8/7/04 Connecting The Dots
On Thursday, the Deloitte Research Leading Index of Consumer Spending was released. The Index fell in May and June, the first consecutive two-month decline in the index since early 2003. Prominently mentioned was the finding that real wages sharply declined as gasoline prices take a toll on consumer purchasing power.
On Friday, the BLS reported that average hourly earnings in July rose by 5 cents, and over the past year, average hourly earnings grew by 1.9%. When you drive into the gas station to filler up, that 5 cents is devoured pretty darn quickly.
The Strategic Petroleum Reserve currently holds 665 million barrels of crude at 4 sites in Texas and Louisiana. The Bush Administration announced it was adding more oil to the Reserve, and over a six-month period beginning Oct. 1, the 700-million barrel capacity will be filled by mid-2005.
the BLS: "The confidence interval for the monthly change in total employment from the household survey is in the order of plus or minus 350,000...BLS analyses are generally conducted at the 90% level of confidence...at an unemployment rate of 5.5%, the 90% confidence interval for the monthly change in unemployment is +/- 320,000."
the BLS: With respect to the establishment survey, "estimates for the most recent two months are based on substantially incomplete returns; for this reason, these estimates are labeled preliminary in the tables. It is only after two successive revisions to a monthly estimate, when nearly all sample reports have been received, that the estimate is considered final."
U.S. stock indexes closed yesterday at 2004 lows. The Nasdaq closed at its lowest point since last Aug. 26; the Dow closed at its lowest level since Nov. 28; and the S&P 500 closed at its lowest point since Dec. 10. Many economists believe that a good's price reduction will generate greater demand. Unfortunately, for many, economic theory does not always produce pleasing results with equities when they are falling in price. Such declines can lead to margin calls and to increased selling.
Some believe that business closings can be seasonal in nature. That is not the case with plant closings. They continue in all months. Sheridan Books of Spotsylvania County, Pa will close their manufacturing facility in late September. About 145 employees will lose their jobs.
U.S. consumer credit rose by $6.6 billion in June, a 3.9% annual rate. May increased by $8 billion.
The July S&P Hedge Fund Index fell 0.54%.
In June and July, many economists expounded on the "soft patch" theory. The stock and bond markets are telling us a very different story. When was the last time an economist risked his or her own capital based on his or her own economic predictions?
Friday, August 06, 2004
8/6/04 The Two Surveys
This week has been a new experience for me. Mike and I have been the closest of friends for 35 years. He called me early Monday morning and asked if I would ghost write his daily blog. Being a publisher, this was a new role. I also knew the blog is important to Mike, and the serious family illness was all he could handle. All he said was "don't read the newspapers or magazines or listen to the radio or watch TV for the info. Just present the facts. Stay the course. The facts are quite clear. The keys are temp help and services."
Everyone could see that crude was making new highs and that consumer spending was being impacted. Not everyone paid attention to the large percentage drop in those hiring in the ISM report--from 27 to 18%. That should have been a good starting point for the July non-farm payroll number. It was not surprising to see the usual suspects do well in July- employment in healthcare and social assistance increased 20,000 and employment in professional and financial services rose by 42,000 in July; however, employment in temporary help was little changed in the month of July and services only added 14,000 jobs, helping to explain why non-farm payrolls only rose by 32,000. It should be noted that May and June's numbers were revised lower by a cumulative 61,000.
Bush supporters will point to the household survey's gain in employment of 434,000. The BLS has studied the differences in both surveys and they are summarized at http://www.bls.gov/cps/ces_cps_trends.pdf.
The Fed prefers to rely on the non-farm payroll survey with a base of information quite different from the household survey. Speaking of the Fed, they have a dilemma. Do they swallow their pride and stand pat on interest rates next week? With 10 year treasuries yielding 4.19%, it would appear that the Fed is being largely ignored. The Fed might remember Kodak. They recently announced closing 9 processing labs in 7 states. About 1,000 jobs will be lost- most by the end of August. Next month's non-farm payroll number may look worse than July's.
Please excuse me rushing off. I need to return to my day job.
This week has been a new experience for me. Mike and I have been the closest of friends for 35 years. He called me early Monday morning and asked if I would ghost write his daily blog. Being a publisher, this was a new role. I also knew the blog is important to Mike, and the serious family illness was all he could handle. All he said was "don't read the newspapers or magazines or listen to the radio or watch TV for the info. Just present the facts. Stay the course. The facts are quite clear. The keys are temp help and services."
Everyone could see that crude was making new highs and that consumer spending was being impacted. Not everyone paid attention to the large percentage drop in those hiring in the ISM report--from 27 to 18%. That should have been a good starting point for the July non-farm payroll number. It was not surprising to see the usual suspects do well in July- employment in healthcare and social assistance increased 20,000 and employment in professional and financial services rose by 42,000 in July; however, employment in temporary help was little changed in the month of July and services only added 14,000 jobs, helping to explain why non-farm payrolls only rose by 32,000. It should be noted that May and June's numbers were revised lower by a cumulative 61,000.
Bush supporters will point to the household survey's gain in employment of 434,000. The BLS has studied the differences in both surveys and they are summarized at http://www.bls.gov/cps/ces_cps_trends.pdf.
The Fed prefers to rely on the non-farm payroll survey with a base of information quite different from the household survey. Speaking of the Fed, they have a dilemma. Do they swallow their pride and stand pat on interest rates next week? With 10 year treasuries yielding 4.19%, it would appear that the Fed is being largely ignored. The Fed might remember Kodak. They recently announced closing 9 processing labs in 7 states. About 1,000 jobs will be lost- most by the end of August. Next month's non-farm payroll number may look worse than July's.
Please excuse me rushing off. I need to return to my day job.
Thursday, August 05, 2004
8/5/04 Hiring Trends Continued
The services sector accounts for almost 80% of our economy. Yesterday, the ISM Services Survey on employment dropped to 50 from 57.4. This was the sharpest one-month decline in the history of the survey. To pooh pooh such a decline would indeed be foolhardy.
The Monster Employment Index collects data from over 1,500 web sites. Its July index declined from 136 to 134, still a strong number when compared with the start of 2004.
In the week ended July 31, U.S. jobless claims fell by 11,000 to 336,000; however, the 4-week moving average rose by 6,750 to 343,500.
In sum, the latest hiring trends for the manufacturing and services sectors were weak in July. Balancing that, in part, was the feeling expressed by many in employer-owned businesses that hiring has continued during this period. This mixed picture will create a non-farm payroll figure that could disappoint many.
Once again, Wal-Mart had its pulse on the paycheck-to-paycheck crowd. July same-store sales for the Wal-Mart stores division rose by 2.4% vs the 4.5% gain in the year earlier period; however, its Sam’s Club same-store sales rose 7.7% this July vs 5.1% last year. Overall company results improved by 3.2% in the U.S. and management forecasts a 2 to 4% gain for August. Meanwhile, Target’s July same-store sales increased by 3.8% and Nordstrom’s by 6.1%. On the other hand, results were disappointing for Sears, Kohl’s, Gap, May’s, T J Maxx, Foot Locker, Dollar Tree, Limited, Pier I, Ross, and others.
Wal-Mart is experimenting at five locations with having their pharmacy operating on a 24-hour basis, just like Walgreen’s.
The Bank of England raised its lending rate by a quarter point to 4.25%
Bankrate.com stated that the average 30-year fixed rate mortgage of 6.02% is the lowest since April 14.
Nanosys withdrew its IPO.
Chrysler recalled more than 830,00 minivans.
The services sector accounts for almost 80% of our economy. Yesterday, the ISM Services Survey on employment dropped to 50 from 57.4. This was the sharpest one-month decline in the history of the survey. To pooh pooh such a decline would indeed be foolhardy.
The Monster Employment Index collects data from over 1,500 web sites. Its July index declined from 136 to 134, still a strong number when compared with the start of 2004.
