STOCK MARKET WATCH, Friday 16 July

[ozymandius]

Friday July 16, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 192
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 217 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 271 DAYS
WHERE ARE SADDAM'S WMD? - DAY 484
DAYS SINCE ENRON COLLAPSE = 967
Number of Enron Execs in handcuffs = 19
Recent Acquisitions: Ken Lay
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 54

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES

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AT THE CLOSING BELL ON July 15, 2004

Dow... 10,163.16 -45.64 (-0.45%)
Nasdaq... 1,912.71 -2.17 (-0.11%)
S&P 500... 1,106.69 -4.78 (-0.43%)
10-Yr Bond... 4.49% +0.00 (+0.02%)
Gold future... 404.40 -1.20 (-0.30%)


|||


GOLD, EURO, YEN and Dollars

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PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

---

[ozymandius]

1. WrapUp by Martin Goldberg

What Is Stock Action of Blue-Chip Company "Paychex" Telling Us? AndUnlike Last time, When this Bubble Bursts, the Average Joe Will Feel the Pain

Sometimes we can get clues into the economy from the performance of certain key stocks. For example, the stock of Paychex Inc. may be telling us that the jobs picture in the US is not as rosy as we have been told on cable television. Paychex, Inc. offers payroll, payroll-related and human resource products to meet the needs of its client base. These include payroll processing, tax filing and payment, employee payment, retirement services administration, employee benefits administration, regulatory compliance (new-hire reporting and garnishment processing), and workers’ compensation insurance and bundled human resource administrative services. The excellent long-term stock performance of Paychex leads me to believe that the management of this company knows what they are doing. A couple of bucks invested in Paychex in the early 90’s would have made you rich today.

-cut-

When This Bubble Bursts, “Joe” Will Feel the Pain

Hello my name is Joe. I have a house, and a dog, and a family. I have a 401K, a brokerage account, an SUV financed with a home equity loan. I work all day in the service economy. I learned that the important thing about having a diversified blue-chip stock portfolio is that it will never go down in the long run. The lesson I learned is that when the market does go down, just hold on and it will come up again. Blue chip stocks always come back as shown in the chart below. If the stock market starts to falter, I will hold on because a diversified portfolio of blue chip stocks always comes back in the long run. Here is a chart of how I learned my lesson.

-cut-

Volatility Says “This Time it is Different”

The chart below shows the Nasdaq index over the last 6 months (upper chart) versus the volatility index (VXN) on the lower chart. It is interesting to note that the Nasdaq peaks corresponded to troughs in the volatility index. Similarly, the Nasdaq troughs corresponded to peaks in the volatility index. However unlike before, and unlike what we would expect, now with the Nasdaq in a trough, the VXN is also in a trough. So if the VXN is considered to be a gauge of Nasdaq fear, we have an unusual situation where there is a reason to fear yet there is little fear. My personal opinion is that the market has been lulled into complacency by its consistently range bound nature over the last 6 months, and by the “consensus” that the stock market will be OK until the presidential election.

-cut-

Paychex, which seemed poised for a bounce Sunday, has yet to deliver the bounce in spite of an analyst upgrade. A similar company, Gevity (GVHR) is suffering in the market as well and seems to be confirming that all is not well in the jobs market.

http://www.financialsense.com/Market/wrapup.htm

[UpInArms]

2. daily dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 87.87 Change -0.12 (-0.14%)

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?font=Reuters&pv_noticia=MTFH14080_2004-07-16_11-44-44_L16279059

FOREX-Dollar boxed-in, seeks direction from U.S. CPI

LONDON, July 16 (Reuters) - The dollar was trapped in tight ranges against other major currencies on Friday as dealers awaited June inflation data from the United States, hoping for new insight into interest rate prospects.

U.S. consumer price numbers for June are due at 1230 GMT and are expected to show that inflation softened last month as energy prices came off their peaks.

Other U.S. indicators will also be closely watched, with U.S. capital inflow data and the University of Michigan's consumer sentiment survey also seen as potential market movers ahead of the weekend.

"We just have to wait and see what happens," said Mark McFarland, currency strategist at UBS in London. "There is risk to the upside from CPI and that could send the dollar moving very sharply."

