more than 11%. The offshore component of this will grow 28% annually during the same time period.
Jerry Rao, the newly elected chairman of India’s IT industry alliance, NASSCOM, stated “the size of the entire Indian IT industry is less than the Accenture topline, forget the Microsofts.”
The intermediate goods index, part of the PPI, climbed 1.4% in April compared with March’s gain of 0.7%. Excluding food and energy, the rise was 1.1% versus 0.6%. Manufacturers of crude goods received prices that were 3% higher in April versus March’s rise of 0.7%. The crude oil energy portion of the index increased 6.3% in April following a 6.1% decline in March. Natural gas rose 7.9% in April after a 14% drop in March.
As of May 13, according to the Department of Defense, 456 U.S. soldiers and marines had been killed in action in Iraq since Bush declared an end to major combat operations on May 1, 2003. As of May 13, more than 770 U.S. service members have died since the beginning of the Iraq war.
The Rocket is 7-0 with an ERA of 1.99.
The miracle in San Antonio: Derek Fisher’s shot with 0.4 seconds on the clock. The near-miracle in San Antonio: Tim Duncan’s shot with one second remaining in the game. It’s not over until the fat lady sings.
Retail sales were down in April, the first drop in 7 months. The biggest culprit was the slowdown in auto sales. You can expect more where that came from.
Seventy four percent of emergency physicians surveyed stated that their uninsured patients are more likely to die prematurely. With at least 44 million uninsured Americans, why should Congress worry? They have been provided health coverage.
In the latest quarter, WalMart’s international sales rose 22.1% and the operating profit increased a whopping 46.6%. That’s where the action is at WalMart.
China’s consumer prices rose in April at their fastest pace in 7 years. Led by food, the increase was 3.8% compare with March’s rise of 3%. The government’s average inflation target is 3%. According to the People’s Bank of China, consumption accounts for less than 60% of China’s GDP.
China ran a $2.26 billion trade deficit in April. A year ago they had a $1 billion trade surplus. Year to date, China’s imports rose nearly 43% while exports rose 32%. For the first four months of 2004, China has a trade deficit of $10.76 billion compared to a $93 million surplus in the same four months of 2003. The trend is not encouraging.
A Kaiser Family Foundation study released this week estimated that caring for the 44 million uninsured Americans will cost the U.S.$41 billion in 2004.
Richard Myers, chairman of the Joint Chief s of Staff: “There is no way to militarily lose in Iraq. There is also no way to militarily win in Iraq.” Too bad he didn’t provide that advice prior to March 20, 2003.
Thursday, May 13, 2004
5/13/04 Leave Your Worries On The Doorstop
Santomero: “Deflation worries are in the past.”
Sony cuts the price of PlayStation 2 to $149 from $179 in order to compete with Xbox.
The U.S. government posted a federal budget surplus of $17.6 billion in April compared with a $51.1 billion surplus a year ago. The surplus is the smallest for the month of April in 10 years. Outlays rose 12.4% from a year ago while receipts fell 4.8% from a year ago. The Treasury department took a page from CEOs who low-ball quarterly estimates only to come in results that “beat the street.” The Treasury department had primed bond traders with an April surplus of $15 billion. They beat their low-ball figure but it still stunk the house out. You can’t put a good spin on lousy cash flow.
According to Ipsos PharmTrends, the rate of non-fulfillment for prescriptions received from physicians outpaces the growth in prescription drug expenditures or fulfillment by consumers. In 2003, 16 million (14.5%) households in the U.S. did not fill a prescription they received, an increase of 21% above 2002 levels. The number of seniors with insurance to support payments for multiple prescription drugs is still much lower than the average. As Ipsos reported, “drug costs continue to be prohibitive for many Americans, particularly seniors. For many seniors on a fixed or low income, the price of multiple treatments can be unaffordable.”
The U.S. trade deficit widened by 9.1% in March to a record $46 billion, significantly higher than the pre-report estimate of $42.6 billion. The spin is that the rise was due to higher oil import prices and the strong U.S. economy that created a greater appetite for imports. Even though the dollar was weak in March, exports only rose 2.6%. The rise is mainly attributable to exports to the EU, China, and Japan.
The U.S. Energy Department stated that crude oil supplies fell by 1.1 million barrels in the latest reporting period. However, the American Petroleum Institute reported that the supply declined by 2.1 million barrels. Any way you cut it, the supply news was not good for pricing.
In 2003, the total volume of paper checks declined for the 3rd consecutive year, according to the Federal Reserve. On the other hand, the Automatic Clearing House Network operated by the Fed moved $27.4 trillion in 2003. In 2001, there were only 1.23 billion ACH transactions. The number jumped to 10.4 billion in 2003.
The Asian Development Bank expects China’s GDP to grow at an 8.3% rate this year. Japan’s total exports increased by 2.4 trillion yen last year, and 79% of that comprised increased exports to China. A word of caution is in order. Bank credits represented 85% of all funds raised in 2003 in China.
A representative price for a Montblanc pen in the U.S is $235. Just in the town of Wengang in China, there are at least 60 factories turning out carbon-copy counterfeits of Montblanc pens at the equivalent cost to the consumer of $1 to $2. The Chinese have transformed the word wholesale to counterfeit. Maybe you’d like a Harley jacket or a North Face ski jacket or a Ralph Lauren cashmere sweater or a “made in Italy” tie or maybe a Titleist golf ball or a DVD of your favorite movie. Fifty years ago designer dresses were being “copied” and sold at huge discounts. Now the variety of products available has exploded.
Tourism is Pennsylvania’s second-largest industry, and with about 117 million visitors annually, it is the fourth most visited state in the country, tied with New York. The total impact of travelers’ spending on the state’s economy is about $34 billion a year, and tourism is responsible for more than 563,000 jobs. Governor Rendell’s office provided these numbers. One would not think that Pennsylvania would equal New York in the number of tourists. One doesn’t think of this state as a major tourist destination. Compared with New York and Florida and California, Pennsylvania does not receive much buzz in the way of tourism. A little research can unlock some interesting facts. Maybe a bit more research and less rumor following could improve investing results.
Santomero: “Deflation worries are in the past.”
Sony cuts the price of PlayStation 2 to $149 from $179 in order to compete with Xbox.
The U.S. government posted a federal budget surplus of $17.6 billion in April compared with a $51.1 billion surplus a year ago. The surplus is the smallest for the month of April in 10 years. Outlays rose 12.4% from a year ago while receipts fell 4.8% from a year ago. The Treasury department took a page from CEOs who low-ball quarterly estimates only to come in results that “beat the street.” The Treasury department had primed bond traders with an April surplus of $15 billion. They beat their low-ball figure but it still stunk the house out. You can’t put a good spin on lousy cash flow.
According to Ipsos PharmTrends, the rate of non-fulfillment for prescriptions received from physicians outpaces the growth in prescription drug expenditures or fulfillment by consumers. In 2003, 16 million (14.5%) households in the U.S. did not fill a prescription they received, an increase of 21% above 2002 levels. The number of seniors with insurance to support payments for multiple prescription drugs is still much lower than the average. As Ipsos reported, “drug costs continue to be prohibitive for many Americans, particularly seniors. For many seniors on a fixed or low income, the price of multiple treatments can be unaffordable.”
The U.S. trade deficit widened by 9.1% in March to a record $46 billion, significantly higher than the pre-report estimate of $42.6 billion. The spin is that the rise was due to higher oil import prices and the strong U.S. economy that created a greater appetite for imports. Even though the dollar was weak in March, exports only rose 2.6%. The rise is mainly attributable to exports to the EU, China, and Japan.
The U.S. Energy Department stated that crude oil supplies fell by 1.1 million barrels in the latest reporting period. However, the American Petroleum Institute reported that the supply declined by 2.1 million barrels. Any way you cut it, the supply news was not good for pricing.
In 2003, the total volume of paper checks declined for the 3rd consecutive year, according to the Federal Reserve. On the other hand, the Automatic Clearing House Network operated by the Fed moved $27.4 trillion in 2003. In 2001, there were only 1.23 billion ACH transactions. The number jumped to 10.4 billion in 2003.
The Asian Development Bank expects China’s GDP to grow at an 8.3% rate this year. Japan’s total exports increased by 2.4 trillion yen last year, and 79% of that comprised increased exports to China. A word of caution is in order. Bank credits represented 85% of all funds raised in 2003 in China.
A representative price for a Montblanc pen in the U.S is $235. Just in the town of Wengang in China, there are at least 60 factories turning out carbon-copy counterfeits of Montblanc pens at the equivalent cost to the consumer of $1 to $2. The Chinese have transformed the word wholesale to counterfeit. Maybe you’d like a Harley jacket or a North Face ski jacket or a Ralph Lauren cashmere sweater or a “made in Italy” tie or maybe a Titleist golf ball or a DVD of your favorite movie. Fifty years ago designer dresses were being “copied” and sold at huge discounts. Now the variety of products available has exploded.
Tourism is Pennsylvania’s second-largest industry, and with about 117 million visitors annually, it is the fourth most visited state in the country, tied with New York. The total impact of travelers’ spending on the state’s economy is about $34 billion a year, and tourism is responsible for more than 563,000 jobs. Governor Rendell’s office provided these numbers. One would not think that Pennsylvania would equal New York in the number of tourists. One doesn’t think of this state as a major tourist destination. Compared with New York and Florida and California, Pennsylvania does not receive much buzz in the way of tourism. A little research can unlock some interesting facts. Maybe a bit more research and less rumor following could improve investing results.