In the week ended July 31, U.S. jobless claims fell by 11,000 to 336,000; however, the 4-week moving average rose by 6,750 to 343,500.
In sum, the latest hiring trends for the manufacturing and services sectors were weak in July. Balancing that, in part, was the feeling expressed by many in employer-owned businesses that hiring has continued during this period. This mixed picture will create a non-farm payroll figure that could disappoint many.
Once again, Wal-Mart had its pulse on the paycheck-to-paycheck crowd. July same-store sales for the Wal-Mart stores division rose by 2.4% vs the 4.5% gain in the year earlier period; however, its Sam’s Club same-store sales rose 7.7% this July vs 5.1% last year. Overall company results improved by 3.2% in the U.S. and management forecasts a 2 to 4% gain for August. Meanwhile, Target’s July same-store sales increased by 3.8% and Nordstrom’s by 6.1%. On the other hand, results were disappointing for Sears, Kohl’s, Gap, May’s, T J Maxx, Foot Locker, Dollar Tree, Limited, Pier I, Ross, and others.
Wal-Mart is experimenting at five locations with having their pharmacy operating on a 24-hour basis, just like Walgreen’s.
The Bank of England raised its lending rate by a quarter point to 4.25%
Bankrate.com stated that the average 30-year fixed rate mortgage of 6.02% is the lowest since April 14.
Nanosys withdrew its IPO.
Chrysler recalled more than 830,00 minivans.
Wednesday, August 04, 2004
8/4/04 Recent Hiring Trends
In the July Hudson Employment Index, the percentage of workers reporting hiring at their companies fell one point from June to33%, the same percentage reached in March. The percentage of managers who say their companies are hiring fell two points to 34% from last month’s reading, and was one point below the March and April reading. Private-sector employees report that 39% of their companies are hiring, and that level ahs remained unchanged for the past four months.
Challenger, Gray, & Christmas stated employers announced 69,572 job cuts in July, up 8% from June but down 18% from July 2003. Hiring announcements also declined to 26,880, a 30% drop from June’s level, which was down 31% from May.
The other day we learned that there was a decline in the latest ISM Mfg Employment Index. Many might wonder how that could be with factory orders remaining at a robust level. One might consider that, stripping out transportation, June factory orders advanced only 0.1%. In the transportation sector, Boeing has only delivered four more planes than the year earlier period, and GM and Ford are building vehicles at a 17 million annual rate. You might think their business is vibrant. In fact, GM July sales were down 3.4% and Ford’s declined 3.7%. In an effort to reduce near-record inventories, GM raised incentives on some cars and trucks to $6,000. As of yesterday, GM is offering a $2,500 rebate on many 2005 models! It should be remembered that auto sales represent about 20% of total retail sales. The auto business is beginning to hurt in China too. Overcapacity, falling prices, and a tightening of credit availability are taking its toll on Chinese automakers, and that includes GM.
We are approaching Friday, and the release of July’s non-farm payrolls. The most recent Bloomberg poll of economists has been reduced from last week’s forecast from a gain of 250,000 jobs to 228,000. There is little question that, as crude prices rose to $40 a barrel and higher, consumer spending dropped, and with it, business activity and the pace of permanent hiring. We know that there has been a recent uptick in plant closings, such as this month’s call center in North Dakota, which resulted in about 260 layoffs. Hiring announcements have slowed. It will be difficult to generate the anticipated payroll gain of 228,000 non-farm jobs. In fact, one might expect a downward revision in the disappointing June number. Importantly, gains in wages and benefits will, once again, not keep pace with inflation. The bond market is poised for a disappointing July number. Will the stock market adjust to reduced payroll numbers without producing a slew of mutual fund redemptions? Rather than just focusing on July’s numbers, a better view might take in the August picture. With crude at $44 per barrel, consumer spending will be constrained and business activity will slow materially. Hiring will be impacted. It would not be surprising to see little or no job gains in August. Preparing for this strong possibility might help to preserve your investment capital.
In the July Hudson Employment Index, the percentage of workers reporting hiring at their companies fell one point from June to33%, the same percentage reached in March. The percentage of managers who say their companies are hiring fell two points to 34% from last month’s reading, and was one point below the March and April reading. Private-sector employees report that 39% of their companies are hiring, and that level ahs remained unchanged for the past four months.
Challenger, Gray, & Christmas stated employers announced 69,572 job cuts in July, up 8% from June but down 18% from July 2003. Hiring announcements also declined to 26,880, a 30% drop from June’s level, which was down 31% from May.
The other day we learned that there was a decline in the latest ISM Mfg Employment Index. Many might wonder how that could be with factory orders remaining at a robust level. One might consider that, stripping out transportation, June factory orders advanced only 0.1%. In the transportation sector, Boeing has only delivered four more planes than the year earlier period, and GM and Ford are building vehicles at a 17 million annual rate. You might think their business is vibrant. In fact, GM July sales were down 3.4% and Ford’s declined 3.7%. In an effort to reduce near-record inventories, GM raised incentives on some cars and trucks to $6,000. As of yesterday, GM is offering a $2,500 rebate on many 2005 models! It should be remembered that auto sales represent about 20% of total retail sales. The auto business is beginning to hurt in China too. Overcapacity, falling prices, and a tightening of credit availability are taking its toll on Chinese automakers, and that includes GM.
We are approaching Friday, and the release of July’s non-farm payrolls. The most recent Bloomberg poll of economists has been reduced from last week’s forecast from a gain of 250,000 jobs to 228,000. There is little question that, as crude prices rose to $40 a barrel and higher, consumer spending dropped, and with it, business activity and the pace of permanent hiring. We know that there has been a recent uptick in plant closings, such as this month’s call center in North Dakota, which resulted in about 260 layoffs. Hiring announcements have slowed. It will be difficult to generate the anticipated payroll gain of 228,000 non-farm jobs. In fact, one might expect a downward revision in the disappointing June number. Importantly, gains in wages and benefits will, once again, not keep pace with inflation. The bond market is poised for a disappointing July number. Will the stock market adjust to reduced payroll numbers without producing a slew of mutual fund redemptions? Rather than just focusing on July’s numbers, a better view might take in the August picture. With crude at $44 per barrel, consumer spending will be constrained and business activity will slow materially. Hiring will be impacted. It would not be surprising to see little or no job gains in August. Preparing for this strong possibility might help to preserve your investment capital.
Tuesday, August 03, 2004
8/3/04 A Day For Puking
This blog is late being posted. I have been too busy puking. Yesterday, the Snowman asked Congress to raise the debt limit from its current level of $7.38 trillion. He stated this debt limit would be reached somewhere in late September or early October. It's the third time the debt ceiling would be increased during Bush's four years in office. This is unprecedented, irresponsible, and dangerous to the economic well being of our country. The debt ceiling should not be raised. Spending must be cut. Bush has not vetoed one spending bill. He would not know what the word "conservative" means. Rallying the NRA and churchgoers does not make you a conservative. It means you pack a weapon to church. If left in office for another term, this Administration will grease the rails towards our country's insolvency.
Construction spending fell 0.3% in June. Spending on housing dropped for the first time in 16 months. Residential construction fell 0.6% in June. The ISM Employment Index dropped to 57.3 from the prior month's 59.7. Consumer spending dropped 0.7% in June, the biggest decline since September 2001. Wages were unchanged in June. The Core Personal Consumption Expenditure Price Index rose only 0.1% in June. This is the index the Fed watches so closely. The personal savings rate rose to 2%. I have been predicting for some time that the savings rate would rise and consumer spending would slow dramatically.
Crude has risen above $44 per barrel.
As we know, this Administration did "misspeak" about the WMD. On Sunday, Homeland Security issued a terror alert for NYC, NJ, and DC. We now know it was based on pre-9/11 information and not recent information. How many times does the American public want to put up with this "missspeaking" and well-timed terror card? By the close of yesterday's trading, the stock market had seen through this mockery. Unfortunately, many innocent people had been agitated in the process. It's enough to make any American puke.
