5/29/04 It's Telling
As we ponder over this Memorial Day weekend, I thought I might interrupt the various happenings with an observation that has proven helpful to me over the years. Whether it's the media, politicians, financial pundits, friends, or family members, often it is more meaningful to focus on what is not said rather than what has been said. The unspoken and the unwritten are frequently more telling and closer to the truth.
Thursday, May 27, 2004
5/28/04 Economic Uncertainty And Casino Gaming
Life must be a crap shoot for many Americans. According to the 2004 State of the States: The AGA Survey of Casino Entertainment, two million more Americans visited a casino in 2003 than in 2002. In fact, 53.4 million adult Americans went to casinos last year. These visitors made a total of 310 million trips to casinos in 2003, averaging 5.8 trips per person. According to statistics gathered primarily from state regulatory agencies, the 443 commercial casinos in 11 states nationwide generated more than $27 billion in gross gaming revenue in 2003, an increase of nearly 2% compared to 2002. From that revenue, casinos paid state and local governments $4.32 billion in direct gaming taxes. Employment figures rose slightly in 2003, with the industry providing jobs for 352,428 workers who earned more than $11.8 billion in salaries, including benefits and tips. Frank Fahrenkopf, Jr., president and CEO of the AGA, stated “what these numbers signify is that even when the country is facing an extended period of economic uncertainty, Americans still set aside a portion of their disposable income for fun and entertainment.”
U.S. Energy Secretary Abraham stated that the increase in output by Saudi Arabia would have a “significant effect on oil prices. We also have positive signs from Mexico, Nigeria, and Russia that production will rise to meet the global demand.” In response to those statements, light crude dropped about $1 to $39.75 per barrel. On the other hand, OPEC President Yusgiantoro stated OPEC probably would have to raise supply allocations by more than 2.3 million barrels per day or 10% to have much success in curbing speculation. In my view, rising prices will reduce demand and the latter will curtail speculation. Gasoline consumption needs to decline from the present 9 million barrels per day. It’s up to American drivers to make that happen.
While the Dow, S&P, and the Nasdaq have been focusing on oil prices, the dollar has resumed its downtrend. The dollar dropped to its lowest level versus the euro in over three weeks. The British pound rose to a six week high against the dollar. In addition, money keeps flowing from the dollar into the Japanese yen. Traders blame the weakness in the dollar on the rising threat of terrorism. That maybe a partial answer; however, with the demand for new houses dimming, rising inventories of SUVs, the impact of high gas prices on consumers, and the failure of jobless claims to experience a larger drop, there is a growing inkling that economic growth has topped out. The recent strength in the bond market appears to be confirming this message.
Government spending rose at a 2.9 percent annual rate last quarter rather than the initial estimate of 2 percent.
The latest GDP report showed after-tax corporate profits rose a muted 1.4 percent in the January-March period, compared with the fourth quarter. I would be surprised if the next quarter approaches that level of improvement.
According to the World Bank, the number of Chinese people subsisting on less than $1 a day has fallen from 490 million in 1981 to 88 million. During this period the country's output has increased more than eight fold and the average income has risen by 7% a year, passing $1,000 (currently £551) for the first time in 2003.
On Thursday, gold for June delivery rose $6.60 to close at $394.90 an ounce on the New York Mercantile Exchange. That's its highest closing level since April 27.
General Electric expects its 2005 revenues from China to increase 92 percent from last year to $5 billion, according to published reports in AFX News and the China Daily.
Banking and financial services company Washington Mutual Inc. has issued layoff notices to 170 employees at its Seattle headquarters.They will be effective on June 1.
Life must be a crap shoot for many Americans. According to the 2004 State of the States: The AGA Survey of Casino Entertainment, two million more Americans visited a casino in 2003 than in 2002. In fact, 53.4 million adult Americans went to casinos last year. These visitors made a total of 310 million trips to casinos in 2003, averaging 5.8 trips per person. According to statistics gathered primarily from state regulatory agencies, the 443 commercial casinos in 11 states nationwide generated more than $27 billion in gross gaming revenue in 2003, an increase of nearly 2% compared to 2002. From that revenue, casinos paid state and local governments $4.32 billion in direct gaming taxes. Employment figures rose slightly in 2003, with the industry providing jobs for 352,428 workers who earned more than $11.8 billion in salaries, including benefits and tips. Frank Fahrenkopf, Jr., president and CEO of the AGA, stated “what these numbers signify is that even when the country is facing an extended period of economic uncertainty, Americans still set aside a portion of their disposable income for fun and entertainment.”
U.S. Energy Secretary Abraham stated that the increase in output by Saudi Arabia would have a “significant effect on oil prices. We also have positive signs from Mexico, Nigeria, and Russia that production will rise to meet the global demand.” In response to those statements, light crude dropped about $1 to $39.75 per barrel. On the other hand, OPEC President Yusgiantoro stated OPEC probably would have to raise supply allocations by more than 2.3 million barrels per day or 10% to have much success in curbing speculation. In my view, rising prices will reduce demand and the latter will curtail speculation. Gasoline consumption needs to decline from the present 9 million barrels per day. It’s up to American drivers to make that happen.