Wednesday, May 12, 2004
5/12/04 The Senate
Martin Wolf: “The world is too complex and dangerous for the pious simplicities and arrogant unilateralism of George W. Bush.”
Raghavan Mayur, president of TIPP: “The share of households classified as ‘job sensitive’ is 32%. These households tend to be pessimistic about the economy.”
Abraham Lincoln: “The best thing about the future is that it comes only one day at a time.”
The average unemployment rate in urban China exceeds 11%.
According to a recent Goldman Sachs quarterly survey of global confidence, the general business outlook declined from 93.8 in February to 75.9 in March, the lowest level in almost one year. There was an unusually large drop in capital expenditure plans as well as the consideration of mergers and acquisitions.
As crude oil traded at a 13-year high of $40 per barrel and demand for crude reached a 16-year high, the U.S. Senate on Tuesday overwhelmingly passed $14 billion in tax breaks for the energy industry. Included are tax provisions for the renewable energy and energy efficient industries, including a $2,000 tax credit for buyers of gas-electric hybrid vehicles. There is an important tax credit for oil and gas production from marginal wells, which are defined as those that produce less than 15 barrels of oil per day. It is reported that more than 80% of all domestic oil production in the U.S. comes from marginal wells. There are incentives to encourage development of clean coal technology and renewable fuels. There are tax breaks for building more energy-efficient homes and buying more energy-efficient appliances. In addition, the bill would encourage construction of a $20 billion pipeline to carry natural gas from Alaska’s North Slope by guaranteeing a price support if the price falls below a certain level.
Yesterday Kerry had a chance to make some lasting political points. He blew the opportunity. The Senate by a single vote rejected an election-year effort Tuesday to extend federal unemployment benefits. It required 60 votes to pass. The vote was 59-40. Kerry was the only senator who missed the vote. He was campaigning Tuesday in Kentucky. If he is to get elected, Kerry had better get his priorities in order. The cost to extend the benefits would amount to about $6 billion. There is $13+ billion in the unemployment insurance trust fund.
Only one-fifth of HP’s PCs are built to order.
Martin Wolf: “The world is too complex and dangerous for the pious simplicities and arrogant unilateralism of George W. Bush.”
Raghavan Mayur, president of TIPP: “The share of households classified as ‘job sensitive’ is 32%. These households tend to be pessimistic about the economy.”
Abraham Lincoln: “The best thing about the future is that it comes only one day at a time.”
The average unemployment rate in urban China exceeds 11%.
According to a recent Goldman Sachs quarterly survey of global confidence, the general business outlook declined from 93.8 in February to 75.9 in March, the lowest level in almost one year. There was an unusually large drop in capital expenditure plans as well as the consideration of mergers and acquisitions.
As crude oil traded at a 13-year high of $40 per barrel and demand for crude reached a 16-year high, the U.S. Senate on Tuesday overwhelmingly passed $14 billion in tax breaks for the energy industry. Included are tax provisions for the renewable energy and energy efficient industries, including a $2,000 tax credit for buyers of gas-electric hybrid vehicles. There is an important tax credit for oil and gas production from marginal wells, which are defined as those that produce less than 15 barrels of oil per day. It is reported that more than 80% of all domestic oil production in the U.S. comes from marginal wells. There are incentives to encourage development of clean coal technology and renewable fuels. There are tax breaks for building more energy-efficient homes and buying more energy-efficient appliances. In addition, the bill would encourage construction of a $20 billion pipeline to carry natural gas from Alaska’s North Slope by guaranteeing a price support if the price falls below a certain level.
Yesterday Kerry had a chance to make some lasting political points. He blew the opportunity. The Senate by a single vote rejected an election-year effort Tuesday to extend federal unemployment benefits. It required 60 votes to pass. The vote was 59-40. Kerry was the only senator who missed the vote. He was campaigning Tuesday in Kentucky. If he is to get elected, Kerry had better get his priorities in order. The cost to extend the benefits would amount to about $6 billion. There is $13+ billion in the unemployment insurance trust fund.
Only one-fifth of HP’s PCs are built to order.
Tuesday, May 11, 2004
5/11/04 Scanning The Globe
The Defense Science Board and the National Defense University have finished separate reviews of the $23.5 billion Air Force plan to lease and buy 100 Boeing 767 refueling tankers. According to sources familiar with the Defense Science Board report, there is less urgency in replacing the Air Force’s 40-year-old tanker fleet, partly due to improved efficiency in maintenance operations and also they raised the possibility of buying used 767s from cargo airlines instead of purchasing new ones. The National Defense University stated the commercial lease was inappropriate since Boeing had a quasi-monopoly on the aircraft and that the military was a quasi-monopoly buyer. Boeing knows the 767 tanker project is stalled. They announced the layoff of 50 contract workers on the 767 program in Wichita. A spokesman for Boeing stated “there will be a number of additional employees on the tanker team affected by this.” It is important to note that the future of the 767 assembly line could hang in the balance because of the commercial version of the aircraft have slowed considerably. I anticipate the line will be shut down in late October. Boeing is in a heap of trouble. Commercially, they are essentially a one-product manufacturer, the 737. Even with their defense business, the company’s future revenue stream is suspect. It will be several years until a 7E7 is built and delivered. With the loss of income from the tanker deal, Boeing will need to revise its earnings estimates and its projections for future layoffs. Boeing will be a further drag on the performance of the Dow.
It’s coming up to ice cream season. Get ready to pay more for a scoop, pint, quart, or gallon. According to the International Dairy Foods Association, retail and restaurant ice cream constitutes a $20 billion business in the U.S. with the average person consuming 26 servings of ice cream a year. A pint of Ben & Jerry’s ice cream is going up 8%, the most in the company’s 26 years. Because of several cyclones in Madagascar, the price of vanilla syrup rose from $75 per gallon to over $400. Due to political unrest in the Ivory Coast, the price of cocoa rose about $1 a pound, the largest jump in 17 years. As one woman in New Hampshire remarked, “it’s ridiculous. You can go to the market and buy a half-gallon for the same price as a small cone.”
Toyota’s fourth quarter net income more than doubled, and their annual net profit exceeded $10 billion, twice the combined earnings of GM and Ford. One should note that currency exchange losses cut the profit by about 140 billion yen.
Anthony Cordesman: “Those Americans and Britons who mistreated the prisoners acted in the direct interests of al-Qaeda, Iraqi insurgents, and their enemies throughout the world. Their names will be written invisibly on the body bags of every coalition soldier and friendly Iraqi who dies from now on- and the consequences of their actions will exact a price in blood for years to come.”
Assets under the global hedge fund business now exceed $1.1 trillion, according to the Alternative Fund Services Review.
With orange juice futures having recently hit a 27-year low, you might consider switching from milk to orange juice. Florida has the largest crop in the state’s history, and that, combined with lower demand resulting from the low-carb diet craze, has pressured prices.
MCI to cut 7,500 jobs.
Alan King: “Marriage is nature’s way of keeping us from fighting with strangers.”
Delta Air has asked pilots for a 30% wage cut. The pilots have countered with a 9% reduction. The company stated that, if they don’t get the requested 30% reduction, then it might have to file for bankruptcy. In its filing, Delta stated “if we cannot achieve a competitive cost structure, regain sustained profitability and access the capital markets on acceptable terms, we will need to pursue alternative courses of action…including the possibility of seeking to restructure our costs under Chapter 11.”
Today, Cisco reports its quarterly results after the close. It might be wise to note that this quarter had 14 weeks compared with the 13 weeks in the prior year period. As such, it is not unreasonable for a Cisco shareowner to hope for close to a 10% rise in this quarter’s revenue.
The Saudi Ambassador stated that “Saudi Arabia believes that it is necessary for OPEC to increase the production ceiling by at least 1.5 million barrels per day.”
The ASEAN finance ministers held a meeting one month ago in Singapore. The President of the Asian Development Bank estimated that ASEAN countries, taken together, posted a better-than-expected GDP growth of 4.5% last year, slightly higher than the 4.1% achieved I 2002. The 10 ASEAN countries are now forecast to post an average GDP growth of 5.5% in 2004 and 5.2% in 2005. It is anticipated that Viet Nam will continue to be the fasting growing ASEAN country with an expected growth rate of 7.2%, followed by 6% in Lao PDR and Malaysia, and I the 4 to 5.5% range in the other ASEAN countries.
Federal Finance Minister Shaukat Aziz has expressed optimism that Pakistan would achieve an 8% GDP growth rate within three years.
The Defense Science Board and the National Defense University have finished separate reviews of the $23.5 billion Air Force plan to lease and buy 100 Boeing 767 refueling tankers. According to sources familiar with the Defense Science Board report, there is less urgency in replacing the Air Force’s 40-year-old tanker fleet, partly due to improved efficiency in maintenance operations and also they raised the possibility of buying used 767s from cargo airlines instead of purchasing new ones. The National Defense University stated the commercial lease was inappropriate since Boeing had a quasi-monopoly on the aircraft and that the military was a quasi-monopoly buyer. Boeing knows the 767 tanker project is stalled. They announced the layoff of 50 contract workers on the 767 program in Wichita. A spokesman for Boeing stated “there will be a number of additional employees on the tanker team affected by this.” It is important to note that the future of the 767 assembly line could hang in the balance because of the commercial version of the aircraft have slowed considerably. I anticipate the line will be shut down in late October. Boeing is in a heap of trouble. Commercially, they are essentially a one-product manufacturer, the 737. Even with their defense business, the company’s future revenue stream is suspect. It will be several years until a 7E7 is built and delivered. With the loss of income from the tanker deal, Boeing will need to revise its earnings estimates and its projections for future layoffs. Boeing will be a further drag on the performance of the Dow.