This blog is late being posted. I have been too busy puking. Yesterday, the Snowman asked Congress to raise the debt limit from its current level of $7.38 trillion. He stated this debt limit would be reached somewhere in late September or early October. It's the third time the debt ceiling would be increased during Bush's four years in office. This is unprecedented, irresponsible, and dangerous to the economic well being of our country. The debt ceiling should not be raised. Spending must be cut. Bush has not vetoed one spending bill. He would not know what the word "conservative" means. Rallying the NRA and churchgoers does not make you a conservative. It means you pack a weapon to church. If left in office for another term, this Administration will grease the rails towards our country's insolvency.
Construction spending fell 0.3% in June. Spending on housing dropped for the first time in 16 months. Residential construction fell 0.6% in June. The ISM Employment Index dropped to 57.3 from the prior month's 59.7. Consumer spending dropped 0.7% in June, the biggest decline since September 2001. Wages were unchanged in June. The Core Personal Consumption Expenditure Price Index rose only 0.1% in June. This is the index the Fed watches so closely. The personal savings rate rose to 2%. I have been predicting for some time that the savings rate would rise and consumer spending would slow dramatically.
Crude has risen above $44 per barrel.
As we know, this Administration did "misspeak" about the WMD. On Sunday, Homeland Security issued a terror alert for NYC, NJ, and DC. We now know it was based on pre-9/11 information and not recent information. How many times does the American public want to put up with this "missspeaking" and well-timed terror card? By the close of yesterday's trading, the stock market had seen through this mockery. Unfortunately, many innocent people had been agitated in the process. It's enough to make any American puke.
Monday, August 02, 2004
8/2/04 Paycheck To Paycheck
WalMart refers to their customers as living paycheck to paycheck. Putting that into perspective, Joe Gillen, Pinnacle Financial Strategies CEO, stated "some 70% of our working population lives paycheck to paycheck. They pay the minimum on their credit cards, if they have them. And if they miss a week of work, all their payments get behind." This is the main economic theme on Main Street.
Ten year Treasury bonds yield 4.43%, only modestly higher than the recent low yield of 4.36%. Whether it's a terror alert or an alert from slowing economic conditions, the recent trend in U.S. gov't bonds is down.
Speaking of terror alert, our intelligence gathering has been able to ferret out from a Pakistani al-Qaeda prisoner that the NYSE, World Bank, IMF, Prudential, and Citigroup may be bombing targets. Fortunately, Bush will be revamping our intelligence gathering. I wonder if that includes increasing our knowledge of speaking and understanding Pakastani citizens.
This week there are contrasting economic forecasts. Economists predict 250,000 new non-farm payroll jobs in July with rising hourly earnings but earnings that still trail the inflation rate. Construction spending is anticipated to drop from the prior month as are prices for manufactured goods; however, supposedly orders for the month will be on the upswing. What does this all mean? I'm not an economist and didn't make the forecasts. Thanks God. I am certain of one fact. Temporary job creation does not lead to sustainable economic growth.
WalMart refers to their customers as living paycheck to paycheck. Putting that into perspective, Joe Gillen, Pinnacle Financial Strategies CEO, stated "some 70% of our working population lives paycheck to paycheck. They pay the minimum on their credit cards, if they have them. And if they miss a week of work, all their payments get behind." This is the main economic theme on Main Street.
Ten year Treasury bonds yield 4.43%, only modestly higher than the recent low yield of 4.36%. Whether it's a terror alert or an alert from slowing economic conditions, the recent trend in U.S. gov't bonds is down.
Speaking of terror alert, our intelligence gathering has been able to ferret out from a Pakistani al-Qaeda prisoner that the NYSE, World Bank, IMF, Prudential, and Citigroup may be bombing targets. Fortunately, Bush will be revamping our intelligence gathering. I wonder if that includes increasing our knowledge of speaking and understanding Pakastani citizens.
This week there are contrasting economic forecasts. Economists predict 250,000 new non-farm payroll jobs in July with rising hourly earnings but earnings that still trail the inflation rate. Construction spending is anticipated to drop from the prior month as are prices for manufactured goods; however, supposedly orders for the month will be on the upswing. What does this all mean? I'm not an economist and didn't make the forecasts. Thanks God. I am certain of one fact. Temporary job creation does not lead to sustainable economic growth.
Sunday, August 01, 2004
8/1/04 Present Dangers
Bush speaking yesterday in Canton, Ohio: "We'll help American families keep something they never have enough of, and that is time, time to be with your kids, time to go to Little League games or Girl Scout meetings." He certainly has provided more time, and it's not flex-time. It's a shorter work week, it's more temporary work, its less people working, and its less factories operating. If you want another four more years of more time, then vote for this man.
Bush continues speaking in Canton, Ohio: "After four more years, there will be better paying jobs in America. There will be more jobs in America." The facts speak in quite a different direction. After almost four years, wages and benefits, after adjusting for inflation, have declined each year since Bush took office. The BLS and the IRS confirm this statement. There have been less jobs in America, and that too is confirmed by the BLS. Americans cannot afford another four more of the Bush years. He has earned the right to be sent down to the Bush League.
According to a study of annual reports by RateFinancials Inc, among 120 of the major companies in the S&P 500 Index, long-term debt rose by a median of 30% when operating leases and other financial arrangements were added to the balance sheet. An example would be FedEx which has legally binding off-balance sheet debt that, in present value, may be more than double the amount of debt appearing on the balance sheet.
Bush speaking yesterday in Canton, Ohio: "We'll help American families keep something they never have enough of, and that is time, time to be with your kids, time to go to Little League games or Girl Scout meetings." He certainly has provided more time, and it's not flex-time. It's a shorter work week, it's more temporary work, its less people working, and its less factories operating. If you want another four more years of more time, then vote for this man.
Bush continues speaking in Canton, Ohio: "After four more years, there will be better paying jobs in America. There will be more jobs in America." The facts speak in quite a different direction. After almost four years, wages and benefits, after adjusting for inflation, have declined each year since Bush took office. The BLS and the IRS confirm this statement. There have been less jobs in America, and that too is confirmed by the BLS. Americans cannot afford another four more of the Bush years. He has earned the right to be sent down to the Bush League.
According to a study of annual reports by RateFinancials Inc, among 120 of the major companies in the S&P 500 Index, long-term debt rose by a median of 30% when operating leases and other financial arrangements were added to the balance sheet. An example would be FedEx which has legally binding off-balance sheet debt that, in present value, may be more than double the amount of debt appearing on the balance sheet.
Saturday, July 31, 2004
7/31/04 This Is For Vic
The Commerce Dept released numbers for the second quarter. If you get your news from the media, economists, and the Fed, then it was news that second quarter GDP growth was only 3% and that consumer spending rose at a paltry 1%. The bond market had sniffed out the lower growth, the stock market has been sputtering, and WalMart and Target told you the paycheck-to-paycheck consumer on Main Street was choking on the fumes from high gas prices. The second quarter is history. We're already one-third through the third quarter. Visit a GM or Ford dealer. Look at their inventory levels. It doesn't paint a pretty picture. Look at gas prices. They've come down in the past month but will rise in August as crude rose to $43 a barrel.
With high crude prices, retail sales for August will suck. Don't you think high crude prices reduce the chances of a big SUV being sold even with a large buyer's incentive? There will be plant shutdowns announced any day. The climate is changing. It's not about outsourcing. It's about less hiring, more layoffs, less benefits, and pay that trails the rate of inflation. You can listen to all the buzz on the campaign junkets. Talk is cheap. Permanent hiring is expensive. Training is time consuming. With revenues in this country growing modestly at best, there are few reasons to take on more staff. Most of the improving profits have been the result of cost cutting. The fun and games are in the late innings. The days are getting shorter. I suggest you turn on the lights a bit earlier. It makes it easier to see through the dusk of the economy.