While the Dow, S&P, and the Nasdaq have been focusing on oil prices, the dollar has resumed its downtrend. The dollar dropped to its lowest level versus the euro in over three weeks. The British pound rose to a six week high against the dollar. In addition, money keeps flowing from the dollar into the Japanese yen. Traders blame the weakness in the dollar on the rising threat of terrorism. That maybe a partial answer; however, with the demand for new houses dimming, rising inventories of SUVs, the impact of high gas prices on consumers, and the failure of jobless claims to experience a larger drop, there is a growing inkling that economic growth has topped out. The recent strength in the bond market appears to be confirming this message.
Government spending rose at a 2.9 percent annual rate last quarter rather than the initial estimate of 2 percent.
The latest GDP report showed after-tax corporate profits rose a muted 1.4 percent in the January-March period, compared with the fourth quarter. I would be surprised if the next quarter approaches that level of improvement.
According to the World Bank, the number of Chinese people subsisting on less than $1 a day has fallen from 490 million in 1981 to 88 million. During this period the country's output has increased more than eight fold and the average income has risen by 7% a year, passing $1,000 (currently £551) for the first time in 2003.
On Thursday, gold for June delivery rose $6.60 to close at $394.90 an ounce on the New York Mercantile Exchange. That's its highest closing level since April 27.
General Electric expects its 2005 revenues from China to increase 92 percent from last year to $5 billion, according to published reports in AFX News and the China Daily.
Banking and financial services company Washington Mutual Inc. has issued layoff notices to 170 employees at its Seattle headquarters.They will be effective on June 1.
5/27/04 Clear And Present Danger
Jay Watson, Wildlife Fire Program director for the Wilderness Society: “It all adds up to a real shortage of resources. This unpreparedness flies in the face of all the rhetoric we have heard from this Bush administration about the forest-fire crisis and the need for proactive fire prevention.” He referred to Bush unexpectedly grounding a fleet of 33 air tankers that are used to dump fire retardant and for refusing to provide extra money to hire temporary firefighters for this summer. Unless emergency funds are provided, there will be 3,000 fewer seasonal firefighters, or 30% less, this summer than last summer. Three weeks ago 29,000 acres burned in S. California and 28 homes were destroyed. In New Mexico, a state of emergency was declared after two wildfires blazed out of control.
It may come as a surprise to some that U.S. Agriculture Secretary Ann Veneman oversees the Forest Service. This is the same woman who is in charge of handling the outbreak of mad cow disease. With more than half of the nation’s 345,000 Army National Guard serving overseas in places such as Iraq and Afghanistan, there will most certainly be a shortage of manpower to combat wildfires this summer in California, Idaho, Montana, Oregon, Washington, New Mexico, and Arizona. After an unusually warm spring, six years of drought, and infestations by tree-killing beetles, there is a clear and present danger that this summer season will be accompanied by potentially devastating wildfires. Only after the fact, will Ann Veneman have a press conference announcing the steps being taken to fight the raging fires. By that time, they will be out of control.
While the employment of seasonal firefighters is sharply reduced, homeland security with its fight on terror continues to add to the non-farm payrolls. There is a recent report “so fresh that we haven’t even bound the pages yet,” stated Tom Clark, executive vice president of the Metro Denver Economic Development Corp. He describes the area being the “center of gravity for the military.” The report tallied 47,500 direct jobs and about 95,000 indirect or spinoff jobs. Of the direct jobs, 16,000 are in the private sector at Raytheon, Northrop Grumman, Boeing, and Merrick, and 31,500 are government employees. Clark stated that only California, Texas, and Florida are ahead of Colorado in defense and military job creation. The 142,500 jobs have generated an annual $9.7 billion payroll to the sate of Colorado. Bush and a larger government go hand-in-hand. This is hardly the picture of a fiscally conservative president.
In April, orders for big-ticket durable goods fell 2.9% after a gain of 5.7% in March and 3.9% in February. It was the largest decrease since the 6% registered in September 2002. Orders outside the defense sector declined 2.4% while non-defense capital goods excluding aircraft dropped 3.5%. Is this a trend reversal? In my view, the best we can hope for is a slow down in the GDP growth curve. Is there a present danger that a slowdown could result in a downturn? We’d need to ask the geniuses at the Fed for that answer.
New U.S. mortgage applications fell last week for a third straight week. Sales of new homes in April fell by 12%.
Stocks of gasoline inventories are running about 4.7 million barrels below the level at this time last year.
China’s PPI rose 5% in April from a year earlier. It was the largest increase since 1996. Their consumer prices rose 3.8% from a year earlier, and it was the largest increase in seven years.