It’s coming up to ice cream season. Get ready to pay more for a scoop, pint, quart, or gallon. According to the International Dairy Foods Association, retail and restaurant ice cream constitutes a $20 billion business in the U.S. with the average person consuming 26 servings of ice cream a year. A pint of Ben & Jerry’s ice cream is going up 8%, the most in the company’s 26 years. Because of several cyclones in Madagascar, the price of vanilla syrup rose from $75 per gallon to over $400. Due to political unrest in the Ivory Coast, the price of cocoa rose about $1 a pound, the largest jump in 17 years. As one woman in New Hampshire remarked, “it’s ridiculous. You can go to the market and buy a half-gallon for the same price as a small cone.”
Toyota’s fourth quarter net income more than doubled, and their annual net profit exceeded $10 billion, twice the combined earnings of GM and Ford. One should note that currency exchange losses cut the profit by about 140 billion yen.
Anthony Cordesman: “Those Americans and Britons who mistreated the prisoners acted in the direct interests of al-Qaeda, Iraqi insurgents, and their enemies throughout the world. Their names will be written invisibly on the body bags of every coalition soldier and friendly Iraqi who dies from now on- and the consequences of their actions will exact a price in blood for years to come.”
Assets under the global hedge fund business now exceed $1.1 trillion, according to the Alternative Fund Services Review.
With orange juice futures having recently hit a 27-year low, you might consider switching from milk to orange juice. Florida has the largest crop in the state’s history, and that, combined with lower demand resulting from the low-carb diet craze, has pressured prices.
MCI to cut 7,500 jobs.
Alan King: “Marriage is nature’s way of keeping us from fighting with strangers.”
Delta Air has asked pilots for a 30% wage cut. The pilots have countered with a 9% reduction. The company stated that, if they don’t get the requested 30% reduction, then it might have to file for bankruptcy. In its filing, Delta stated “if we cannot achieve a competitive cost structure, regain sustained profitability and access the capital markets on acceptable terms, we will need to pursue alternative courses of action…including the possibility of seeking to restructure our costs under Chapter 11.”
Today, Cisco reports its quarterly results after the close. It might be wise to note that this quarter had 14 weeks compared with the 13 weeks in the prior year period. As such, it is not unreasonable for a Cisco shareowner to hope for close to a 10% rise in this quarter’s revenue.
The Saudi Ambassador stated that “Saudi Arabia believes that it is necessary for OPEC to increase the production ceiling by at least 1.5 million barrels per day.”
The ASEAN finance ministers held a meeting one month ago in Singapore. The President of the Asian Development Bank estimated that ASEAN countries, taken together, posted a better-than-expected GDP growth of 4.5% last year, slightly higher than the 4.1% achieved I 2002. The 10 ASEAN countries are now forecast to post an average GDP growth of 5.5% in 2004 and 5.2% in 2005. It is anticipated that Viet Nam will continue to be the fasting growing ASEAN country with an expected growth rate of 7.2%, followed by 6% in Lao PDR and Malaysia, and I the 4 to 5.5% range in the other ASEAN countries.
Federal Finance Minister Shaukat Aziz has expressed optimism that Pakistan would achieve an 8% GDP growth rate within three years.
Monday, May 10, 2004
5/10/04 Cracks
According to Trilby Lundberg, U.S. gasoline prices rose by slightly more than 10 cents per gallon in the past two weeks, the biggest jump since last August. The weighted national average for all three grades of gasoline was just over $1.96 per gallon. The markets are concerned about inflation. Think about this. The price of mini-vans has been cut once again. More importantly, beginning May 1, Ford began offering its dealers $1,500 per F-150 pickup sold this month. This vehicle is regarded as Ford’s bread and butter item, its hottest seller. Look around you on the highways. Over the past two weekends, were there less cars on the road? The Saudis have recommended increasing oil production, and the price of gas is down over a $1 per gallon on the commodity markets today. The average American worker is being squeezed. With wages and salaries failing to meet or exceed the inflation rate, cash flow is in harm’s way. With the recent sharp rise in interest rates, it is highly doubtful that the consumer shall have a continued willingness to take on more debt. Big ticket items, such as, cars will be the first to back up on the dealer shelves, so to speak. Greater incentives are on the way. It will be interesting to watch the auto companies offer zero percent financing as they swallow the higher interest costs.
In California, this year’s budget shortfall represents 16% of the $76 billion general fund budget.
Since 2000, food stamp use grew faster in Arizona than in any other state due to the state’s rapid population growth accompanied by the difficult economic conditions and a sluggish job market.
Suffering the biggest daily loss since 9/11, the TOPIX fell 5.68% and the Nikkei plunged 4.84%.
This month, the Bank of America opens it branch in Southern India. They may hire 1,500 people there instead of the originally projected 1,000.
Norsk Hydro, the world’s third largest aluminum producer, announced cutting up to 800 jobs. Management complained that productivity was too low at their plants.
The Goldman Sachs Commodity Index (GSCI) is the most widely followed commodity index. With its heavy weighting in energy, it is not surprising that the index rose 30% in 2002, 20% in 2003, and so far this year another 18.4%. Between January 1970 and March 2004, the GSCI returned an annualized 12.1%. As such, as a generalization, I do not believe commodities are the place to be today. As they decline in price, the vision of inflation will appear less ominous. This will prove a friendlier scenario for treasury securities.
Over the past three years, the strongest industry in our country has been housing. It has been the stalwart. As 30 year mortgages approach 6.25%, the dependency on housing would be ill-advised. Its recent run has seen its best days, and so has refinancing. With the tax credits fading into the sunset, the extra terrestrial economic goosing is behind us. It’s back to basics. We are no longer playing on artificial turf, as it were. That means you will need to change shoes and wear cleats.
Last week it was doughnuts and today it is pasta. The maker of Ronzoni and San Giorgio pasta will file for Chapter 11 bankruptcy. Pasta sales are down 7% from a year ago.
Since December, 250,000 employees have been added in retailing and restaurants. As consumers cutback on discretionary spending, I wonder how many of those 250,000 will lose their lower wage-paying jobs? The good news is those jobs do not require an expensive college education. As such, repaying college loans should not be an issue.
According to Trilby Lundberg, U.S. gasoline prices rose by slightly more than 10 cents per gallon in the past two weeks, the biggest jump since last August. The weighted national average for all three grades of gasoline was just over $1.96 per gallon. The markets are concerned about inflation. Think about this. The price of mini-vans has been cut once again. More importantly, beginning May 1, Ford began offering its dealers $1,500 per F-150 pickup sold this month. This vehicle is regarded as Ford’s bread and butter item, its hottest seller. Look around you on the highways. Over the past two weekends, were there less cars on the road? The Saudis have recommended increasing oil production, and the price of gas is down over a $1 per gallon on the commodity markets today. The average American worker is being squeezed. With wages and salaries failing to meet or exceed the inflation rate, cash flow is in harm’s way. With the recent sharp rise in interest rates, it is highly doubtful that the consumer shall have a continued willingness to take on more debt. Big ticket items, such as, cars will be the first to back up on the dealer shelves, so to speak. Greater incentives are on the way. It will be interesting to watch the auto companies offer zero percent financing as they swallow the higher interest costs.
In California, this year’s budget shortfall represents 16% of the $76 billion general fund budget.
Since 2000, food stamp use grew faster in Arizona than in any other state due to the state’s rapid population growth accompanied by the difficult economic conditions and a sluggish job market.
Suffering the biggest daily loss since 9/11, the TOPIX fell 5.68% and the Nikkei plunged 4.84%.
This month, the Bank of America opens it branch in Southern India. They may hire 1,500 people there instead of the originally projected 1,000.
Norsk Hydro, the world’s third largest aluminum producer, announced cutting up to 800 jobs. Management complained that productivity was too low at their plants.
The Goldman Sachs Commodity Index (GSCI) is the most widely followed commodity index. With its heavy weighting in energy, it is not surprising that the index rose 30% in 2002, 20% in 2003, and so far this year another 18.4%. Between January 1970 and March 2004, the GSCI returned an annualized 12.1%. As such, as a generalization, I do not believe commodities are the place to be today. As they decline in price, the vision of inflation will appear less ominous. This will prove a friendlier scenario for treasury securities.
Over the past three years, the strongest industry in our country has been housing. It has been the stalwart. As 30 year mortgages approach 6.25%, the dependency on housing would be ill-advised. Its recent run has seen its best days, and so has refinancing. With the tax credits fading into the sunset, the extra terrestrial economic goosing is behind us. It’s back to basics. We are no longer playing on artificial turf, as it were. That means you will need to change shoes and wear cleats.
Last week it was doughnuts and today it is pasta. The maker of Ronzoni and San Giorgio pasta will file for Chapter 11 bankruptcy. Pasta sales are down 7% from a year ago.
Since December, 250,000 employees have been added in retailing and restaurants. As consumers cutback on discretionary spending, I wonder how many of those 250,000 will lose their lower wage-paying jobs? The good news is those jobs do not require an expensive college education. As such, repaying college loans should not be an issue.