Halliburton announced in November that the company would stop providing health insurance for its retirees who are eligible for Medicare. The change goes into effect Jan.1. Three retirees wrote Halliburton and complained. Halliburton sued them. No retiree left behind!
Now, I wrote this was Vic. I'm your friend. Today is a good day for testing data. When doing so, please leave a bit of time for a visit to Main Street.
The Commerce Dept released numbers for the second quarter. If you get your news from the media, economists, and the Fed, then it was news that second quarter GDP growth was only 3% and that consumer spending rose at a paltry 1%. The bond market had sniffed out the lower growth, the stock market has been sputtering, and WalMart and Target told you the paycheck-to-paycheck consumer on Main Street was choking on the fumes from high gas prices. The second quarter is history. We're already one-third through the third quarter. Visit a GM or Ford dealer. Look at their inventory levels. It doesn't paint a pretty picture. Look at gas prices. They've come down in the past month but will rise in August as crude rose to $43 a barrel.
With high crude prices, retail sales for August will suck. Don't you think high crude prices reduce the chances of a big SUV being sold even with a large buyer's incentive? There will be plant shutdowns announced any day. The climate is changing. It's not about outsourcing. It's about less hiring, more layoffs, less benefits, and pay that trails the rate of inflation. You can listen to all the buzz on the campaign junkets. Talk is cheap. Permanent hiring is expensive. Training is time consuming. With revenues in this country growing modestly at best, there are few reasons to take on more staff. Most of the improving profits have been the result of cost cutting. The fun and games are in the late innings. The days are getting shorter. I suggest you turn on the lights a bit earlier. It makes it easier to see through the dusk of the economy.
Halliburton announced in November that the company would stop providing health insurance for its retirees who are eligible for Medicare. The change goes into effect Jan.1. Three retirees wrote Halliburton and complained. Halliburton sued them. No retiree left behind!
Now, I wrote this was Vic. I'm your friend. Today is a good day for testing data. When doing so, please leave a bit of time for a visit to Main Street.
Friday, July 30, 2004
7/30/04 Fortunately Help Is On The Way
"The decision by Union Pacific to limit the number of rock and aggregate carloads in Texas will have a severe impact on the economic viability of the entire state, especially Houston, " stated Marianne Gooch, director of communications for Cemex Inc.
The Conference Board's Help-Wanted Advertising Index dipped one point in June to 38. The Index was 38 one year ago. For the past four months the Index has been virtually flat.
Total compensation costs for civilian workers increased 0.9% during the June quarter, seasonally adjusted. In the March quarter there was a 1.1% gain. In the latest period wage and salary costs increased 0.6% and benefit costs rose 1.8%. Wages and salries for both civilian and private workers advanced 0.6% during the June quarter, identical to the March 2004 quarter.
In the latest week auto plant shutdowns contributed to the unemployment rolls rising. There will be plenty more shutdowns in the near future.
Schwab will close more offices and cut 186 workers.
AT&T's debt was downgraded to junk level by Moody's.
State Farm will cut up to 900 jobs.
Washington Mutual announced the closing of an additional fifty three branches and this will create 850 layoffs.
"The decision by Union Pacific to limit the number of rock and aggregate carloads in Texas will have a severe impact on the economic viability of the entire state, especially Houston, " stated Marianne Gooch, director of communications for Cemex Inc.
The Conference Board's Help-Wanted Advertising Index dipped one point in June to 38. The Index was 38 one year ago. For the past four months the Index has been virtually flat.
Total compensation costs for civilian workers increased 0.9% during the June quarter, seasonally adjusted. In the March quarter there was a 1.1% gain. In the latest period wage and salary costs increased 0.6% and benefit costs rose 1.8%. Wages and salries for both civilian and private workers advanced 0.6% during the June quarter, identical to the March 2004 quarter.
In the latest week auto plant shutdowns contributed to the unemployment rolls rising. There will be plenty more shutdowns in the near future.
Schwab will close more offices and cut 186 workers.
AT&T's debt was downgraded to junk level by Moody's.
State Farm will cut up to 900 jobs.
Washington Mutual announced the closing of an additional fifty three branches and this will create 850 layoffs.
Thursday, July 29, 2004
7/29/04 Going Concerns
Excluding transportation, June’s durable orders fell 0.6%. U.S. auto production has kept pace with the year earlier period; however, despite increasing incentives, the inventory of unsold vehicles continues to mount. As for the delivery of commercial aircraft, Boeing anticipates 285 plane deliveries for 2004 or four planes more than the number delivered in 2003. Much of Boeing’s improved earnings for the second quarter can be attributed to a 23 cents per share Federal tax refund, lower than expected pension and retiree medical expenses, and cost savings from monthly employee firings.
Gina Martin, economist at Wachovia, stated "it’s somewhat disappointing; clearly the soft patch continued in June.."
Yukos pumps more oil than five of the OPEC countries. With their production halted by the court, it was not surprising that crude reached $43 a barrel, a 21-year high.
According to the Defense Department, 908 U.S. service members have died since the beginning of military operations in March 2003. Our troops have been stationed there for 16 months.
According to Cutting Edge Information, a business intelligence firm, pharmaceutical companies spend over 25% of their clinical budget outsourcing to CROs. They stated "outsourcing is a great way for lots of pharmas to get the number of trial participants they need in a shorter amount of time…Outsourcing overseas can quickly cut cost and time."
State Farm to cut 900 jobs. About 1,200 jobs will be lost as part of the consolidation of Wella with Proctor & Gamble. About 200 cuts will be in Germany, and the remainder in the U.S., Mexico, South Korea, Indonesia, and other nations. About 300 P&G workers will be affected as well.
Beth Shulman, a D.C.-based labor consultant who wrote "The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans and Their Families," stated that one-quarter of workers make less than $8.70 per hour and that "wage inequality translates into a vicious cycle where people get stuck. It’s not just that people aren’t making enough money. That’s bad enough. But the normal means of righting itself is not in place. The political and education system are working to the detriment of moving these people up." Maybe that’s why John Edwards emphasized that "hope is on the way."
Michael Peroutka, Constitution Party presidential nominee, stated "George Bush has given us the most un-Constitutional, most powerful, biggest, far-reaching, fiscally irresponsible, intrusive, debt-ridden Federal government in the history of the universe! If there was, in the ‘Guiness Book of World Records,’ such a category, Mr. Bush, Big Government wise, would be Flip-Flopper Number One.’
Excluding transportation, June’s durable orders fell 0.6%. U.S. auto production has kept pace with the year earlier period; however, despite increasing incentives, the inventory of unsold vehicles continues to mount. As for the delivery of commercial aircraft, Boeing anticipates 285 plane deliveries for 2004 or four planes more than the number delivered in 2003. Much of Boeing’s improved earnings for the second quarter can be attributed to a 23 cents per share Federal tax refund, lower than expected pension and retiree medical expenses, and cost savings from monthly employee firings.
Gina Martin, economist at Wachovia, stated "it’s somewhat disappointing; clearly the soft patch continued in June.."
Yukos pumps more oil than five of the OPEC countries. With their production halted by the court, it was not surprising that crude reached $43 a barrel, a 21-year high.
According to the Defense Department, 908 U.S. service members have died since the beginning of military operations in March 2003. Our troops have been stationed there for 16 months.
According to Cutting Edge Information, a business intelligence firm, pharmaceutical companies spend over 25% of their clinical budget outsourcing to CROs. They stated "outsourcing is a great way for lots of pharmas to get the number of trial participants they need in a shorter amount of time…Outsourcing overseas can quickly cut cost and time."
State Farm to cut 900 jobs. About 1,200 jobs will be lost as part of the consolidation of Wella with Proctor & Gamble. About 200 cuts will be in Germany, and the remainder in the U.S., Mexico, South Korea, Indonesia, and other nations. About 300 P&G workers will be affected as well.