India’s exports rose 19.55 in April over the same period last year. India’s goal is to achieve one percent of global trade by 2007.
Iranian OIL Minister Bijan Zanganeh: “Any OPEC quota increase should be based on consensus, be cautious, limited, and temporary.’
Jay Watson, Wildlife Fire Program director for the Wilderness Society: “It all adds up to a real shortage of resources. This unpreparedness flies in the face of all the rhetoric we have heard from this Bush administration about the forest-fire crisis and the need for proactive fire prevention.” He referred to Bush unexpectedly grounding a fleet of 33 air tankers that are used to dump fire retardant and for refusing to provide extra money to hire temporary firefighters for this summer. Unless emergency funds are provided, there will be 3,000 fewer seasonal firefighters, or 30% less, this summer than last summer. Three weeks ago 29,000 acres burned in S. California and 28 homes were destroyed. In New Mexico, a state of emergency was declared after two wildfires blazed out of control.
It may come as a surprise to some that U.S. Agriculture Secretary Ann Veneman oversees the Forest Service. This is the same woman who is in charge of handling the outbreak of mad cow disease. With more than half of the nation’s 345,000 Army National Guard serving overseas in places such as Iraq and Afghanistan, there will most certainly be a shortage of manpower to combat wildfires this summer in California, Idaho, Montana, Oregon, Washington, New Mexico, and Arizona. After an unusually warm spring, six years of drought, and infestations by tree-killing beetles, there is a clear and present danger that this summer season will be accompanied by potentially devastating wildfires. Only after the fact, will Ann Veneman have a press conference announcing the steps being taken to fight the raging fires. By that time, they will be out of control.
While the employment of seasonal firefighters is sharply reduced, homeland security with its fight on terror continues to add to the non-farm payrolls. There is a recent report “so fresh that we haven’t even bound the pages yet,” stated Tom Clark, executive vice president of the Metro Denver Economic Development Corp. He describes the area being the “center of gravity for the military.” The report tallied 47,500 direct jobs and about 95,000 indirect or spinoff jobs. Of the direct jobs, 16,000 are in the private sector at Raytheon, Northrop Grumman, Boeing, and Merrick, and 31,500 are government employees. Clark stated that only California, Texas, and Florida are ahead of Colorado in defense and military job creation. The 142,500 jobs have generated an annual $9.7 billion payroll to the sate of Colorado. Bush and a larger government go hand-in-hand. This is hardly the picture of a fiscally conservative president.
In April, orders for big-ticket durable goods fell 2.9% after a gain of 5.7% in March and 3.9% in February. It was the largest decrease since the 6% registered in September 2002. Orders outside the defense sector declined 2.4% while non-defense capital goods excluding aircraft dropped 3.5%. Is this a trend reversal? In my view, the best we can hope for is a slow down in the GDP growth curve. Is there a present danger that a slowdown could result in a downturn? We’d need to ask the geniuses at the Fed for that answer.
New U.S. mortgage applications fell last week for a third straight week. Sales of new homes in April fell by 12%.
Stocks of gasoline inventories are running about 4.7 million barrels below the level at this time last year.
China’s PPI rose 5% in April from a year earlier. It was the largest increase since 1996. Their consumer prices rose 3.8% from a year earlier, and it was the largest increase in seven years.
India’s exports rose 19.55 in April over the same period last year. India’s goal is to achieve one percent of global trade by 2007.
Iranian OIL Minister Bijan Zanganeh: “Any OPEC quota increase should be based on consensus, be cautious, limited, and temporary.’
Wednesday, May 26, 2004
5/26/04 A Closer Look
Richard Branson: “Like old trees, some airlines deserve to die.”
Bush’s five-step program for Iraqi sovereignty is halfway there to a 10-step recovery plan. Maybe the plan should be outsourced to AA.
Not all nations are created equal. Despite record high prices for oil imports, Japan’s trade surplus rose 30% in April from a year earlier. The eurozone region had a current account surplus of 12.4 billion euros in March. It’s no wonder the rally in the dollar has hit a brick wall.
All eyes are on the Energy Information Administration data to be released today at 10:30 am EDT. A Reuters survey suggests gas supplies will be up by 1.2 million barrels for the latest week and crude oil stocks will have had a rise of 1.6 million barrels. The market’s strong rally yesterday reflected Tuesday’s 1.4% decline in the price of crude oil. For my money, other matters carry equal and/or more weight.
According to the AARP Public Policy Institute report, prices for 197 drugs most commonly prescribed for older Americans rose by an average of 27.6% over the past four years, almost triple the overall rate of inflation during this period. Prices of the top 30 medicines used by seniors increased by more than four times the rate of inflation in the past year alone.