Sunday, May 09, 2004
5/9/04 Happy Mother’s Day
I would like to spread some cheer. Comerica’s National Recession Watch Index, which forecasts the likelihood of a national recession occurring six to 12 months in the future, registered a 6% probability in April. That is the same reading as the one in March. The chief economist for Comerica stated “this marks the 33rd consecutive month below 12% and suggests that the U.S. economy will experience above-average real GDP growth over the next 12 months. A slow drift upward in the Recession Watch Index may have begun. A similar pattern of strength prefaced the 1994-95 expansions.” Comerica is Michigan’s oldest and largest bank. I certainly hope their economic vision proves to be on the mark.
Five meat packers control 74% of the beef we eat today. Four companies control 66% of the pork we consume. However, 50 companies control 95% of the chicken we eat. McDonald’s, with its 30,000 locations, is the largest buyer of beef and chicken and the second largest buyer of pork. The company owns 90% of the Chipotle chain, which has 300 restaurants and is expanding. As Chipotle’s roll-out goes nationwide, I believe McDonald’s will then become the nation’s largest buyer of pork.
It was just one year ago in the beginning of June that interest rates had a very swift and sharp rise. At that time, very few bond experts had predicted this increase. The situation has now shifted 180 degrees. Those same experts anticipate a continuing rise in interest rates. In my view, when the Fed raises rates in June, that will represent the high point in long-term interest rates for 2004. The Fed is not only way behind the curve. They have been benched by the daily movement in rates. The Fed has become the manipulator of last resort. They have dishonored the free enterprise system. Ayn Rand would no longer recognize Alan Greenspan.
Cheney: “Don Rumsfeld is the best secretary of defense the United States has ever had. People ought to get off his case and let him do his job.” One must forgive Cheney. Casper, Wyoming is not known for deep thinkers.
I would like to spread some cheer. Comerica’s National Recession Watch Index, which forecasts the likelihood of a national recession occurring six to 12 months in the future, registered a 6% probability in April. That is the same reading as the one in March. The chief economist for Comerica stated “this marks the 33rd consecutive month below 12% and suggests that the U.S. economy will experience above-average real GDP growth over the next 12 months. A slow drift upward in the Recession Watch Index may have begun. A similar pattern of strength prefaced the 1994-95 expansions.” Comerica is Michigan’s oldest and largest bank. I certainly hope their economic vision proves to be on the mark.
Five meat packers control 74% of the beef we eat today. Four companies control 66% of the pork we consume. However, 50 companies control 95% of the chicken we eat. McDonald’s, with its 30,000 locations, is the largest buyer of beef and chicken and the second largest buyer of pork. The company owns 90% of the Chipotle chain, which has 300 restaurants and is expanding. As Chipotle’s roll-out goes nationwide, I believe McDonald’s will then become the nation’s largest buyer of pork.
It was just one year ago in the beginning of June that interest rates had a very swift and sharp rise. At that time, very few bond experts had predicted this increase. The situation has now shifted 180 degrees. Those same experts anticipate a continuing rise in interest rates. In my view, when the Fed raises rates in June, that will represent the high point in long-term interest rates for 2004. The Fed is not only way behind the curve. They have been benched by the daily movement in rates. The Fed has become the manipulator of last resort. They have dishonored the free enterprise system. Ayn Rand would no longer recognize Alan Greenspan.
Cheney: “Don Rumsfeld is the best secretary of defense the United States has ever had. People ought to get off his case and let him do his job.” One must forgive Cheney. Casper, Wyoming is not known for deep thinkers.
Saturday, May 08, 2004
5/8/04 Ass Backwards
For well over a year, I would get emails berating me for ignoring the Household Employment Survey. In the last two months, no one has written me on this subject. I am truly upset by that. I will fill in the blanks for you. Between the third quarter of 2003 and the end of April 2004, those not in the labor force rose from 75.290 million to 76.016 million while the employed population rose by 200,000. Over the past three months, the civilian labor participation rate has remained unchanged at 65.9% while the employment-population ratio has remained about unchanged at 62.2%. Presently, the total not in the labor force is 76.5 million versus 74.6 million only one year ago. In other words, for all the whiners, the employment situation for the past year has sucked under your requested survey.
There are two sides to every coin. The “other survey” paints a different picture. Prior employment numbers for February and March were increased, and April’s numbers were another barn burner. I’m a bit old fashioned. I don’t give a crap for simple statistics. I want to know more. Consequently, this is my take, and straight up without a chaser. There are more jobs being created. Those jobs, as a generalization, stink the house out. The average hours for all employees held at 33.7 per week in April. Why? There was a large increase in temporary help, those in employment services, food services, and services to buildings and dwellings. Do you get the picture? The headlines state that there has been a pick-up in the manufacturing sector. Really? The manufacturing workweek fell to 40.6 hours from 40.9 hours in March. April overtime declined to 4.5 hours from 4.6 hours. Overall, workers’ average hourly earnings rose by 5 cents in April. Average weekly earnings rose by $1.68. After inflation, the workers in this nation are behind the eight ball. They are in a negative position for the third straight year. Of the 288,000 jobs added in April, 246,000 were service jobs. For the most part, these positions are in the lower paying per hour category with fewer weekly working hours. This is not progress. On the contrary, it leads to a lower standard of living for out nation.
While job numbers were revised upward, consumer credit for February was revised downward from the $4.2 billion initially estimated to $883 million. Yesterday, March’s consumer credit numbers came in at a rise of $5.7 billion, less than the $7 billion projected. I feel confident that the March number will be revised downward. With April retail sales less than expected and auto sales disappointing, I believe April consumer credit will also be on the low side. The consumer is reining in his/her spending habits. As the price of gas, milk, meat, and other daily staples rise, and wages and salaries stay pretty much stagnant, there is less cash flow available for discretionary spending. With interest rates rising, the crunch will become worse. The refinancing boom is over, and there will not be the added cash available from that source. In fact, according to the latest Cambridge Consumer Credit Index, only 8% of Americans plan to refinance their mortgage in the next year, down 50% from those polled in October 2002. Of those surveyed, in the past two years 35% refinanced their mortgages. In addition, there will not be a check in the mail for child credits and your refund checks have been received. The thrill is gone. Our consumer-based economy is rolling over. The headlines state the opposite. My money is where my mouth is. This economy is facing a world of hurt.
Even Warren Buffett’s Berkshire Hathaway is in for a world of hurt. The company’s first-quarter earnings dropped 10%. There’s much more to follow. As the price increases for insurance become less frequent, and, in fact, begin to turn down, profits will fall even more. Berkshire stated yesterday that “underwriters are instructed to reject inadequately priced risks.” They may need to get more accustomed to lower pricing. The gravy train has left the station. Just as Friday was most unpleasant for shareholders of Krispy Kreme, Monday will prove unsettling for Berkshire holders. A significant portion of the company’s cash flow is derived from re-insurance. As with refinancing income, this too has seen it’s best days for sometime.
International Association of Machinists International President Tom Buffenbarger, whose union lost 90,000 members since 2000, observed “the fear of job loss runs deep among the workers. For millions of middle class Americans, both in and out of work, the nation’s employment crisis is far from over.”
OPEC’s 11 members, including Iraq, pumped 330,000 barrels per day less in April than in March. According to the Platts survey, “these numbers show that OPEC never came close to implementing its 1 million barrel per day cut in April, and all our early reports for May and even into June show no further significant cuts likely.”
Those betting on higher prices for gas, milk, meat, and other daily staples will, in my view, be disappointed. More muted consumer spending will lead to larger inventories in the pipeline, as it were.
Bush: “ I put together a fantastic team of people to serve this country.” Possibly he is referring to the Texas Rangers baseball team.
For well over a year, I would get emails berating me for ignoring the Household Employment Survey. In the last two months, no one has written me on this subject. I am truly upset by that. I will fill in the blanks for you. Between the third quarter of 2003 and the end of April 2004, those not in the labor force rose from 75.290 million to 76.016 million while the employed population rose by 200,000. Over the past three months, the civilian labor participation rate has remained unchanged at 65.9% while the employment-population ratio has remained about unchanged at 62.2%. Presently, the total not in the labor force is 76.5 million versus 74.6 million only one year ago. In other words, for all the whiners, the employment situation for the past year has sucked under your requested survey.
There are two sides to every coin. The “other survey” paints a different picture. Prior employment numbers for February and March were increased, and April’s numbers were another barn burner. I’m a bit old fashioned. I don’t give a crap for simple statistics. I want to know more. Consequently, this is my take, and straight up without a chaser. There are more jobs being created. Those jobs, as a generalization, stink the house out. The average hours for all employees held at 33.7 per week in April. Why? There was a large increase in temporary help, those in employment services, food services, and services to buildings and dwellings. Do you get the picture? The headlines state that there has been a pick-up in the manufacturing sector. Really? The manufacturing workweek fell to 40.6 hours from 40.9 hours in March. April overtime declined to 4.5 hours from 4.6 hours. Overall, workers’ average hourly earnings rose by 5 cents in April. Average weekly earnings rose by $1.68. After inflation, the workers in this nation are behind the eight ball. They are in a negative position for the third straight year. Of the 288,000 jobs added in April, 246,000 were service jobs. For the most part, these positions are in the lower paying per hour category with fewer weekly working hours. This is not progress. On the contrary, it leads to a lower standard of living for out nation.