Beth Shulman, a D.C.-based labor consultant who wrote "The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans and Their Families," stated that one-quarter of workers make less than $8.70 per hour and that "wage inequality translates into a vicious cycle where people get stuck. It’s not just that people aren’t making enough money. That’s bad enough. But the normal means of righting itself is not in place. The political and education system are working to the detriment of moving these people up." Maybe that’s why John Edwards emphasized that "hope is on the way."
Michael Peroutka, Constitution Party presidential nominee, stated "George Bush has given us the most un-Constitutional, most powerful, biggest, far-reaching, fiscally irresponsible, intrusive, debt-ridden Federal government in the history of the universe! If there was, in the ‘Guiness Book of World Records,’ such a category, Mr. Bush, Big Government wise, would be Flip-Flopper Number One.’
Wednesday, July 28, 2004
7/28/04 Pivotal Issues
Yesterday the Conference Board stated that U.S. consumer confidence rose in July to a two-year high. They also mentioned that the percentage of consumers that see business conditions in the current month as "good" was little changed, falling to 25.6 from 25.8 in June. It’s difficult to reconcile those two statements and with the UBS Index which dropped seven points in July.
Maybe it would be helpful to take a closer look at some numbers. Avery Shenfeld, an economist with CIBC World Markets, stated that, in this year’s first quarter, wages and salaries had the smallest share of total national income than at any time since WW II. After adjusting for inflation, average hourly wages in May of $15.64 were at the same level as in November 2001, the month when the last recession ended. In June, real average weekly earnings were down 1.3% from June 2003. It’s not surprising that only 25% of those polled believe business conditions are "good." When analysts look back, this will be one of the primary reasons why Bush will have lost re-election. For 80% of Americans who rely primarily on wages and salaries, they are not better off than four years ago.
According to a survey done for staffing services provider Hudson, 52% of African-Americans and 57% of Hispanics state their pay is not equal to what others in similar positions are paid; 38% of male workers and 36% of female workers state their pay does not equal others in similar positions; and 34% of white workers stated similar complaints. According to BLS statistics, white workers earn a median income of $636 a week, while African-Americans earn about $100 less and Hispanics about $200 less. According to the Hudson survey, only 36% of workers overall said better performance leads to higher pay, while about 60% stated that longevity in a job leads to better pay.
In another survey by Robert Half Management Resources, top complaints were long hours and unfair pay. In the second quarter, 6% of workers stated they quit their jobs voluntarily, up from 5.3% in the first quarter and 3.8% a year ago. Surveys show the primary reasons for leaving were to seek an alternative to long workdays and unfair pay.
Jeff Anderson, senior vice president at Hudson, remarked "we have found that workers’ perceptions are directly linked to reality." In my opinion, Bush will find in November that voters’ perceptions are directly linked to reality.
In a recent Bloomberg survey, it is thought that non-farm payrolls increased by 233,000 jobs in July. Whatever the number, how many jobs are not temporary? How many jobs pay a wage, adjusted for inflation, that exceed the level reached in November 2001? How many unemployed workers lost their benefits in July and were not counted as unemployed? Could that number exceed 233,000? The estimate is 320,000. Are we gaining or losing jobs each month? The numbers tell the story. The numbers will help determine the election.
Every once in a generation, the real deal graces us. Barack Obama is the real deal.
Yesterday the Conference Board stated that U.S. consumer confidence rose in July to a two-year high. They also mentioned that the percentage of consumers that see business conditions in the current month as "good" was little changed, falling to 25.6 from 25.8 in June. It’s difficult to reconcile those two statements and with the UBS Index which dropped seven points in July.
Maybe it would be helpful to take a closer look at some numbers. Avery Shenfeld, an economist with CIBC World Markets, stated that, in this year’s first quarter, wages and salaries had the smallest share of total national income than at any time since WW II. After adjusting for inflation, average hourly wages in May of $15.64 were at the same level as in November 2001, the month when the last recession ended. In June, real average weekly earnings were down 1.3% from June 2003. It’s not surprising that only 25% of those polled believe business conditions are "good." When analysts look back, this will be one of the primary reasons why Bush will have lost re-election. For 80% of Americans who rely primarily on wages and salaries, they are not better off than four years ago.
According to a survey done for staffing services provider Hudson, 52% of African-Americans and 57% of Hispanics state their pay is not equal to what others in similar positions are paid; 38% of male workers and 36% of female workers state their pay does not equal others in similar positions; and 34% of white workers stated similar complaints. According to BLS statistics, white workers earn a median income of $636 a week, while African-Americans earn about $100 less and Hispanics about $200 less. According to the Hudson survey, only 36% of workers overall said better performance leads to higher pay, while about 60% stated that longevity in a job leads to better pay.
In another survey by Robert Half Management Resources, top complaints were long hours and unfair pay. In the second quarter, 6% of workers stated they quit their jobs voluntarily, up from 5.3% in the first quarter and 3.8% a year ago. Surveys show the primary reasons for leaving were to seek an alternative to long workdays and unfair pay.
Jeff Anderson, senior vice president at Hudson, remarked "we have found that workers’ perceptions are directly linked to reality." In my opinion, Bush will find in November that voters’ perceptions are directly linked to reality.
In a recent Bloomberg survey, it is thought that non-farm payrolls increased by 233,000 jobs in July. Whatever the number, how many jobs are not temporary? How many jobs pay a wage, adjusted for inflation, that exceed the level reached in November 2001? How many unemployed workers lost their benefits in July and were not counted as unemployed? Could that number exceed 233,000? The estimate is 320,000. Are we gaining or losing jobs each month? The numbers tell the story. The numbers will help determine the election.
Every once in a generation, the real deal graces us. Barack Obama is the real deal.
Tuesday, July 27, 2004
7/27/04 Decline In Optimism
According to the UBS Index of Investor Optimism, a joint effort of UBS and the Gallup Organization, the overall index decreased by 7 points in July to 88, down from June’s level of 95. The decline can be attributed to a 4-point decrease in the Index’s personal dimension, which measures investors’ confidence in their ability to reach investment targets and maintain income. It is also driven by a 3-point decrease in the Index’s economic dimension, which measures investors’ sentiment on economic growth, unemployment, stock market performance, and inflation.
Alcoa will lay off 400 workers at an idle aluminum smelter in Wenatchee, Washington this fall after its union rejected a contract proposal. The company stated that health care costs were the sticking point in the contract negotiations.
With a 65% decline in revenue, Cray will lay off 100 workers.
According to the Department of Energy, the nationwide average price for on-highway diesel fuel is about $1.75 a gallon, just shy of the $1.77 record set in March 2003, and it is more than 21% higher than at this time last year. According to a trucking association, the tonnage of freight hauled by trucks nationally hit a record in this April. The tonnage was off a bit in May. Year-to-date truck tonnage is up 6.4% and growth in demand for diesel is up 4.8% this year. By comparison, there has been a 2.5% demand growth for gasoline.
Existing home sales rose 2.1% in June, another new record.
A coalition of health experts called Partnership for Essential Nutrition make the claim that low-carb, high protein diets lead to kidney stress, liver disorders, gout, higher risk o heart disease, stroke, diabetes, assorted types of cancer, and even worse, severe constipation, nausea, headaches, and even bad breath.
DuPont's second quarter revenue rose only 2%.
According to the UBS Index of Investor Optimism, a joint effort of UBS and the Gallup Organization, the overall index decreased by 7 points in July to 88, down from June’s level of 95. The decline can be attributed to a 4-point decrease in the Index’s personal dimension, which measures investors’ confidence in their ability to reach investment targets and maintain income. It is also driven by a 3-point decrease in the Index’s economic dimension, which measures investors’ sentiment on economic growth, unemployment, stock market performance, and inflation.