U.S. May capital flow data at 1300 GMT could also be crucial, he said, since it would give an indication as to how difficult the U.S. current account deficit would be to fund.

"A lot of support for the dollar recently was from private demand for U.S. corporate bonds," McFarland said.

The United States needs to attract more than a billion dollars in foreign capital every day to cover its current account gap, which is heading towards 5 percent of U.S. gross domestic product.

...more...

http://futures.fxstreet.com/Futures/content/100130/content.asp?menu=commodities&dia=1672004

THE GRAIN REPORT

Hi, this is Tim Hannagan, and it is Thursday, July 15th, 2004, and the markets are closed. Our weekly export sales report came out at 7:30 a.m. central telling us how much of each grain was sold last week and becomes a gauge of demands. Corn sales last week were 657 t.t. up 27% over the week prior and four week average. Key sales all went to Asian countries in part thanks to a lower dollar to yen relationship. It is important to keep the exchange rate favorable as up to 72% of our exportable feed grains go to Asian countries yearly. It is a friendly demand indicator but not bullish and will not override weather’s impact on pricing. Commercial grain exporters and large trading funds have been light buyers this week putting a floor under prices. No one wants to sell with the next 30 days as key yield development time and also our hottest and sometimes dry months ahead.

...more...

http://www.nytimes.com/2004/07/16/business/16air.html

Out of the Blue, Southwest Airlines Chief Resigns

James F. Parker unexpectedly resigned yesterday as chief executive of Southwest Airlines, the largest low-fare carrier in the country. The airline said Gary C. Kelly, its chief financial officer, would succeed Mr. Parker.

With Southwest's announcement, which startled the industry, six of the seven largest airlines in the United States have now changed chief executives, or announced plans to do so, since the terror attacks of Sept. 11, 2001. The lone holdover is Richard H. Anderson of Northwest Airlines, who took the job in February 2001. Continental's chief executive, Gordon C. Bethune, has said he will step down at the end of this year.

The abrupt departure of Mr. Parker, who is 57, came with little warning even to Mr. Kelly, 49. Events were set in motion last week, when Mr. Parker, whose three-year contract had run out, told Southwest's chairman, Herbert D. Kelleher, that he was thinking about retiring. The first Mr. Kelly heard about Mr. Parker's leaving was on Monday, when Mr. Kelleher told him that he was the chosen successor, Mr. Kelly said in an interview.

Yesterday morning, Mr. Parker notified Southwest's board that he would leave immediately. The airline, which had announced its second-quarter results earlier in the day, then turned a scheduled conference call with analysts and reporters into Mr. Kelly's debut as chief executive.

...more...

http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=5686530

Fed must get rates to neutral, Fed's Bies says

CHICAGO, July 15 (Reuters) - The Federal Reserve will lift interest rates to their "neutral rate" from current accommodative levels, a top Fed policymaker said on Thursday, but gave no time frame for this action.

"You cannot keep short-term interest rates below the rate of inflation -- it's too accommodative. We've got to get to what we call a neutral level," Federal Reserve Board Governor Susan Schmidt Bies told reporters after a speech here.

She also said June's U.S. employment report, which fell well short of expectations, was no cause for alarm.

...a bit more...

and last but not least - a M&A fallout article:

http://www.businessworld.ie/livenews.htm?a=955851?s=rollingnews.htm

Sony plans up to 3,000 job cuts

Sony Music and BMG plan to shed up to 3,000 jobs, or about 25pc of their combined workforce, following regulatory approval for their merger.

The music units of Sony Corp and German media group Bertelsmann will begin work on their reorganisation next week.

The overhaul is expected to involve one-off charges of USD300m to USD350m, mainly covering severance terms. Both firms hope to achieve 85pc of the cutbacks by next June, according to reports in today's Financial Times.

...more...

Have a Great Day Marketeers!