While job numbers were revised upward, consumer credit for February was revised downward from the $4.2 billion initially estimated to $883 million. Yesterday, March’s consumer credit numbers came in at a rise of $5.7 billion, less than the $7 billion projected. I feel confident that the March number will be revised downward. With April retail sales less than expected and auto sales disappointing, I believe April consumer credit will also be on the low side. The consumer is reining in his/her spending habits. As the price of gas, milk, meat, and other daily staples rise, and wages and salaries stay pretty much stagnant, there is less cash flow available for discretionary spending. With interest rates rising, the crunch will become worse. The refinancing boom is over, and there will not be the added cash available from that source. In fact, according to the latest Cambridge Consumer Credit Index, only 8% of Americans plan to refinance their mortgage in the next year, down 50% from those polled in October 2002. Of those surveyed, in the past two years 35% refinanced their mortgages. In addition, there will not be a check in the mail for child credits and your refund checks have been received. The thrill is gone. Our consumer-based economy is rolling over. The headlines state the opposite. My money is where my mouth is. This economy is facing a world of hurt.
Even Warren Buffett’s Berkshire Hathaway is in for a world of hurt. The company’s first-quarter earnings dropped 10%. There’s much more to follow. As the price increases for insurance become less frequent, and, in fact, begin to turn down, profits will fall even more. Berkshire stated yesterday that “underwriters are instructed to reject inadequately priced risks.” They may need to get more accustomed to lower pricing. The gravy train has left the station. Just as Friday was most unpleasant for shareholders of Krispy Kreme, Monday will prove unsettling for Berkshire holders. A significant portion of the company’s cash flow is derived from re-insurance. As with refinancing income, this too has seen it’s best days for sometime.
International Association of Machinists International President Tom Buffenbarger, whose union lost 90,000 members since 2000, observed “the fear of job loss runs deep among the workers. For millions of middle class Americans, both in and out of work, the nation’s employment crisis is far from over.”
OPEC’s 11 members, including Iraq, pumped 330,000 barrels per day less in April than in March. According to the Platts survey, “these numbers show that OPEC never came close to implementing its 1 million barrel per day cut in April, and all our early reports for May and even into June show no further significant cuts likely.”
Those betting on higher prices for gas, milk, meat, and other daily staples will, in my view, be disappointed. More muted consumer spending will lead to larger inventories in the pipeline, as it were.
Bush: “ I put together a fantastic team of people to serve this country.” Possibly he is referring to the Texas Rangers baseball team.
Friday, May 07, 2004
5/7/04 Staying Ahead Of The Brainless
According to the BLS, non-farm unit labor costs grew 0.5% in the first quarter of 2004. They were unchanged in the fourth quarter of 2003. When the rise in consumer prices was taken into account, real hourly compensation grew by 0.4% in this year’s first quarter. It had increased 1.7% in the fourth quarter of 2003. In this year’s first quarter, unit labor costs for non-durable manufacturing rose by 2% while unit labor costs for durable manufacturing fell by 1.4%. This highlights a point made by Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, who stated “there are cost pressures affecting firms, such as, soaring prices for insurance, energy, and raw materials, and firms are doing their best to battle these factors, so they aren’t likely to give very much on labor.” Last week, the Labor Department stated that, in this year’s first quarter, salaries rose just 0.6%. Meanwhile, the Commerce Department’s latest report showed inflation running at an annual rate of 3.2%. With an abundance of unemployed workers, and an increasing amount of unemployed workers who lose their benefits each week and therefore are not counted as unemployed, the employed are unafraid to lose their jobs should they ask for higher wages and benefits. They can easily be replaced by the unemployed or even have their jobs outsourced, such as, interrogators for our armed forces. Rising productivity has not led to higher wages. As Meckstroth observed, “the higher material cost pressures are coming at a time when Wall Street expects increased profitability. You’ve got to offset those higher costs somewhere, and labor is your variable cost.” One additional point must be recognized. The Labor Department stated that, in the 12 months that ended in March, the cost of providing workers with benefits increased by 6.9%. Private employers, on average, pay about $23 for each hour worked, but of that amount, about $6.50 goes towards benefits. In sum, despite greater productivity, businesses are loath to raise salaries due to increased spending on medical costs and health insurance.
Today there will be the report on non-farm payrolls. A survey of 75 economists projects a rise in jobs of 170,000+ for the month of April with the unemployment rate remaining the same at 5.7%. Most of the jobs will be lower-paying and non-permanent positions at service companies. Some will be at a missile-manufacturing site. Some could be at a firm that makes landing gear for aircraft. Some might be California grocery workers returning to their jobs. No mention will be made of the 320,000 in April dropped from the unemployment roles due to the loss of unemployment benefits. The bond and stock markets are prepared for a blow-out number like March’s. They will most likely ignore other statistics released today- the monthly consumer debt increase and the level of business inventories. The growth in consumer spending has topped out. When talking about the latest retail sales number, even Michael Niemira, chief economist at the International Council of Shopping Centers, warned that “the discretionary purchasing power of middle-to-lower income households was seeing some constraint.” Niemira is a bull of all of retail bulls. It must have been difficult for him to make that statement. It's not surprising that Wal-Mart'’ stock has recently declined from $60 to $54. Stay ahead of the brainless. When they raid the whorehouse, they take all the girls.
A big deal will be made that there might be a slight increase in manufacturing employment in April. Keep your eye on the ball. The average hourly earnings are up only 1.8% year-on-year. Inflation is running higher than that. In addition, inventories are piling up in certain industries, such as, in the automotive field. There will be manufacturing cut-backs. Is that the Hummer I see with discounted prices? How the mighty tax-credit vehicle has begun to fall? If you have to ask the price of gas, maybe the Hummer isn’t for you.
BASF will eliminate 550 to 680 jobs at its Geismer, Louisiana and Freeport, Texas sites.
In April, the corporate tax revenue in Georgia fell 8.5% to $71 million.
According to Cutting Edge Information, the generic pharmaceuticals market is anticipated to rise 15% in 2004. Nearly 50% of all U.S. prescriptions today are filled with generic drugs, up from 18.6% twenty years earlier.
China accounted for 12% of Japan’s exports in 2003, up one-third from the prior year.
Greenspan: “Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces.”
Santa Clara County announced a $32 million “structural deficit.” Since its fiscal 2003 fiscal year, the county has had to find more than $500 million in savings in response to local conditions and cuts in federal and state funding. The county manager stated “this is unprecedented” and also proposed hundreds of layoffs at the county department level.
Krispy Kreme revised its forecast for fiscal 2005 diluted earning per share from continuing operations down 10% from previously announced guidance. The company chairman stated “for several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including, bread, cereal, and pasta. This trend had little discernible effect on our business last year. However, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened significantly following the beginning of the year and as accelerated in the last two to three months. This phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged donuts to grocery store customers.” The U.S. packaged donut category experienced a 0.4% decrease in volume for the 12-week period ending April18, 2004 compared to the same period a year ago, according to IRI reports. However, during the same period, Krispy Kreme experienced a 26.3% increase in system-wide volume in U.S. packaged donuts. Periodically, there are difficult moments, as it were, at some great companies. It has occurred with Starbucks and studies on caffeine, for example. Now we come to low carbohydrate diets and Krispy Kreme. I do believe the long-term viability of many grocery outlets is in doubt. That will put a damper on their off-premises business; however, long-term their growth at their own stores will, in my view, more than offset that weakness. At the outset of its public offering, I believed this company’s shares offered a wonderful long-term investment. I continue to believe that.
According to the Joint Commission on the Accreditation of Healthcare Organizations, nearly a third of Americans will experience chronic pain at some joint in their lives. Approximately 50 million Americans live with chronic pain today. Lessen the potential pain levels in your portfolio. Read beyond the headlines. The story is often buried in the small print. I haven’t had an opportunity to read the fine print. The headlines were: April non-farm payrolls up by 288,000, unemployment rate down to 5.6%, and March’s numbers revised upward. So much for the median forecasts by economists or by me.
According to the BLS, non-farm unit labor costs grew 0.5% in the first quarter of 2004. They were unchanged in the fourth quarter of 2003. When the rise in consumer prices was taken into account, real hourly compensation grew by 0.4% in this year’s first quarter. It had increased 1.7% in the fourth quarter of 2003. In this year’s first quarter, unit labor costs for non-durable manufacturing rose by 2% while unit labor costs for durable manufacturing fell by 1.4%. This highlights a point made by Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, who stated “there are cost pressures affecting firms, such as, soaring prices for insurance, energy, and raw materials, and firms are doing their best to battle these factors, so they aren’t likely to give very much on labor.” Last week, the Labor Department stated that, in this year’s first quarter, salaries rose just 0.6%. Meanwhile, the Commerce Department’s latest report showed inflation running at an annual rate of 3.2%. With an abundance of unemployed workers, and an increasing amount of unemployed workers who lose their benefits each week and therefore are not counted as unemployed, the employed are unafraid to lose their jobs should they ask for higher wages and benefits. They can easily be replaced by the unemployed or even have their jobs outsourced, such as, interrogators for our armed forces. Rising productivity has not led to higher wages. As Meckstroth observed, “the higher material cost pressures are coming at a time when Wall Street expects increased profitability. You’ve got to offset those higher costs somewhere, and labor is your variable cost.” One additional point must be recognized. The Labor Department stated that, in the 12 months that ended in March, the cost of providing workers with benefits increased by 6.9%. Private employers, on average, pay about $23 for each hour worked, but of that amount, about $6.50 goes towards benefits. In sum, despite greater productivity, businesses are loath to raise salaries due to increased spending on medical costs and health insurance.