Alcoa will lay off 400 workers at an idle aluminum smelter in Wenatchee, Washington this fall after its union rejected a contract proposal. The company stated that health care costs were the sticking point in the contract negotiations.
With a 65% decline in revenue, Cray will lay off 100 workers.
According to the Department of Energy, the nationwide average price for on-highway diesel fuel is about $1.75 a gallon, just shy of the $1.77 record set in March 2003, and it is more than 21% higher than at this time last year. According to a trucking association, the tonnage of freight hauled by trucks nationally hit a record in this April. The tonnage was off a bit in May. Year-to-date truck tonnage is up 6.4% and growth in demand for diesel is up 4.8% this year. By comparison, there has been a 2.5% demand growth for gasoline.
Existing home sales rose 2.1% in June, another new record.
A coalition of health experts called Partnership for Essential Nutrition make the claim that low-carb, high protein diets lead to kidney stress, liver disorders, gout, higher risk o heart disease, stroke, diabetes, assorted types of cancer, and even worse, severe constipation, nausea, headaches, and even bad breath.
DuPont's second quarter revenue rose only 2%.
Monday, July 26, 2004
7/26/04 Inventories And GDP Growth
This week there will be a report on the latest inventory statistics. Contributing to the 3.7% GDP growth rate in the second quarter has been the growth in inventories. That information can be misleading. As the Detroit Free Press recently stated, inventories of 3.5 million vehicles are so bloated at Ford and GM that, even if the companies shut their plants between now and the presidential election, some of the better selling models would still have vehicles remaining after the votes are tallied.
Social Security trustees state that OASDI (old age security and disability income programs) has unfunded liabilities of $3.7 trillion, and that actual cash to make payments may be in trouble as early as 2010. With an aging population, that news is not very comforting.
ETL represents the software market for data extract, transform, and load. Oracle and Microsoft are adding ETL capabilities in their database offerings. PowerCenter 7.0 is the latest ETL version offered by Informatica. PC7 has many capabilities not offered by others in this space. Its strengths in data warehousing and business intelligence make it a compelling alternative in the growing ETL arena. It also can be quite appealing to those looking to make an acquisition in the world of open architecture.
This week there will be a report on the latest inventory statistics. Contributing to the 3.7% GDP growth rate in the second quarter has been the growth in inventories. That information can be misleading. As the Detroit Free Press recently stated, inventories of 3.5 million vehicles are so bloated at Ford and GM that, even if the companies shut their plants between now and the presidential election, some of the better selling models would still have vehicles remaining after the votes are tallied.
Social Security trustees state that OASDI (old age security and disability income programs) has unfunded liabilities of $3.7 trillion, and that actual cash to make payments may be in trouble as early as 2010. With an aging population, that news is not very comforting.
ETL represents the software market for data extract, transform, and load. Oracle and Microsoft are adding ETL capabilities in their database offerings. PowerCenter 7.0 is the latest ETL version offered by Informatica. PC7 has many capabilities not offered by others in this space. Its strengths in data warehousing and business intelligence make it a compelling alternative in the growing ETL arena. It also can be quite appealing to those looking to make an acquisition in the world of open architecture.
Sunday, July 25, 2004
7/25/04 Supremacy
"Microsoft's CFO John Connor: "We'll take a little bit of a dip this year. If we execute well, we might improve on that; 06', we should be able to accelerate a little bit from 05'." Barron's suggests that Microsoft "has impressive growth prospects." Maybe they do. I have no reason to doubt Connors' statement about the near-term challenges to growth. A slowdown is in the cards. He should know better than Barron's. From his perch, his knowledge reins supreme. On a side note, Microsoft had projected 2004 job growth at 4,000 to 5,000. Actual job growth was 2,000. The company has a strong focus on cost cutting. For fiscal 2005, the forecast is for hiring 6,000 to 7,000 people. Don't bet on it.
As long as hourly wages, adjusted for inflation, remain stagnant or decline, Bush will have trouble at the polls. Main Street contains more votes than Bush's high income base. Without the extension of tax cuts, real disposable income will prove disappointing to voters. That disappointment will also be felt at the retail level. One can hear the grinding noise from the slowing economic gears. The sparks are flying. In this heat the sparks can cause a big conflagration.
It would be a big mistake to miss the Bourne Supremacy. Matt Damon is the real deal. He just keeps getting better.
"Microsoft's CFO John Connor: "We'll take a little bit of a dip this year. If we execute well, we might improve on that; 06', we should be able to accelerate a little bit from 05'." Barron's suggests that Microsoft "has impressive growth prospects." Maybe they do. I have no reason to doubt Connors' statement about the near-term challenges to growth. A slowdown is in the cards. He should know better than Barron's. From his perch, his knowledge reins supreme. On a side note, Microsoft had projected 2004 job growth at 4,000 to 5,000. Actual job growth was 2,000. The company has a strong focus on cost cutting. For fiscal 2005, the forecast is for hiring 6,000 to 7,000 people. Don't bet on it.
As long as hourly wages, adjusted for inflation, remain stagnant or decline, Bush will have trouble at the polls. Main Street contains more votes than Bush's high income base. Without the extension of tax cuts, real disposable income will prove disappointing to voters. That disappointment will also be felt at the retail level. One can hear the grinding noise from the slowing economic gears. The sparks are flying. In this heat the sparks can cause a big conflagration.
It would be a big mistake to miss the Bourne Supremacy. Matt Damon is the real deal. He just keeps getting better.
Saturday, July 24, 2004
7/24/04 The Gauges Are There
For the holders of U.S. equities, yesterday was discouraging. The Dow, the S&P 500, and the Nasdaq fell below their 200-day moving averages, an important support level for many money managers. Another sign for me is the strength in the bond market. Ten year treasury bonds closed at 4.43%, or very close to their recent low yield of 4.36%. In other words, despite the repeated warnings by Greenspan of future measured rate hikes, the bond market is quite sanguine that. at the very least, growth is slowing in our economy. Looking back, investors will blame Kerry for this malaise. The seeds were planted long before Kerry.
Besides stocks, gold had a bad week and dropped over $15 to $392.50. The long term dynamics for gold seem more promising than equities. There is increasing demand by India for gold jewelry, and the twin deficits in the U.S. are not diminishing. The deficits help to account for the diminishing value of the dollar.
After lying to protect his boss and after accepting a payoff, Douglas Faneuil was fined $2,000. Under sentencing guidelines, he faced up to six months in prison. He was an assistant to Peter Bacanovic, Martha Stewart's stockbroker. There are a million stories in our "justice system."
As long as it remains in bankruptcy, United Airlines stated that it would cease making payments to employee pension funds. Half of United's slated cost cuts of $5 billion in 2005 will be taken from workers' wages and benefits. I wonder if the company's top management will have their salaries and perks cut in the same relationship as the union workers.
For the holders of U.S. equities, yesterday was discouraging. The Dow, the S&P 500, and the Nasdaq fell below their 200-day moving averages, an important support level for many money managers. Another sign for me is the strength in the bond market. Ten year treasury bonds closed at 4.43%, or very close to their recent low yield of 4.36%. In other words, despite the repeated warnings by Greenspan of future measured rate hikes, the bond market is quite sanguine that. at the very least, growth is slowing in our economy. Looking back, investors will blame Kerry for this malaise. The seeds were planted long before Kerry.
Besides stocks, gold had a bad week and dropped over $15 to $392.50. The long term dynamics for gold seem more promising than equities. There is increasing demand by India for gold jewelry, and the twin deficits in the U.S. are not diminishing. The deficits help to account for the diminishing value of the dollar.
After lying to protect his boss and after accepting a payoff, Douglas Faneuil was fined $2,000. Under sentencing guidelines, he faced up to six months in prison. He was an assistant to Peter Bacanovic, Martha Stewart's stockbroker. There are a million stories in our "justice system."