According to a survey conducted for Robert Half Technology, CIOs are cautious about Q3 IT hiring. Eight percent of executives expect to add IT staff and three percent plan personnel cutbacks. The net five percent hiring increase compares with a net nine percent forecast last quarter. Eighty eight percent plan to maintain existing staff levels. The survey noted that “businesses that overstaffed and experienced layoffs during the recession are taking a more strategic and measured approach to hiring today. Many managers are initiating projects previously on hold due to budget constraints. However, they are carefully analyzing their requirements before adding full-time IT employees and relying on project professionals for short-term demands.” Prior to buying a tech stock, it might be wise to look around the corner in order to see business beyond short-term demands. The P/E ratios, for the most part, reflect a vision of clear sailing for the longer term. If that were true, more insiders would most likely be buying shares in their own company.
The Conference Board’s latest monthly survey indicated that the proportion of consumers anticipating an increase in their incomes declined again and is now at 16.8%, down from 17.4% last month. In other words, 83.2% see no increase in their incomes. The survey didn’t reveal what percentage anticipated a decrease in their incomes. If there were such a rush to hire, then one might expect some upward pressure on wages and salaries. As the CIO survey indicates for Q3, for example, 88% are not hiring.
Insanity reigns. According to the California Association of Realtors, the median price of an existing home in California in April increased 24.6% and sales increased 9.8% compared tot he same period a year ago. In just the one month of April, the median price increased 5.8% compared to March’s numbers and stands at $453,590. Can you imagine what the price would be if people were not moving out of the state?
Wal-Mart has a 37.8% stake in Japan’s Seiyu. A company spokesperson stated they would likely exercise their option to increase ownership to 50.1% in 2005.
In April, China’s M2 money supply surged 19%. Outstanding loans in both yuan and foreign currency rose 20%. Fixed-asset investment rose 43% in the first quarter. If the Chinese government is attempting to cool the economy, their efforts have not proven too successful. Their central bank stated that, only in the second half of this year, would a slowdown start to emerge as government policies come through the system. Maybe then shipping costs will decrease along with the prices for soybeans, coal, copper, aluminum, tin, crude oil, and many other widely used commodities.
India-China bilateral trade surged 88% in the first quarter of 2004 to $3.13 billion, and appears on its way to exceed $10 billion on an annual basis for the first time.
John Kay: “However it comes about, the inevitable consequence of the U.S. ceasing to spend more than it produces is that other countries must cease to produce more than they spend. The solution to America’s problems will not be a problem for America alone.”
At some point reality will hit Boeing shareholders. Their management continues to expound the theory that the Boeing tanker deal has simply been delayed--this time for another six months. I strongly suggest the company’s board of directors instruct the CEO to, at the very least, revise downward earnings projections for 2004.
There hasn’t been a new oil refinery built in the U.S. since 1976.
Hans Blix remarked that Bush and Blair “may have been sincerely convinced that there were weapons of mass destruction in Iraq like some were convinced of the existence of witches in the 18th century.”
Richard Branson: “Like old trees, some airlines deserve to die.”
Bush’s five-step program for Iraqi sovereignty is halfway there to a 10-step recovery plan. Maybe the plan should be outsourced to AA.
Not all nations are created equal. Despite record high prices for oil imports, Japan’s trade surplus rose 30% in April from a year earlier. The eurozone region had a current account surplus of 12.4 billion euros in March. It’s no wonder the rally in the dollar has hit a brick wall.
All eyes are on the Energy Information Administration data to be released today at 10:30 am EDT. A Reuters survey suggests gas supplies will be up by 1.2 million barrels for the latest week and crude oil stocks will have had a rise of 1.6 million barrels. The market’s strong rally yesterday reflected Tuesday’s 1.4% decline in the price of crude oil. For my money, other matters carry equal and/or more weight.
According to the AARP Public Policy Institute report, prices for 197 drugs most commonly prescribed for older Americans rose by an average of 27.6% over the past four years, almost triple the overall rate of inflation during this period. Prices of the top 30 medicines used by seniors increased by more than four times the rate of inflation in the past year alone.
According to a survey conducted for Robert Half Technology, CIOs are cautious about Q3 IT hiring. Eight percent of executives expect to add IT staff and three percent plan personnel cutbacks. The net five percent hiring increase compares with a net nine percent forecast last quarter. Eighty eight percent plan to maintain existing staff levels. The survey noted that “businesses that overstaffed and experienced layoffs during the recession are taking a more strategic and measured approach to hiring today. Many managers are initiating projects previously on hold due to budget constraints. However, they are carefully analyzing their requirements before adding full-time IT employees and relying on project professionals for short-term demands.” Prior to buying a tech stock, it might be wise to look around the corner in order to see business beyond short-term demands. The P/E ratios, for the most part, reflect a vision of clear sailing for the longer term. If that were true, more insiders would most likely be buying shares in their own company.