Today there will be the report on non-farm payrolls. A survey of 75 economists projects a rise in jobs of 170,000+ for the month of April with the unemployment rate remaining the same at 5.7%. Most of the jobs will be lower-paying and non-permanent positions at service companies. Some will be at a missile-manufacturing site. Some could be at a firm that makes landing gear for aircraft. Some might be California grocery workers returning to their jobs. No mention will be made of the 320,000 in April dropped from the unemployment roles due to the loss of unemployment benefits. The bond and stock markets are prepared for a blow-out number like March’s. They will most likely ignore other statistics released today- the monthly consumer debt increase and the level of business inventories. The growth in consumer spending has topped out. When talking about the latest retail sales number, even Michael Niemira, chief economist at the International Council of Shopping Centers, warned that “the discretionary purchasing power of middle-to-lower income households was seeing some constraint.” Niemira is a bull of all of retail bulls. It must have been difficult for him to make that statement. It's not surprising that Wal-Mart'’ stock has recently declined from $60 to $54. Stay ahead of the brainless. When they raid the whorehouse, they take all the girls.
A big deal will be made that there might be a slight increase in manufacturing employment in April. Keep your eye on the ball. The average hourly earnings are up only 1.8% year-on-year. Inflation is running higher than that. In addition, inventories are piling up in certain industries, such as, in the automotive field. There will be manufacturing cut-backs. Is that the Hummer I see with discounted prices? How the mighty tax-credit vehicle has begun to fall? If you have to ask the price of gas, maybe the Hummer isn’t for you.
BASF will eliminate 550 to 680 jobs at its Geismer, Louisiana and Freeport, Texas sites.
In April, the corporate tax revenue in Georgia fell 8.5% to $71 million.
According to Cutting Edge Information, the generic pharmaceuticals market is anticipated to rise 15% in 2004. Nearly 50% of all U.S. prescriptions today are filled with generic drugs, up from 18.6% twenty years earlier.
China accounted for 12% of Japan’s exports in 2003, up one-third from the prior year.
Greenspan: “Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces.”
Santa Clara County announced a $32 million “structural deficit.” Since its fiscal 2003 fiscal year, the county has had to find more than $500 million in savings in response to local conditions and cuts in federal and state funding. The county manager stated “this is unprecedented” and also proposed hundreds of layoffs at the county department level.
Krispy Kreme revised its forecast for fiscal 2005 diluted earning per share from continuing operations down 10% from previously announced guidance. The company chairman stated “for several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including, bread, cereal, and pasta. This trend had little discernible effect on our business last year. However, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened significantly following the beginning of the year and as accelerated in the last two to three months. This phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged donuts to grocery store customers.” The U.S. packaged donut category experienced a 0.4% decrease in volume for the 12-week period ending April18, 2004 compared to the same period a year ago, according to IRI reports. However, during the same period, Krispy Kreme experienced a 26.3% increase in system-wide volume in U.S. packaged donuts. Periodically, there are difficult moments, as it were, at some great companies. It has occurred with Starbucks and studies on caffeine, for example. Now we come to low carbohydrate diets and Krispy Kreme. I do believe the long-term viability of many grocery outlets is in doubt. That will put a damper on their off-premises business; however, long-term their growth at their own stores will, in my view, more than offset that weakness. At the outset of its public offering, I believed this company’s shares offered a wonderful long-term investment. I continue to believe that.
According to the Joint Commission on the Accreditation of Healthcare Organizations, nearly a third of Americans will experience chronic pain at some joint in their lives. Approximately 50 million Americans live with chronic pain today. Lessen the potential pain levels in your portfolio. Read beyond the headlines. The story is often buried in the small print. I haven’t had an opportunity to read the fine print. The headlines were: April non-farm payrolls up by 288,000, unemployment rate down to 5.6%, and March’s numbers revised upward. So much for the median forecasts by economists or by me.
Thursday, May 06, 2004
5/6/04 Technically Speaking
Donald Rumsfeld: “My impression is that what has been charged so far is abuse, which I believe technically is different from torture.”
Edmund Burke: “The greater the power, the more dangerous the abuse.”
The Bank of England raised its short-term interest rate from 4% to 4.25% in order “to keep CPI inflation on track to meet the target in the medium term.”
Walgreens has more 24-hour pharmacies than all its competitors combined.
According to a new study by the Sacramento Regional Research Institute, new-home construction generated $59 billion in economic activity and more than 526,000 jobs in California in 2003. The housing industry (including expenditures on existing housing) contributed $218 billion to the state’s economy, supported almost 1 million jobs, and accounted for approximately 10% of all statewide activity. The California Building Industry stated, with about 600,000 people being added to the state’s population yearly, the current construction pace is barely keeping up with demand and has done nothing to erase an estimated deficit of 500,000 housing units accumulated in the 1990s. The report failed to address the affordability index in California. The facts show that there is a widening gap between the annual income for those in California and the escalating prices for new and existing homes.
Ohio Casualty’s first quarter profit results fell and were short of analyst expectations. The company, however, is on track in one area. It has so far cut 384 jobs on the way to its goal of as many as 500 job cuts by the end of 2004.
In 2000, Chiron purchased Seattle’s Pathogenesis, a company that developed an aerosol drug called Tobi for cystic fibrosis. Last year Chiron laid off 30 researchers at the Seattle site. With additional cuts announced yesterday, only 85 people remain at Pathogenesis, down 50% from its peak employment level.
According to a new Wall Street Journal/NBC poll, six in 10 of those polled responded that the economy is headed for trouble rather than better times. Only 42% say they are better off than 4 years ago, and that compares with 33% who state they are worse off and 23% reporting about the same. The view on Main Street is quite different from the windows looking out over Wall Street. On Main Street many bulls graze on farms and ranches. On Wall Street a good deal of bullshit is generated. TIPS are the tip of the iceberg. If one wants to protect against inflation, consume less. A good place to start is to walk more and drive less. There are no carbs in walking.
According to a recent study by The Robert Wood Foundation, nationally, at least 20 million working Americans do not have health insurance. In six states, at least one in five working adults is uninsured. In 38 other states, at least one working adult in every 10 does not have health insurance. With 27%, Texas has the highest percentage of uninsured residents among all employed or self-employed. It should come as no surprise that, the number of Americans without health insurance, has risen since January 2001 when Bush became president.
About 3 million individuals and families were hit by the AMT this year. The House voted 333-89 to prevent the tax from snaring 9 million more taxpayers next year and imposing about $18 billion in extra taxes. The House bill would keep the amount of income exempt from the tax to this year’s level of $40,250 for individuals and $58,000 for couples. Without passage of the House bill, the exemptions would fall back next year to $33,750 for individuals and $45,000 for couples. It still needs to be passed by the Senate and to be signed by Bush. The Democrat plan, which was rejected, was to exempt every individual earning $125,000 or less and every couple earning $250,000 or less.
Donald Rumsfeld: “My impression is that what has been charged so far is abuse, which I believe technically is different from torture.”
Edmund Burke: “The greater the power, the more dangerous the abuse.”
The Bank of England raised its short-term interest rate from 4% to 4.25% in order “to keep CPI inflation on track to meet the target in the medium term.”
Walgreens has more 24-hour pharmacies than all its competitors combined.
According to a new study by the Sacramento Regional Research Institute, new-home construction generated $59 billion in economic activity and more than 526,000 jobs in California in 2003. The housing industry (including expenditures on existing housing) contributed $218 billion to the state’s economy, supported almost 1 million jobs, and accounted for approximately 10% of all statewide activity. The California Building Industry stated, with about 600,000 people being added to the state’s population yearly, the current construction pace is barely keeping up with demand and has done nothing to erase an estimated deficit of 500,000 housing units accumulated in the 1990s. The report failed to address the affordability index in California. The facts show that there is a widening gap between the annual income for those in California and the escalating prices for new and existing homes.
Ohio Casualty’s first quarter profit results fell and were short of analyst expectations. The company, however, is on track in one area. It has so far cut 384 jobs on the way to its goal of as many as 500 job cuts by the end of 2004.
In 2000, Chiron purchased Seattle’s Pathogenesis, a company that developed an aerosol drug called Tobi for cystic fibrosis. Last year Chiron laid off 30 researchers at the Seattle site. With additional cuts announced yesterday, only 85 people remain at Pathogenesis, down 50% from its peak employment level.
According to a new Wall Street Journal/NBC poll, six in 10 of those polled responded that the economy is headed for trouble rather than better times. Only 42% say they are better off than 4 years ago, and that compares with 33% who state they are worse off and 23% reporting about the same. The view on Main Street is quite different from the windows looking out over Wall Street. On Main Street many bulls graze on farms and ranches. On Wall Street a good deal of bullshit is generated. TIPS are the tip of the iceberg. If one wants to protect against inflation, consume less. A good place to start is to walk more and drive less. There are no carbs in walking.
According to a recent study by The Robert Wood Foundation, nationally, at least 20 million working Americans do not have health insurance. In six states, at least one in five working adults is uninsured. In 38 other states, at least one working adult in every 10 does not have health insurance. With 27%, Texas has the highest percentage of uninsured residents among all employed or self-employed. It should come as no surprise that, the number of Americans without health insurance, has risen since January 2001 when Bush became president.