As long as it remains in bankruptcy, United Airlines stated that it would cease making payments to employee pension funds. Half of United's slated cost cuts of $5 billion in 2005 will be taken from workers' wages and benefits. I wonder if the company's top management will have their salaries and perks cut in the same relationship as the union workers.
Thursday, July 22, 2004
7/23/04 What Is The Color Of The Flashing Signal?
The Conference Board's index of leading economic indicators fell 0.2% in June, the first decline since March 2003. May's rise was adjusted downward slightly.
S&P recommended investors reduce their exposure to U.S. equities to only 45% of their portfolios and to increase the cash portion to 30%.
Washington Mutual will close mortgage operations in as many as 10 states . The company is cutting 2,500 jobs.
From January through June 2004, the total number of events (mass layoffs), at 8,114, and of initial claims, at 795,612 were lower than in January through June 2003 (9,860 and 959,589 respectively.) Given the large number of non-farm payrolls created in the first six months of 2004, one might have thought the difference in mass layoffs with 2003 would have been larger. Maybe the rise in payrolls will be adjusted downward again.
Sears stated "we experienced weak demand in June." They provided a disappointing forecast for the third quarter.
I have been meaning to provide a look into conditions in the Napa Valley. The annual wine auction, which raises money for charity, collected less revenue for the third consecutive year. Old-time merchants report that store traffic is down slightly; however, the average purchase is down about 10%. In restaurants there is a trend for diners to order somewhat lower priced wines than in 2003. In sum, even the wealthier individuals are parting reluctantly with their money.
The Conference Board's index of leading economic indicators fell 0.2% in June, the first decline since March 2003. May's rise was adjusted downward slightly.
S&P recommended investors reduce their exposure to U.S. equities to only 45% of their portfolios and to increase the cash portion to 30%.
Washington Mutual will close mortgage operations in as many as 10 states . The company is cutting 2,500 jobs.
From January through June 2004, the total number of events (mass layoffs), at 8,114, and of initial claims, at 795,612 were lower than in January through June 2003 (9,860 and 959,589 respectively.) Given the large number of non-farm payrolls created in the first six months of 2004, one might have thought the difference in mass layoffs with 2003 would have been larger. Maybe the rise in payrolls will be adjusted downward again.
Sears stated "we experienced weak demand in June." They provided a disappointing forecast for the third quarter.
I have been meaning to provide a look into conditions in the Napa Valley. The annual wine auction, which raises money for charity, collected less revenue for the third consecutive year. Old-time merchants report that store traffic is down slightly; however, the average purchase is down about 10%. In restaurants there is a trend for diners to order somewhat lower priced wines than in 2003. In sum, even the wealthier individuals are parting reluctantly with their money.
7/22/04 What's Going On?
When the doors are closed, no outsider knows what goes on between a husband and a wife. When the doors are shut to an investor's psyche, no one truly knows why that individual is buying or selling. (Margin calls are an exception.)
There are so many factors behind decision making. Yesterday can be viewed as particularly disappointing. The Dow had quickly risen right out of the shoot. Before you could adjust your chair, it was up 85 points. The Nasdaq never caught the same frenzy. When the day was offer, the indices were badly in the red. I'm not in the mind of investors. I can only provide many possible scenarios, and some or all could have played a part.
This is not a latte market. You cannot expect Starbucks to carry the entire market on its shoulders. Same-store sales in the quarter rose 11% and profits increased by 43%. Projections were raised for the second time. The stock has been hitting new all-time highs. Earning 95 cents per share and selling at $46 per share, where would you like the stock to go? The price of a latte may rise next year, but at this rich P/E, this great one needs a rest. The same can be said for eBay, which did tank yesterday. These have been your most relaible high growth stocks for some time.
We know that the earnings growth for companies is slowing. The question is how much, and will that growth turn to flat numbers or even decline. Office Depot said sales had been below expectations for the last few weeks and they "approach the second half with a mixture of caution and optimism." Right now the market is focusing more on the caution and less on the optimism.
Demand for gasoline is slowing and inventories rose 2.5 million barrels last week, up 600,000 barrels from a year ago and the highest since mid-January. While the world is looking at gasoline, heating oil futures are trading at $1.0827 and natural gas at $5.931 per thousand cubic feet. If the winter is exceptionally cold, heating bills will be exceptionally high. You can cut back on driving, but you can reduce your thermostats just so much.
Getting back to yesterday, there were suggestions that the S&P could not hold the 1104 level and that inspired selling pressure. Another factor could be the deadlock on tax cut extensions. For me, there is dwindling demand for goods and services, and that includes equities. Right now supply exceeds demand and there is a lack of equilibrium. The pricing power is, at least temporarily, in decline for equities. This is not a new phenomenon. Unfortunately, it is new for those who make their living buying on weakness. That modus operandi is not working.
Eckerd is cutting 1,200 jobs and Mitsubishi 1,400 workers and reducing capacity by 22%. Santomero may think this economy is having its "usual fits and starts." He's a government worker and on salary. His money is not at risk in this economy. He is not a risk taker. He feeds off tax dollars. He gets paid even with record government deficits. In the business world, he might have lost his job. He creates no revenue. He is expendable. He is strictly a cost item. Businesses are still focusing on cutting costs. Why? Generating revenue continues to be a daunting task. Profit margins have made headway over the past year but the workers on Main Street are not seeing the fruits of their labors. The economy is feeling the impact of the paycheck to paycheck worker's cash flow dilemma.
When the doors are closed, no outsider knows what goes on between a husband and a wife. When the doors are shut to an investor's psyche, no one truly knows why that individual is buying or selling. (Margin calls are an exception.)
There are so many factors behind decision making. Yesterday can be viewed as particularly disappointing. The Dow had quickly risen right out of the shoot. Before you could adjust your chair, it was up 85 points. The Nasdaq never caught the same frenzy. When the day was offer, the indices were badly in the red. I'm not in the mind of investors. I can only provide many possible scenarios, and some or all could have played a part.
This is not a latte market. You cannot expect Starbucks to carry the entire market on its shoulders. Same-store sales in the quarter rose 11% and profits increased by 43%. Projections were raised for the second time. The stock has been hitting new all-time highs. Earning 95 cents per share and selling at $46 per share, where would you like the stock to go? The price of a latte may rise next year, but at this rich P/E, this great one needs a rest. The same can be said for eBay, which did tank yesterday. These have been your most relaible high growth stocks for some time.
We know that the earnings growth for companies is slowing. The question is how much, and will that growth turn to flat numbers or even decline. Office Depot said sales had been below expectations for the last few weeks and they "approach the second half with a mixture of caution and optimism." Right now the market is focusing more on the caution and less on the optimism.
Demand for gasoline is slowing and inventories rose 2.5 million barrels last week, up 600,000 barrels from a year ago and the highest since mid-January. While the world is looking at gasoline, heating oil futures are trading at $1.0827 and natural gas at $5.931 per thousand cubic feet. If the winter is exceptionally cold, heating bills will be exceptionally high. You can cut back on driving, but you can reduce your thermostats just so much.
Getting back to yesterday, there were suggestions that the S&P could not hold the 1104 level and that inspired selling pressure. Another factor could be the deadlock on tax cut extensions. For me, there is dwindling demand for goods and services, and that includes equities. Right now supply exceeds demand and there is a lack of equilibrium. The pricing power is, at least temporarily, in decline for equities. This is not a new phenomenon. Unfortunately, it is new for those who make their living buying on weakness. That modus operandi is not working.
Eckerd is cutting 1,200 jobs and Mitsubishi 1,400 workers and reducing capacity by 22%. Santomero may think this economy is having its "usual fits and starts." He's a government worker and on salary. His money is not at risk in this economy. He is not a risk taker. He feeds off tax dollars. He gets paid even with record government deficits. In the business world, he might have lost his job. He creates no revenue. He is expendable. He is strictly a cost item. Businesses are still focusing on cutting costs. Why? Generating revenue continues to be a daunting task. Profit margins have made headway over the past year but the workers on Main Street are not seeing the fruits of their labors. The economy is feeling the impact of the paycheck to paycheck worker's cash flow dilemma.