(edited to fix broken link)

[UpInArms]

3. CPI reports are in

8:29am 07/16/04

U.S. JUNE CPI UP 0.3% VS. 0.2% EXPECTED

8:29am 07/16/04

U.S. JUNE CORE CPI UP 0.1% VS. 0.2% EXPECTED

8:30am 07/16/04

U.S. CPI UP 3.3% IN PAST YEAR, CORE UP 1.9%

8:30am 07/16/04

U.S. JUNE ENERGY PRICES UP 2.6%, FOOD PRICES UP 0.2%

[UpInArms]

4. U.S. June core CPI up 0.1%, below expectations

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38184.3543055556-816001881&siteID=mktw&scid=0&doctype=806&

WASHINGTON (CBS.MW) - Energy prices moved higher yet in June, but core inflation fell to its lowest rate of the year, the Labor Department reported Friday. The consumer price index increased 0.3 percent in June, slightly ahead of expectations of a 0.2 percent gain. However, the core CPI - which excludes food and energy costs - rose just 0.1 percent, a tick less than the 0.2 percent expected. Energy prices rose 2.6 percent in June after 4.6 percent in May. Food prices increased 0.2 percent after 0.9 percent in May. Elsewhere, inflationary pressures were modest. Housing prices rose 0.3 percent in June. Medical care costs also increased 0.3 percent for the second month in a row.

With the "no inflation" spin - there will be no need to raise interest rates - so watch for the dollar to retreat in the face of this info.

[54anickel]

13. U.S. Treasuries Drop After Fed Official Says Inflation `Faster' (HUH?)

http://quote.bloomberg.com/apps/news?pid=10000103&sid=aF0x9h83qPM0&refer=us

July 16 (Bloomberg) -- U.S. 10-year notes fell in London, after Federal Reserve Governor Susan Bies said inflation is faster than she expected this year and the central bank must ``be ready to respond.''

Prices paid by U.S. consumers rose for a seventh month in June, keeping the annual pace of inflation above 3 percent for a second month, according to a survey of economists before a report to be released today. The Federal Reserve must be prepared to lift its key interest rate early because it takes time for changes in monetary policy to curb inflation, Bies said.

``Stronger growth and higher inflation is what they're going to have to deal with,'' said Jonathan Lee, a fixed-income analyst in London at Barclays Capital, one of 22 primary dealers of U.S. government securities that trade with the Fed's New York Branch. ``Bond yields are going to have to rise pretty sharply over the medium term.'' Yields move inversely to bond prices.

snip>

Lee predicts that the Fed will raise its target rate for overnight loans between banks to 4.5 percent by August next year, to curb the threat of rising inflation. The yield on the 10-year Treasury note will rise to 5.10 percent by the end of September, he said.

The forecast ``shows the degree to which rate will have to rise if the economy continues to soldier on,'' said Lee.

`Adjust in Advance'

more...

[54anickel]

16. Bies: Fed Must Watch for Higher Inflation (a different spin)

http://www.reuters.com/newsArticle.jhtml;jsessionid=4KN0OA300ITWACRBAEZSFEY?type=businessNews&storyID=5686862

CHICAGO (Reuters) - The Federal Reserve must be ready to take action to ensure price stability, one of its top policy makers said on Thursday, adding that the U.S. economy looked set for sustained, solid growth this year.

"The Federal Reserve will need to be alert to signs of higher inflation, and be ready to respond to fulfill its commitment to maintain price stability as a necessary condition for maximum sustainable economic growth," Federal Reserve Board Governor Susan Schmidt Bies said.

Speaking to the Chicago chapter of Financial Executives International, she also said consumer spending had slowed this spring but housing demand and business investment were strong.

"With financial conditions still accommodative, I expect that economic activity will continue to expand at a solid pace in the second half of the year," she said in the speech, a copy of which was made available to media before delivery.

more...

[TrogL]

17. I'm confused - this thread says it's 0.3 percent

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x689506

[UpInArms]

5. No easy escape for DaimlerChrysler

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373763782

If DaimlerChrysler carries out its threat to shift production of its new Mercedes C-class car from Stuttgart to Bremen and South Africa, it might find it jumps from the frying pan into the fire.

As tens of thousands of workers disrupted production across Germany yesterday in protest at its cost-cutting tactics, DaimlerChrysler and other carmakers were threatened with a strike in South Africa from July 26 unless they agreed to a 9 cent pay rise.

...more...

[ze_dscherman]

10. 60.000 workers demonstrating

This has become a big issue in Germany. The car manufacturing of DaimlerChrysler in Germany is *highly* profitable - the company is not in need.