The Conference Board’s latest monthly survey indicated that the proportion of consumers anticipating an increase in their incomes declined again and is now at 16.8%, down from 17.4% last month. In other words, 83.2% see no increase in their incomes. The survey didn’t reveal what percentage anticipated a decrease in their incomes. If there were such a rush to hire, then one might expect some upward pressure on wages and salaries. As the CIO survey indicates for Q3, for example, 88% are not hiring.
Insanity reigns. According to the California Association of Realtors, the median price of an existing home in California in April increased 24.6% and sales increased 9.8% compared tot he same period a year ago. In just the one month of April, the median price increased 5.8% compared to March’s numbers and stands at $453,590. Can you imagine what the price would be if people were not moving out of the state?
Wal-Mart has a 37.8% stake in Japan’s Seiyu. A company spokesperson stated they would likely exercise their option to increase ownership to 50.1% in 2005.
In April, China’s M2 money supply surged 19%. Outstanding loans in both yuan and foreign currency rose 20%. Fixed-asset investment rose 43% in the first quarter. If the Chinese government is attempting to cool the economy, their efforts have not proven too successful. Their central bank stated that, only in the second half of this year, would a slowdown start to emerge as government policies come through the system. Maybe then shipping costs will decrease along with the prices for soybeans, coal, copper, aluminum, tin, crude oil, and many other widely used commodities.
India-China bilateral trade surged 88% in the first quarter of 2004 to $3.13 billion, and appears on its way to exceed $10 billion on an annual basis for the first time.
John Kay: “However it comes about, the inevitable consequence of the U.S. ceasing to spend more than it produces is that other countries must cease to produce more than they spend. The solution to America’s problems will not be a problem for America alone.”
At some point reality will hit Boeing shareholders. Their management continues to expound the theory that the Boeing tanker deal has simply been delayed--this time for another six months. I strongly suggest the company’s board of directors instruct the CEO to, at the very least, revise downward earnings projections for 2004.
There hasn’t been a new oil refinery built in the U.S. since 1976.
Hans Blix remarked that Bush and Blair “may have been sincerely convinced that there were weapons of mass destruction in Iraq like some were convinced of the existence of witches in the 18th century.”
Tuesday, May 25, 2004
5/25/04 Record High Gasoline Prices Take A Toll
Over the past week, the average retail price for gasoline has jumped to $2.07 a gallon. In a survey of 400 Michigan residents, 38% of those planning a trip Memorial Day weekend stated the change in gasoline prices will affect their travel plans, the highest percentage since 2000, AAA Michigan reported. Last year the percentage had declined to 15%. The group stated “the survey results suggest that the economy and high gas prices continue to affect domestic travel plans.”
Last week I noted that Continental Airlines had raised its fares $10 each way for flights under 1,000 miles and $20 each way for flights over 1,000 miles in an effort to offset soaring fuel costs. Yesterday Continental and other airlines dropped this fare increase. You can expect benefit and wage concessions and, at the very least, furloughs at many major airlines. The higher fuel costs will result in an extra $750 million in operating expenses at United. If the higher fuel costs can’t be passed along, survival may depend on significant employee cuts.
Fifty percent of India’s population is under 25 years of age. Fifty percent of their GDP comes from services with agriculture and manufacturing contributing 25 percent each. P.D. Samududra, Executive Director, Uhde India Ltd, cautioned “ a lot of people are indulging in wishful thinking that India will become an economic superpower by 2020. But, we have to realize that while India certainly has great potential, she has to first tackle more pressing issues like high level of poverty, lack of proper education of the masses, inadequate investments in infrastructure facilities such as water, power, and roads, to name only a few issues.”
Some 109 tornadoes were reported over this past weekend in the plains states. Storms and heavy rains produced flooding from Wisconsin to parts of Iowa.
Retired Marine General Anthony Zinni, former chief of U.S. Central Command, stated that planning for the Iraq war and its aftermath had been flawed from the start. He stated “somebody has screwed up. And at this level and at this stage, it should be evident to everybody that they’ve screwed up. And whose heads are rolling on this? That’s what bothers me most.” So far, the only head to roll appears to be that of Sanchez’s. There will be others.
It was reported that the average Mexican factory worker earns $300 per month or triple the average wage in China. Abel Saavedra, director of international marketing at Mexican shoemaker Botas Industriales de Piletas, stated “we can’t compete with those costs. Basically, it’s all about price.”
As the operating margins continue to increase at our domestic oil refining companies, they should maintain a watchful eye on the price of gas at the pump. Demand does matter. Record high prices do damper demand. Someone has to absorb those higher prices and costs. The headlines will soon show cutbacks in economic growth forecasts and an upswing in announced employee layoffs.
Ben Wallace blocks more shots than an armored Humvee.