Wednesday, July 21, 2004
7/21/04 You Gotta Believe! Right?
Greenspan: "I think the effect of increasing concentration of incomes is not desirable in a democratic society."
The BLS: "Median weekly earnings of the nation's 101.3 million full-time wage and salary workers were $639 in the second quarter of 2004 or 3.7% higher than a year ago while the CPI gained 2.8% over the same period. " Information was taken from the Current Population Survey of 60,000 households covering all our 50 states and DC. Income excluded the self-employment sector.
Greenspan: "Business caution remains a feature of the economic landscape. Temporary hires relative to total employment continue to rise, and investment spending is still below cash flows inside U.S. companies."
The BLS: "Compared with May, June's unemployment rates were higher in 20 states , lower in 18 states and DC, and unchanged in 12 states."
Philly Fed's Santomero described our economy as having the "usual fits and starts" with "ample positive momentum" and with "inflation well contained." He has all the right answers.
GMAC posted record quarterly earnings driven by financing and insurance. GMAC earned $860 million. GM's sales in China rose 58%. GM Asia earned $236 million in the quarter. Unfortunately, the remaining auto operations only produced $529 million and GM's market share in North America dropped even though the company offered record incentives. Inventories rose. Prospects for the third quarter will be less than analysts had been expecting.
Next to the Federal Reserve, Microsoft is the greatest consistent generator of cash in our nation. The company has been on close to a 30 year run. To top it off, they will distribute a special dividend of $3 per share or $32 billion. This represents 2 year's cash flow. In addition, over a four year period, they intend to repurchase $30 billion in stock. In case you think this is an income stock, Microsoft announced they will file for more than 3,000 patents this year. The company spends about $7 billion a year on research. You can see that you are getting a lot of patent for your buck. I never thought of Microsoft as a think tank. Hopefully they won't turn into another Xerox PARC. It's most unfortunate that a special dividend and a stock buyback were the best ideas promoted by management. A sequel to Windows would have been nice. Maybe one of those 3,000 patents will turn into gold. You gotta believe. Right?
Greenspan: "I think the effect of increasing concentration of incomes is not desirable in a democratic society."
The BLS: "Median weekly earnings of the nation's 101.3 million full-time wage and salary workers were $639 in the second quarter of 2004 or 3.7% higher than a year ago while the CPI gained 2.8% over the same period. " Information was taken from the Current Population Survey of 60,000 households covering all our 50 states and DC. Income excluded the self-employment sector.
Greenspan: "Business caution remains a feature of the economic landscape. Temporary hires relative to total employment continue to rise, and investment spending is still below cash flows inside U.S. companies."
The BLS: "Compared with May, June's unemployment rates were higher in 20 states , lower in 18 states and DC, and unchanged in 12 states."
Philly Fed's Santomero described our economy as having the "usual fits and starts" with "ample positive momentum" and with "inflation well contained." He has all the right answers.
GMAC posted record quarterly earnings driven by financing and insurance. GMAC earned $860 million. GM's sales in China rose 58%. GM Asia earned $236 million in the quarter. Unfortunately, the remaining auto operations only produced $529 million and GM's market share in North America dropped even though the company offered record incentives. Inventories rose. Prospects for the third quarter will be less than analysts had been expecting.
Next to the Federal Reserve, Microsoft is the greatest consistent generator of cash in our nation. The company has been on close to a 30 year run. To top it off, they will distribute a special dividend of $3 per share or $32 billion. This represents 2 year's cash flow. In addition, over a four year period, they intend to repurchase $30 billion in stock. In case you think this is an income stock, Microsoft announced they will file for more than 3,000 patents this year. The company spends about $7 billion a year on research. You can see that you are getting a lot of patent for your buck. I never thought of Microsoft as a think tank. Hopefully they won't turn into another Xerox PARC. It's most unfortunate that a special dividend and a stock buyback were the best ideas promoted by management. A sequel to Windows would have been nice. Maybe one of those 3,000 patents will turn into gold. You gotta believe. Right?
Tuesday, July 20, 2004
7/20/04 Storm Clouds
Ford's financial services sector recorded a June quarter pre-tax profit of $1.6 billion, up from $800 million a year ago. On a pre-tax basis, Ford's worldwide automotive sector reported a loss of $57 million. Vehicle sales dropped 5.2% and their market share fell to 19.7% from 20.9%. Management was pleased with the results. Third quarter forecasts were provided, and they are below analyst projections.
OPEC forecasts demand for crude will rise by 340,000 bpd in 2005 to an average 27.36 million bpd after an increase of 590,000 bpd in 2004. Petrologistics estimated OPEC production ex Iraq at 27.81 million bpd in July.
Peoples Energy offers buyouts to 1,200 workers.
AT&T Wireless to launch its 3G service in 4 markets. It will offer a high-speed data network.
June housing starts dropped 8.5%. Building permits also fell sharply. These declines spell trouble for the economic growth numbers and will assist in bond rates dropping further.
August crude futures are bumping close to $42 pb once again.
According to CardWeb.com, the average credit card debt in the U.S. is $8,400.
We account for 21% of the world's GDP but only 5% of the population. I have a feeling that ratio is about to change.
Ford's financial services sector recorded a June quarter pre-tax profit of $1.6 billion, up from $800 million a year ago. On a pre-tax basis, Ford's worldwide automotive sector reported a loss of $57 million. Vehicle sales dropped 5.2% and their market share fell to 19.7% from 20.9%. Management was pleased with the results. Third quarter forecasts were provided, and they are below analyst projections.
OPEC forecasts demand for crude will rise by 340,000 bpd in 2005 to an average 27.36 million bpd after an increase of 590,000 bpd in 2004. Petrologistics estimated OPEC production ex Iraq at 27.81 million bpd in July.
Peoples Energy offers buyouts to 1,200 workers.
AT&T Wireless to launch its 3G service in 4 markets. It will offer a high-speed data network.
June housing starts dropped 8.5%. Building permits also fell sharply. These declines spell trouble for the economic growth numbers and will assist in bond rates dropping further.
August crude futures are bumping close to $42 pb once again.
According to CardWeb.com, the average credit card debt in the U.S. is $8,400.
We account for 21% of the world's GDP but only 5% of the population. I have a feeling that ratio is about to change.
Monday, July 19, 2004
7/19/04 Automaker Woes
Rising gasoline prices and rising sales incentives on new vehicles are driving down the wholesale price of large used SUVs. The decline could signal trouble for profitable sales of new full-sized SUVs.
There has been abrupt slowdown in sales of passenger cars in China. Automakers have begun cutting production plans. GM's major profit sector will still make money, but not as much.
A 1992 agreement permits Boeing to have a level of indirect subsidies through R&D programs of the FAA, NASA, and the Defense Department. That alone will not offset the onslaught of Airbus. The latter's CEO suggested his company's A380 would kill the aging 747 and leave Boeing competing in just two parts of the commercial jet market. Judging from recent orders, the Airbus executive seems to have the facts to support that viewpoint.
Rising gasoline prices and rising sales incentives on new vehicles are driving down the wholesale price of large used SUVs. The decline could signal trouble for profitable sales of new full-sized SUVs.
There has been abrupt slowdown in sales of passenger cars in China. Automakers have begun cutting production plans. GM's major profit sector will still make money, but not as much.
A 1992 agreement permits Boeing to have a level of indirect subsidies through R&D programs of the FAA, NASA, and the Defense Department. That alone will not offset the onslaught of Airbus. The latter's CEO suggested his company's A380 would kill the aging 747 and leave Boeing competing in just two parts of the commercial jet market. Judging from recent orders, the Airbus executive seems to have the facts to support that viewpoint.
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