Still workers were threatened that jobs would be moved to lower-cost areas, if they don't give in to Daimler pressure that is supposed to save the company 500 million EUR anually. Unions have offered a compromise, a plan that is said to reduce costs by 180 million, but that is not enough.

Extending the work week back to 40 and even more hours is on the conservative agenda. But, different to the US, every employee in Germany pays with his taxes/insurance for the unemployed - so people are forced to work more in times unemployment is rising - and you bet this does not go well with workers and unions.

BTW, the workers in Bremen (where work time is longer and unemployment much higher than in Southern Germany) also demonstrated against the DaimlerChrysler pressure.

[54anickel]

14. Damn, a few years ago I had hoped the US would follow Europe's

example of shorter work weeks and more vacation. Instead we are in a global race to "serfdom".

[UpInArms]

24. Over 60,000 walked out at DaimlerChrysler plants on 15 July

http://www.autoindustry.co.uk/news/industry_news/news-55h8n03ka6

Over 60,000 members of the IG Metall union representing DaimlerChrysler workers downed tools yesterday in protest at cost reduction plans including the reduction of 6,000 out of over 30,000 jobs at the firm’s Sindelfingen assembly plant, claimed to the end result of productivity improvements set as the condition of retaining C-clasas production there rather than moving it to Bremen or to DaimlerChrysler’s South African plant. 20,000 Sindelfingen workers left their posts, at the cost of some 800 completed vehicles, and the protest was echoed at eight other manufacturing facilities.

Discussions between DaimlerChrysler’s management and its Works Council are due to take place on 20-21 July.

...very short newsblurb...

[ze_dscherman]

26. Better article at Reuters

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5683256

[UpInArms]

46. thanks for that link

you're right - it is a much better article with many more details:

The group said on Monday it might cut 6,000 jobs at the Sindelfingen plant and shift some production of the new C-class Mercedes model to other plants in Germany and abroad if workers continued to oppose deeper cost cuts.

"These are not negotiations -- this is a brutal attempt at blackmail," said the head of DaimlerChrysler's works council, Erich Klemm, at the demonstration in Sindelfingen.

The dispute comes as pressure mounts on western European employees to work longer, take fewer holidays and do without collective wage agreements to prevent jobs disappearing to cheaper locations in less developed economies.

DaimlerChrysler is following a lead set by manufacturing giant Siemens, which last month clinched a deal with trade unions to raise working hours at two German plants to 40 hours a week from 35 without extra pay.

[UpInArms]

6. Oil Prices Break $41 a Barrel

http://www.thestreet.com/_tsclsii/markets/marketfeatures/10171637.html

Oil prices rose above $41 a barrel again Friday, as the Organization of Petroleum Exporting Countries' latest move to calm market supply worries had a short-lived impact.

The benchmark U.S. crude added 29 cents, or 0.7%, to $41.22, about a dollar shy of the record high set six weeks ago. Gasoline futures rose almost 1 cent to $1.33 a gallon.

Oil prices slipped Thursday after OPEC said it had decided on a increase its production ceiling by half a million barrels a day in August and also cancelled a July 21 meeting on the issue.

<snip>

During May, traders relentlessly bid up prices on short-term supply concerns triggered by strong global demand and terror attacks on oil industry personnel and facilities in the Persian Gulf region ahead of the peak summer driving season in the U.S. and Europe.

...more at link...

[UpInArms]

7. pre-opening blather

briefing.com

08:56 ET S&P futures vs fair value: +3.3. Nasdaq futures vs fair value: +7.5. Futures trade continues to trade along its highs and point to a moderate move higher at the open... The retreat in stocks this week, IBM's solid Q2 (June) earnings report, and a June CPI report that was in line with expectations have drawn buyers in this morning.

08:32 ET S&P futures vs fair value: +3.3. Nasdaq futures vs fair value: +7.5. Futures indications get a boost (2 points for the S&P; 3.5 points for the Nasdaq) from the roughly in line June CPI data... The core CPI (excluding food and energy) rose just 0.1% versus the consensus of 0.2%, helping to put to rest concerns about inflation (just like yesterday's June PPI)... As a result, the indices are set to move noticeably higher at the start of trading.