Over the past week, the average retail price for gasoline has jumped to $2.07 a gallon. In a survey of 400 Michigan residents, 38% of those planning a trip Memorial Day weekend stated the change in gasoline prices will affect their travel plans, the highest percentage since 2000, AAA Michigan reported. Last year the percentage had declined to 15%. The group stated “the survey results suggest that the economy and high gas prices continue to affect domestic travel plans.”
Last week I noted that Continental Airlines had raised its fares $10 each way for flights under 1,000 miles and $20 each way for flights over 1,000 miles in an effort to offset soaring fuel costs. Yesterday Continental and other airlines dropped this fare increase. You can expect benefit and wage concessions and, at the very least, furloughs at many major airlines. The higher fuel costs will result in an extra $750 million in operating expenses at United. If the higher fuel costs can’t be passed along, survival may depend on significant employee cuts.
Fifty percent of India’s population is under 25 years of age. Fifty percent of their GDP comes from services with agriculture and manufacturing contributing 25 percent each. P.D. Samududra, Executive Director, Uhde India Ltd, cautioned “ a lot of people are indulging in wishful thinking that India will become an economic superpower by 2020. But, we have to realize that while India certainly has great potential, she has to first tackle more pressing issues like high level of poverty, lack of proper education of the masses, inadequate investments in infrastructure facilities such as water, power, and roads, to name only a few issues.”
Some 109 tornadoes were reported over this past weekend in the plains states. Storms and heavy rains produced flooding from Wisconsin to parts of Iowa.
Retired Marine General Anthony Zinni, former chief of U.S. Central Command, stated that planning for the Iraq war and its aftermath had been flawed from the start. He stated “somebody has screwed up. And at this level and at this stage, it should be evident to everybody that they’ve screwed up. And whose heads are rolling on this? That’s what bothers me most.” So far, the only head to roll appears to be that of Sanchez’s. There will be others.
It was reported that the average Mexican factory worker earns $300 per month or triple the average wage in China. Abel Saavedra, director of international marketing at Mexican shoemaker Botas Industriales de Piletas, stated “we can’t compete with those costs. Basically, it’s all about price.”
As the operating margins continue to increase at our domestic oil refining companies, they should maintain a watchful eye on the price of gas at the pump. Demand does matter. Record high prices do damper demand. Someone has to absorb those higher prices and costs. The headlines will soon show cutbacks in economic growth forecasts and an upswing in announced employee layoffs.
Ben Wallace blocks more shots than an armored Humvee.
Monday, May 24, 2004
5/24/04 The Real Shrek
There are several reports this morning that Saudi Arabia will boost production by 800,000 barrels a day, bringing daily output to 11.3 million barrels. The news was anticipated and led crude to drop from a 21-year high of $41.85 per barrel to this morning’s level approaching $39.50. On the surface this is most welcome. Unfortunately, the real problem has been set aside. In this year’s first quarter, China overtook Japan as the second largest consuming nation of oil. According to Japan’s Institute of Energy Economics, over the next 20 years China’s consumption of oil will rise by 16 million barrels per day to 35 million barrels per day. You might say “why should I worry?” You would be a fool not to have a real shrek. In the last two years look at what increased consumption by China has done to the prices for steel, copper, aluminum, soybeans, etc. The world cannot afford wars. Nations need to conserve cash flow and expend funds on alternative sources of energy. Without the latter, there will be an untenable price to pay for the six-fold increase expected to occur in the output of vehicles on China’s roads. What form of energy will power those 120 million vehicles? I hope you don’t believe Saudi Arabia’s daily output will make a difference. One additional near-term note of caution might be in order. As we approach Memorial Day, U.S. gasoline inventories are nearly 8 million barrels below the 5-year average at this time.
GM is shutting down its Moraine, Ohio assembly plant for one week. The closure will result in 4,000 workers temporarily being laid off. The plant makes three mid-size SUVs. Last week, another plant in Oklahoma City that makes mid-size SUVs was shut down temporarily. GM will tell you that sales of SUVs continue to exhibit strength. If that were the case, inventories would not exceed 100 days of supply. It is wise to pay attention to what people do, and not what they say. The same can be said for Bush’s speech tonight.
Listening to Bush, reminds me of weather in Iowa in May and June. Those are the most severe weather months for Iowa. Over this past weekend, up to 9 inches of rain and about 20 tornadoes were reported in 16 counties. Bush will tell you help is on the way. The water level may be rising in Iraq, as it were. Americans should not worry. It’s been worth all the deaths and all the wounded. Democracy is coming to Iraq on June 30. Senator Richard Lugar, a Republican from Indiana, remarked “unless the United States commits itself to a sustained program of repairing and building alliances, expanding trade, pursuing resolutions to regional conflicts, supporting democracy and development worldwide, and controlling weapons of mass destruction, we are likely to experience acts of catastrophic terrorism that would undermine our economy, damage our society, and kill hundreds of thousands, if not millions of people. The United States, as a nation, has not made this commitment.”