About 3 million individuals and families were hit by the AMT this year. The House voted 333-89 to prevent the tax from snaring 9 million more taxpayers next year and imposing about $18 billion in extra taxes. The House bill would keep the amount of income exempt from the tax to this year’s level of $40,250 for individuals and $58,000 for couples. Without passage of the House bill, the exemptions would fall back next year to $33,750 for individuals and $45,000 for couples. It still needs to be passed by the Senate and to be signed by Bush. The Democrat plan, which was rejected, was to exempt every individual earning $125,000 or less and every couple earning $250,000 or less.
Wednesday, May 05, 2004
5/5/04 Measure This!
The Lone Star Beef plant in San Angelo, Texas processes older dairy cows, which carry a higher risk of being infected with Mad Cow disease. It is the 18th largest slaughterhouse in the U.S. and processed about 350,000 animals over the last two years. During this time period, only three animals have been tested for the disease, which is an incurable, fatal brain disorder. The three animals that were tested were downers between the ages of 5 and 8+ years. The principal product from this plant is ground beef. How many hamburgers and tacos are consumed in Texas? How many came from this plant. Happy Cinco de Mayo to you too. Fire up that outdoor grill! Mad Cow has an incubation period stretching many years.
According to the Earth Policy Institute, the 2004 world grain harvest is expected to reach a record 1.89 billion tons. Unfortunately, consumption is projected at 1.95 billion tons. It would represent the fifth straight year of grain-harvest shortfalls. This organization’s president stated “we are looking at substantial rises in grain and food prices as early as this fall.”
Oil prices reached $39 (Roy Campanella’s old jersey number) a barrel, a 13 ½ year high. At the same time, GM announced disappointing sales results for April. Inventories are at high levels for the big three auto companies. I look for production schedules to be reduced. In my view, near-term demand has peaked-out for the auto industry. A model like the Prius will remain in demand.
With high interest rates anticipated by all economists, the refinancing frenzy will lessen and the price and sale of new homes will decline. That means less demand for mortgage bankers and home construction workers.
Boeing has put up 46 acres of contiguous land in Renton, Washington for sale. The site formerly was part of Boeing’s 737 and 757 production program, but was vacated when the company consolidated these operations. The 757 assembly line will be shut down in October. The jobs were not outsourced. They were permanently eliminated. Airbus has increasingly taken Boeing’s customers.
According to Challenger, Gray, & Christmas, planned job cuts announced by employers increased in April to 72,184, up 6.1% from March’s figures. Through April, employers have announced 335,024 job cuts, 33% lower than the four-month total in 2003. However, over the past 12 months, employers have announced 1,069,256 job cuts. Since January 2001, 4,995,149 job cuts have been announced. That is a staggering number. As I have mentioned over and over again, there were an increasing number of government and non-profit employers announcing job cuts this year. They totaled 15,926 in April. With on-going budget problems at the local and state levels, one can expect a continued rise in government worker layoffs. Many economists do not weigh in heavily enough on this area.
Dell’s financing arm is offering zero-percent 30-month leases.
Alan Greenspan: “Threats of deflation, which were a significant concern last year, by all indications are no longer an issue for us.” Maybe that’s true for a government worker; however, for the man on Main Street, the wages and salaries continue in a downward direction for the third year in a row.
According to Right Management Consultants, “about 70% of Americans expect the unemployment rate to rise further in the next 12 months. ..There is a recognition that jobs are still neither plentiful, nor are they easy to land. Until the job market completely recovers, we are unlikely to see major shifts in worker confidence levels.”
According to the Hudson Employment Index, 33% of all workers who responded to the survey stated their companies would be hiring in coming months, up from January and February’s 31%. Results were based on telephone interviews of 9,467 working Americans.
The Lone Star Beef plant in San Angelo, Texas processes older dairy cows, which carry a higher risk of being infected with Mad Cow disease. It is the 18th largest slaughterhouse in the U.S. and processed about 350,000 animals over the last two years. During this time period, only three animals have been tested for the disease, which is an incurable, fatal brain disorder. The three animals that were tested were downers between the ages of 5 and 8+ years. The principal product from this plant is ground beef. How many hamburgers and tacos are consumed in Texas? How many came from this plant. Happy Cinco de Mayo to you too. Fire up that outdoor grill! Mad Cow has an incubation period stretching many years.
According to the Earth Policy Institute, the 2004 world grain harvest is expected to reach a record 1.89 billion tons. Unfortunately, consumption is projected at 1.95 billion tons. It would represent the fifth straight year of grain-harvest shortfalls. This organization’s president stated “we are looking at substantial rises in grain and food prices as early as this fall.”
Oil prices reached $39 (Roy Campanella’s old jersey number) a barrel, a 13 ½ year high. At the same time, GM announced disappointing sales results for April. Inventories are at high levels for the big three auto companies. I look for production schedules to be reduced. In my view, near-term demand has peaked-out for the auto industry. A model like the Prius will remain in demand.
With high interest rates anticipated by all economists, the refinancing frenzy will lessen and the price and sale of new homes will decline. That means less demand for mortgage bankers and home construction workers.
Boeing has put up 46 acres of contiguous land in Renton, Washington for sale. The site formerly was part of Boeing’s 737 and 757 production program, but was vacated when the company consolidated these operations. The 757 assembly line will be shut down in October. The jobs were not outsourced. They were permanently eliminated. Airbus has increasingly taken Boeing’s customers.
According to Challenger, Gray, & Christmas, planned job cuts announced by employers increased in April to 72,184, up 6.1% from March’s figures. Through April, employers have announced 335,024 job cuts, 33% lower than the four-month total in 2003. However, over the past 12 months, employers have announced 1,069,256 job cuts. Since January 2001, 4,995,149 job cuts have been announced. That is a staggering number. As I have mentioned over and over again, there were an increasing number of government and non-profit employers announcing job cuts this year. They totaled 15,926 in April. With on-going budget problems at the local and state levels, one can expect a continued rise in government worker layoffs. Many economists do not weigh in heavily enough on this area.
Dell’s financing arm is offering zero-percent 30-month leases.
Alan Greenspan: “Threats of deflation, which were a significant concern last year, by all indications are no longer an issue for us.” Maybe that’s true for a government worker; however, for the man on Main Street, the wages and salaries continue in a downward direction for the third year in a row.
According to Right Management Consultants, “about 70% of Americans expect the unemployment rate to rise further in the next 12 months. ..There is a recognition that jobs are still neither plentiful, nor are they easy to land. Until the job market completely recovers, we are unlikely to see major shifts in worker confidence levels.”
According to the Hudson Employment Index, 33% of all workers who responded to the survey stated their companies would be hiring in coming months, up from January and February’s 31%. Results were based on telephone interviews of 9,467 working Americans.
Tuesday, May 04, 2004
5/4/04 Ferret Out The Truth
Today, we may have some issues to confront. It will be challenging. Depending on what horoscope you read, it’s possible there could be a lunar eclipse and a full moon in your sign today. They could bring misunderstandings and troubles. Prior to bending over backward and falling prey to the cosmic atmosphere, let us illuminate some misconceptions. Wal-Mart is introducing a line of Hawaii Tropic Beverages at 1,200 of their stores. They are sugar-free and caffeine-free. They come from Las Vegas and not Hawaii. Liberate Inc. of San Mateo, California filed for Chapter 11 bankruptcy. The company stated the suppliers would be paid and the stockholders would not be harmed. It’s business as usual. Right? There was this cow at a Lone Star Beef plant in San Angelo, Texas. It was condemned on April 27 after the federal veterinarian “observed the cow stagger and fall,” according to a USDA statement. But instead of holding the cow for testing or giving it a DUI, the carcass was sent to rendering, preventing regulators from ever determining if it had mad-cow disease. The USDA stated the meat from the animal did not enter the human food chain. It’s business as usual. Right? Another three cases of SARS have been confirmed in Beijing. This brings the total to nine. China stated they have a system in place to cut the chain of transmission. Only one of the nine cases has died. In 2002, nearly 800 people died from SARS. It’s business as usual. Right? The U.S. budget deficit is expected to be much less than $520 billion. It appears that tax refunds are less than anticipated and tax receipts are higher than expected. Of course, this year’s costs for the Iraq war are not included in the budget and, as I recently mentioned, other spending items have been unaccounted. In other words, less government spending has not created the projected budget improvement. It’s business as usual. Right? Corporate governance has taken on new meaning. Outsourcing has moved beyond jobs. Boeing performed a slight of hand. Yesterday, they raised the dividend. At the same time, they agreed to demands placed on the company by the Air Force. Boeing is outsourcing its ethics to an independent ethics-compliance watchdog. It’s business as usual as a defense contractor to the Pentagon. Right? Today the Fed will prescribe a glass of warm milk at night for all those investing in U.S. treasury bonds. Of course, the increased demand for milk will create even higher record prices for the moo juice. The Fed has it under control. They will tell investors that the major risk is worrying too much and not enjoying life to the fullest. The danger is not in the rising price of milk. The danger is pulling the trigger and killing the recovery. The Fed does not want the risk of going to prison. They could be judged by the same jury that convicted Quattrone of “destroying evidence in government investigations.” The Fed does not want to put any proclamations in e-mails. They will provide a short written statement that covers up all references to a terror alert on inflation. It’s business as usual. Right?
There is trouble afoot in San Jose. Stay out of the parks. In an effort to close the third year of budget gaps, San Jose is locking rest rooms at city parks. It’s possible urinating in the bushes will be allowed. We don’t know for certain at this point. On a less serious note, scores of city employees will lose their jobs. In addition, they might impose a fee for calling 911. I hope everyone knows how to whistle loudly for help. In addition, the frequency of trash collection, graffiti abatement and watering will be reduced. I can’t wait to move to San Jose. The quality of life seems so inviting.