08:01 ET S&P futures vs fair value: +1.7. Nasdaq futures vs fair value: +3.5. Shaping up to be a modestly higher open for the cash market following IBM's well-received Q2 (June) report last night... Asia (Hong Kong's Hang Seng +1.0%) and Europe (Germany's DAX +0.8%) have also responded favorably, and helped set the stage for the higher open.

ino.com

The September NASDAQ 100 was lower overnight and spiked below the 75% retracement level of the May-June rally crossing at 1414.51. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near- term. If September extends this week's decline, May's low crossing at 1376.50 is the next downside target. Closes above the 10-day moving average crossing at 1437.85 are needed to temper the near-term bearish outlook in the market. The September NASDAQ 100 was up 5.50 pt. at 1419.50 as of 6:46 AM ET. Overnight action sets the stage for a steady to firmer opening by the NASDAQ composite index later this morning.

The September S&P 500 index was higher overnight due to short covering as it consolidates above the 62% retracement level of the May- June rally crossing at 1104.86. If September extends last week's decline, the 75% retracement level crossing at 1095.17 is the next downside target. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. Closes above the 10-day moving average crossing at 1112.76 are needed to temper the near-term bearish outlook in the market. The September S&P 500 Index was up 2.10 pts. at 1105.50 as of 6:48 AM ET. Overnight action sets the stage for a steady to firmer opening when the day session begins later this morning.

dollar after CPI report

Last trade 87.71 Change -0.28 (-0.32%)

[Tandalayo_Scheisskopf]

8. Could one of you Economic Sages...

direct me to a webpage with statistics on failure rates of small businesses under the maladministration.

I'll clean out your carport if you do. Or something. ;-)

[ozymandius]

41. You might try looking here.

http://www.ex-cult.org/Groups/Amway/otherside/tosp05.htm

This page has links to the U.S. Small Business Administation. Some of the data is old. However the links seem to work. With more time I bet that you will find the answer to your question.

EDIT: and here from the census bureau -

http://www.census.gov/csd/susb/susb.htm

This material is reflective of a span of years encompassing the dot-com boom. So the data may be a bit skewed.

[54anickel]

9. Inventory is inventory (intel)

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=34196

It used to be that you could hear or read about Intel's quarterly earnings call and readily see how they were doing.

Ranked among the hype-meisters of Silicon Valley, Intel was very low on the totem pole. Intel's "spin" was never in the same leagues as "artful" dodgers John Chambers or the Sun brain trust or Jerry Sanders in his heyday.

snip>

Then it gets a little confusing, "The gross margin reduction is due, Intel said, to better-than-expected manufacturing efficiencies for its computer chips which have, in turn, resulted in more chips than needed."

snip>

If there is anything we could all agree on about the semiconductor business it is probably the idea that unit prices decline over time. A CPU or flash IC or whatever will sell for a lower price six months from now than what it did yesterday. (Occasional bouts of allocation notwithstanding.) Intel's "planned obsolescence" with continuous speed improvements or feature enhancements has built this concept into their business model for over a decade.

Incredibly, Intel blamed the inventory growth not on the lack of a corporate replacement cycle in North America and Europe or weak IT spending growth or on a slow-down in the laptop business in Taiwan or even on a flattening of cell phone production in China. Instead they blamed it on "a new generation of computer chip making equipment (which) is manufacturing its chips at a better rate, or yield, than previously expected."

more...

[Frodo]

18. I don't understand why they aren't just being honest?

Opec controls prices by altering supply. And it get's a bit out of their control when some members produce more than they are limited to by the agreement.

Does it have to be that sales are lower than they expected (profits were certainly acceptable)?


Yes "increase in inventory is increase in inventory", but it does matter whether the increase is because "we made more than we expected" or "we sold fewer than we expected".

The thing is that, based on the source, we know that he isn't just commenting on Intel. The idea is to give the impression that sales (and thus the economy) are not particularly strong and that increasing inventories are a sign of that.

The problem with the theory is that, while inventories did move upwards a tad in June, right now the inventory/sales ratio is about as low as it's ever been. Substantially below anything that could be considered a problem of excess inventory. If anything the opposite is true.