According to Fed statistics, since the end of 2001, outstanding household mortgages exceeded a growth rate of 10%, and for 2003, mortgage growth outstripped a 13% rate. The increasing demand for mortgages has led directly to escalating home prices.
Chicago has the nation’s third-largest school system. It faces a $100 million deficit. Approximately, 3,660 Chicago Public School workers. including 2,180 teachers, were laid off this past week.
Samsung and Toshiba control 90% of the $4.7 billion market for 512-megabit flash chips. According to dramaexchange.com, the average price for these chips has dropped to $9 from $21.50 in October. I expect the price to drop further over the course of this year.
There are several reports this morning that Saudi Arabia will boost production by 800,000 barrels a day, bringing daily output to 11.3 million barrels. The news was anticipated and led crude to drop from a 21-year high of $41.85 per barrel to this morning’s level approaching $39.50. On the surface this is most welcome. Unfortunately, the real problem has been set aside. In this year’s first quarter, China overtook Japan as the second largest consuming nation of oil. According to Japan’s Institute of Energy Economics, over the next 20 years China’s consumption of oil will rise by 16 million barrels per day to 35 million barrels per day. You might say “why should I worry?” You would be a fool not to have a real shrek. In the last two years look at what increased consumption by China has done to the prices for steel, copper, aluminum, soybeans, etc. The world cannot afford wars. Nations need to conserve cash flow and expend funds on alternative sources of energy. Without the latter, there will be an untenable price to pay for the six-fold increase expected to occur in the output of vehicles on China’s roads. What form of energy will power those 120 million vehicles? I hope you don’t believe Saudi Arabia’s daily output will make a difference. One additional near-term note of caution might be in order. As we approach Memorial Day, U.S. gasoline inventories are nearly 8 million barrels below the 5-year average at this time.
GM is shutting down its Moraine, Ohio assembly plant for one week. The closure will result in 4,000 workers temporarily being laid off. The plant makes three mid-size SUVs. Last week, another plant in Oklahoma City that makes mid-size SUVs was shut down temporarily. GM will tell you that sales of SUVs continue to exhibit strength. If that were the case, inventories would not exceed 100 days of supply. It is wise to pay attention to what people do, and not what they say. The same can be said for Bush’s speech tonight.
Listening to Bush, reminds me of weather in Iowa in May and June. Those are the most severe weather months for Iowa. Over this past weekend, up to 9 inches of rain and about 20 tornadoes were reported in 16 counties. Bush will tell you help is on the way. The water level may be rising in Iraq, as it were. Americans should not worry. It’s been worth all the deaths and all the wounded. Democracy is coming to Iraq on June 30. Senator Richard Lugar, a Republican from Indiana, remarked “unless the United States commits itself to a sustained program of repairing and building alliances, expanding trade, pursuing resolutions to regional conflicts, supporting democracy and development worldwide, and controlling weapons of mass destruction, we are likely to experience acts of catastrophic terrorism that would undermine our economy, damage our society, and kill hundreds of thousands, if not millions of people. The United States, as a nation, has not made this commitment.”
According to Fed statistics, since the end of 2001, outstanding household mortgages exceeded a growth rate of 10%, and for 2003, mortgage growth outstripped a 13% rate. The increasing demand for mortgages has led directly to escalating home prices.
Chicago has the nation’s third-largest school system. It faces a $100 million deficit. Approximately, 3,660 Chicago Public School workers. including 2,180 teachers, were laid off this past week.
Samsung and Toshiba control 90% of the $4.7 billion market for 512-megabit flash chips. According to dramaexchange.com, the average price for these chips has dropped to $9 from $21.50 in October. I expect the price to drop further over the course of this year.
Sunday, May 23, 2004
5/23/04 Staging
The first thought coming to mind is that of the Broadway stage or possibly the world as a stage. That’s not exactly what I have in mind. Most guys will not be familiar with the term “staging.” I am specifically referring to staging a home prior to its sale. Since its inception 30 years ago, it has been a cottage industry with few participants; however, that is changing.
Staging has become a recognized and accepted selling tool among West Coast real estate professionals. Over the past four years there have been studies comparing the results of staged and non-staged homes. On average, a staged home sells 50% faster and creates at least 5% additional realized value. The cost for the staging services can range from $25 per hour to $200 per hour or for a job in a very large home it can run as high as $50,000.
What is staging? It originated from the description ‘being on stage.’ The idea is to place the home, which is to be put on the market for sale, in the most appealing and sellable manner. Many stagers have their own furniture, fixtures, plants, accessories, etc. They transform your home into a showplace. When the potential buyer approaches the property, the idea is to make that home so appealing that the buyer gladly and willingly overbids the listing price. In the San Francisco Bay Area it is commonplace for a home to sell in one day and for the price to exceed the listing price by 15% or more. Many real estate agents demand that their sellers agree to have their home staged. The results have more than warranted the extra expense.