According to a recent RBC Dain Rauscher report, in 2008, as the first of the baby boomers begin to retire, some developed nations will be confronted with a smaller share of workers to support a growing group of retirees. The report mentions “unfortunately, many investors are unprepared. Their retirement fantasy is just that--- a fantasy. More workers may be forced to postpone retirement and work part-time in retirement. It also puts them at greater risk of outliving their savings.” The good news is a greater potential pool of part-time workers. Essentially, almost all of the job growth is in part-time work. We can keep wage levels down with more part-time workers. The Fed can afford to be patient.
Today, we may have some issues to confront. It will be challenging. Depending on what horoscope you read, it’s possible there could be a lunar eclipse and a full moon in your sign today. They could bring misunderstandings and troubles. Prior to bending over backward and falling prey to the cosmic atmosphere, let us illuminate some misconceptions. Wal-Mart is introducing a line of Hawaii Tropic Beverages at 1,200 of their stores. They are sugar-free and caffeine-free. They come from Las Vegas and not Hawaii. Liberate Inc. of San Mateo, California filed for Chapter 11 bankruptcy. The company stated the suppliers would be paid and the stockholders would not be harmed. It’s business as usual. Right? There was this cow at a Lone Star Beef plant in San Angelo, Texas. It was condemned on April 27 after the federal veterinarian “observed the cow stagger and fall,” according to a USDA statement. But instead of holding the cow for testing or giving it a DUI, the carcass was sent to rendering, preventing regulators from ever determining if it had mad-cow disease. The USDA stated the meat from the animal did not enter the human food chain. It’s business as usual. Right? Another three cases of SARS have been confirmed in Beijing. This brings the total to nine. China stated they have a system in place to cut the chain of transmission. Only one of the nine cases has died. In 2002, nearly 800 people died from SARS. It’s business as usual. Right? The U.S. budget deficit is expected to be much less than $520 billion. It appears that tax refunds are less than anticipated and tax receipts are higher than expected. Of course, this year’s costs for the Iraq war are not included in the budget and, as I recently mentioned, other spending items have been unaccounted. In other words, less government spending has not created the projected budget improvement. It’s business as usual. Right? Corporate governance has taken on new meaning. Outsourcing has moved beyond jobs. Boeing performed a slight of hand. Yesterday, they raised the dividend. At the same time, they agreed to demands placed on the company by the Air Force. Boeing is outsourcing its ethics to an independent ethics-compliance watchdog. It’s business as usual as a defense contractor to the Pentagon. Right? Today the Fed will prescribe a glass of warm milk at night for all those investing in U.S. treasury bonds. Of course, the increased demand for milk will create even higher record prices for the moo juice. The Fed has it under control. They will tell investors that the major risk is worrying too much and not enjoying life to the fullest. The danger is not in the rising price of milk. The danger is pulling the trigger and killing the recovery. The Fed does not want the risk of going to prison. They could be judged by the same jury that convicted Quattrone of “destroying evidence in government investigations.” The Fed does not want to put any proclamations in e-mails. They will provide a short written statement that covers up all references to a terror alert on inflation. It’s business as usual. Right?
There is trouble afoot in San Jose. Stay out of the parks. In an effort to close the third year of budget gaps, San Jose is locking rest rooms at city parks. It’s possible urinating in the bushes will be allowed. We don’t know for certain at this point. On a less serious note, scores of city employees will lose their jobs. In addition, they might impose a fee for calling 911. I hope everyone knows how to whistle loudly for help. In addition, the frequency of trash collection, graffiti abatement and watering will be reduced. I can’t wait to move to San Jose. The quality of life seems so inviting.
According to a recent RBC Dain Rauscher report, in 2008, as the first of the baby boomers begin to retire, some developed nations will be confronted with a smaller share of workers to support a growing group of retirees. The report mentions “unfortunately, many investors are unprepared. Their retirement fantasy is just that--- a fantasy. More workers may be forced to postpone retirement and work part-time in retirement. It also puts them at greater risk of outliving their savings.” The good news is a greater potential pool of part-time workers. Essentially, almost all of the job growth is in part-time work. We can keep wage levels down with more part-time workers. The Fed can afford to be patient.
Monday, May 03, 2004
5/3/04 Expectations
Disappointment frequently results from unrealistic expectations. For example, the government of Japan has been purchasing billions of U.S. dollars. Traders have come to believe that Japan is also the buyer of last resort for our treasury bonds. I know a sucker is born every day but that doesn’t mean forever. After having blown $77 billion on currency intervention in the first quarter, Japan didn’t buy one U.S. dollar in the month of April. I guess Japan realized they weren’t getting a bang for their buck.
James Grant: “Whenever I hear the dignified phrase ‘central banker’, I mentally substitute the words ‘government worker.’”
There is a rising expectation that the world is moving from disinflation to inflation. It might serve a purpose to remember that labor is a bigger component of business costs than that of materials or even equipment. Aided by rising productivity, the cost of labor dropped by 1.2% in 2003. In this year’s first quarter one can anticipate a somewhat slowing in productivity gains; however, statistics will show that unit labor costs continued to fall. As such, with non-farm payroll gains probably dropping at least 100,000 from the March number, and almost all of the gains again in the non-permanent sector, unit labor costs for April will once again be down. The folks in New York City will bemoan higher cab fares this morning. They might be better served to focus on the disappointing length of the average workweek; the factory workweek; wage and salary gains more than offset by inflation; the rising cost of benefits; and the strong possibility that the Department of Labor’s overtime guidelines will be implemented to the detriment of both workers and employers. All told, consumer debt accumulation is rising, government debt is rising, and it is only a matter of time until consumer and government spending are curtailed dramatically. Who would have thought that Japan would go one whole month without purchasing our currency?
Since Abraham Thomas, a native of Singapore, took over the running of IBM’s operations in India, that unit’s revenues have doubled to over $650 million. The number of employees increased from 4,500 to 15,000, and hundreds are joining the company each month. IBM’s sales in the domestic market in India grew by 16% in 2002-2003. Its acquisition of Daksh should prove a further boost to its growth strategies.
Eleven American service members were killed in Iraq yesterday and another 41 were wounded. Of those killed, five were Navy Seabees, and therefore it represented the worst casualties in the war for the Navy. Since April 1, 2004, 151 U.S. soldiers have been killed and at least 753 since we invaded Iraq on March 20, 2003.
The Fed meets tomorrow. On Thursday, Sysan Schmidt Bies, Michael Moskow, Alfred Broaddus, William Poole, and Alan Greenspan give speeches and addresses. The noise level this week will be deafening. I suggest you mute the volume and watch the markets. Talk is cheap. You can make or lose a ham sandwich trading the markets. You might want to assess the cost per unit traded. Over-trading might lead to manic disorder.
Disappointment frequently results from unrealistic expectations. For example, the government of Japan has been purchasing billions of U.S. dollars. Traders have come to believe that Japan is also the buyer of last resort for our treasury bonds. I know a sucker is born every day but that doesn’t mean forever. After having blown $77 billion on currency intervention in the first quarter, Japan didn’t buy one U.S. dollar in the month of April. I guess Japan realized they weren’t getting a bang for their buck.
James Grant: “Whenever I hear the dignified phrase ‘central banker’, I mentally substitute the words ‘government worker.’”
There is a rising expectation that the world is moving from disinflation to inflation. It might serve a purpose to remember that labor is a bigger component of business costs than that of materials or even equipment. Aided by rising productivity, the cost of labor dropped by 1.2% in 2003. In this year’s first quarter one can anticipate a somewhat slowing in productivity gains; however, statistics will show that unit labor costs continued to fall. As such, with non-farm payroll gains probably dropping at least 100,000 from the March number, and almost all of the gains again in the non-permanent sector, unit labor costs for April will once again be down. The folks in New York City will bemoan higher cab fares this morning. They might be better served to focus on the disappointing length of the average workweek; the factory workweek; wage and salary gains more than offset by inflation; the rising cost of benefits; and the strong possibility that the Department of Labor’s overtime guidelines will be implemented to the detriment of both workers and employers. All told, consumer debt accumulation is rising, government debt is rising, and it is only a matter of time until consumer and government spending are curtailed dramatically. Who would have thought that Japan would go one whole month without purchasing our currency?
Since Abraham Thomas, a native of Singapore, took over the running of IBM’s operations in India, that unit’s revenues have doubled to over $650 million. The number of employees increased from 4,500 to 15,000, and hundreds are joining the company each month. IBM’s sales in the domestic market in India grew by 16% in 2002-2003. Its acquisition of Daksh should prove a further boost to its growth strategies.
Eleven American service members were killed in Iraq yesterday and another 41 were wounded. Of those killed, five were Navy Seabees, and therefore it represented the worst casualties in the war for the Navy. Since April 1, 2004, 151 U.S. soldiers have been killed and at least 753 since we invaded Iraq on March 20, 2003.
The Fed meets tomorrow. On Thursday, Sysan Schmidt Bies, Michael Moskow, Alfred Broaddus, William Poole, and Alan Greenspan give speeches and addresses. The noise level this week will be deafening. I suggest you mute the volume and watch the markets. Talk is cheap. You can make or lose a ham sandwich trading the markets. You might want to assess the cost per unit traded. Over-trading might lead to manic disorder.
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