Staging creates an inviting picture. Everything is real. The paint on the wall can be changed a different color. The art work on the walls may be changed. The carpeting maybe changed. The décor is often transformed. At the same time, it is an illusion for the buyer and the seller. The seller’s home has never looked like this, and the buyer is viewing a home with multiple visual incentives. These staged incentives create an inviting and an appealing look to the buyer. As such, paying a higher price for this transformed masterpiece becomes a pill ready and willing to swallow.
Why do I focus on staging at this time? We are fast approaching the November 2 presidential election. The candidates will be staging their accomplishments and their goals for the future. There is nothing wrong with this endeavor except for one thing. The voter wants to buy the real deal. Bush was elected as a conservative. From a fiscal standpoint, he is the greatest political spender I have witnessed in my lifetime. The voters did not get what they were promised. In real estate, the sellers must list what’s wrong with the listed property. It is not simply buyer beware. In politics, it is buyer beware. To get elected, politicians frequently tell you what you want to hear. The Federal Reserve plays that game as well. While you are paying through the nose for milk and meat, the governors go around the country telling you that inflation is not a problem. Bush goes around the country focusing on the 600,000 new jobs created in the past two months. He is staging his economic policies. He tells you to stay the course with him. It doesn’t matter that your wages and salaries have been running below the inflation rate for the past three years. It doesn’t matter that 80,000 unemployed Americans have lost their benefits each week since December 23, 2003. Bush will stage his policies and change the décor. Buyer beware. The price you are paying is very dear. The price you are paying for the Fed’s staged economy is very dear. Zero down payments and zero percent financing are not sustainable. They are staged short-run policies designed to sell a car or a home or refinance your debt in the shortest time. The idea is to make you smile while you gladly swallow the daily consumer pill. Don’t look now. You need to call the Roto Rooter man.
The first thought coming to mind is that of the Broadway stage or possibly the world as a stage. That’s not exactly what I have in mind. Most guys will not be familiar with the term “staging.” I am specifically referring to staging a home prior to its sale. Since its inception 30 years ago, it has been a cottage industry with few participants; however, that is changing.
Staging has become a recognized and accepted selling tool among West Coast real estate professionals. Over the past four years there have been studies comparing the results of staged and non-staged homes. On average, a staged home sells 50% faster and creates at least 5% additional realized value. The cost for the staging services can range from $25 per hour to $200 per hour or for a job in a very large home it can run as high as $50,000.
What is staging? It originated from the description ‘being on stage.’ The idea is to place the home, which is to be put on the market for sale, in the most appealing and sellable manner. Many stagers have their own furniture, fixtures, plants, accessories, etc. They transform your home into a showplace. When the potential buyer approaches the property, the idea is to make that home so appealing that the buyer gladly and willingly overbids the listing price. In the San Francisco Bay Area it is commonplace for a home to sell in one day and for the price to exceed the listing price by 15% or more. Many real estate agents demand that their sellers agree to have their home staged. The results have more than warranted the extra expense.
Staging creates an inviting picture. Everything is real. The paint on the wall can be changed a different color. The art work on the walls may be changed. The carpeting maybe changed. The décor is often transformed. At the same time, it is an illusion for the buyer and the seller. The seller’s home has never looked like this, and the buyer is viewing a home with multiple visual incentives. These staged incentives create an inviting and an appealing look to the buyer. As such, paying a higher price for this transformed masterpiece becomes a pill ready and willing to swallow.
Why do I focus on staging at this time? We are fast approaching the November 2 presidential election. The candidates will be staging their accomplishments and their goals for the future. There is nothing wrong with this endeavor except for one thing. The voter wants to buy the real deal. Bush was elected as a conservative. From a fiscal standpoint, he is the greatest political spender I have witnessed in my lifetime. The voters did not get what they were promised. In real estate, the sellers must list what’s wrong with the listed property. It is not simply buyer beware. In politics, it is buyer beware. To get elected, politicians frequently tell you what you want to hear. The Federal Reserve plays that game as well. While you are paying through the nose for milk and meat, the governors go around the country telling you that inflation is not a problem. Bush goes around the country focusing on the 600,000 new jobs created in the past two months. He is staging his economic policies. He tells you to stay the course with him. It doesn’t matter that your wages and salaries have been running below the inflation rate for the past three years. It doesn’t matter that 80,000 unemployed Americans have lost their benefits each week since December 23, 2003. Bush will stage his policies and change the décor. Buyer beware. The price you are paying is very dear. The price you are paying for the Fed’s staged economy is very dear. Zero down payments and zero percent financing are not sustainable. They are staged short-run policies designed to sell a car or a home or refinance your debt in the shortest time. The idea is to make you smile while you gladly swallow the daily consumer pill. Don’t look now. You need to call the Roto Rooter man.
Saturday, May 22, 2004
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.”
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.
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