[54anickel]

23. I understand your point, and yes, this article is industry specific.

But, the IT industry is huge! Intel is the big player (nearly a monopoly in the IC industry - they also can be thugs about it - ask a few Taiwanese mfgs - but that's another thread!)

IMHO, the author makes a valid point.

[Frodo]

30. And you post that ten minutes AFTER...???

You post a story about PC sales being up 15%[/b}???

[54anickel]

11. Is Your House Really An Asset?

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=34246

snip>

One of the biggest mistakes average investors have made throughout history, is to assume what’s happened in the past will continue to occur in the future. I know people that have bought houses in supposed “up-and-coming” areas of Denver – at prices I wouldn’t touch with a 10-foot pole – and are betting on future appreciation over the next few years, just like it has in years past.

The problem with this theory is the assumptions behind it. The average American is assuming that mortgage rates will stay at 40-year lows, inflation won’t be a problem now and in the future, and that wages won’t be negatively affected by outsourcing of blue and white-collar jobs to India and China. And that prices will keep on rising, just like they have through the 90s and early 2000s.

snip>

In the book “Financial Reckoning Day,” there’s a memorable phrase spoken by the late-90s “tech-stock Messiah” George Gilder. He told investors that America was in a “new economy” and that you couldn’t afford to be out of the stock market – the same mantra preached by Wall Street. When asked by someone about what price level they should buy at, he replied with a curious remark: “I don’t do price.”

OK…alrighty then. Looking at the 60% drop in the NASDAQ from March 2000 until present (July 2004) – not to mention the numerous dot-coms that dot-bombed - that statement doesn’t make any sense. An investor that doesn’t “do price” is like a radiator mechanic who doesn’t “do temperature” – eventually they’ll both get burned.

snip>

Back to the main point – how these trends will affect the value of US real estate. Again, the two main factors that affect the price of real estate are 1) mortgage interest rates, and 2) a homeowner’s income. Since most Americans depend on a job for their income, and salaries are under deflationary pressure from outsourcing and a slowly recovering economy, it doesn’t appear to be a bullish factor for real estate prices.

Looking at mortgage interest rates, they’re still at multi-decade lows. A 30-year fixed mortgage is in the low 6% range as of this writing (July 2004). How long these rates will stay this low is anyone’s guess. My advice would be to expect rates to significantly increase (at least 1-1.5%) in the next 12 to 18 months. My crystal ball isn’t any clearer than this.

There are probably bond traders and technical analysts that could give a more accurate prediction of when this will happen. My focus is primarily on the fundamental trends, and staying ahead of them – even if I’m several months to years ahead of time. A wise man once said: Better to be two years early than a day late.

more...

[JNelson6563]

22. Good article!

I often consider the housing market and the current situation of homeowners. Not only have many people bought in areas that were "about to skyrocket in value" but many have refinanced even more than the current value of their home in order to maintain their unmaintainable standard of living.

Hence the subsequent increase in foreclosures and bankruptcy filings.

Thanks for posting that article 54. You're very generous with yoiur time and efforts to the SWT and I for one appreciate it!

Julie

[Frodo]

25. He's wrong when he says...

"One of the biggest mistakes average investors have made throughout history, is to assume what’s happened in the past will continue to occur in the future."

Nope. One of the biggest mistakes people (average or not apperently) is to assume that what's happened in the past will not continue to occur in the future. It's jsut a question of "how far back into the past" you are looking.

Sure, if you made 30% in the market last year and expect, therefore, that it will do the same this year.... or averaged 15% over the last ten and expect to do so over the next ten... etc... You're likely to be sadly dissapointed. But it's what has happened throghout history that tells us this.


His second mistake is the common one of comparing the real estate market to the ".com" bust. These are not even both fruits... let alone "apples to apples".

His third mistake is assuming that 1 1-1.5% increase in mortgage rates, has a big affect on home prices. 7-8% are still pretty atractive rates, not even "neutral". Remember the conversations about the Fed rates. They have to increase them substantially before we ever get out of the "easy money" pricing levels to "neutral". Marginally fewer people can afford houses with each .25% rise in rates, but we have miles to go before we move from a sellers' market to a buyers' market. And prices still go up in buyers' markets, just not as fast.


Here's the REAL message for these "investors". Your home is NOT an "investment", it's a place to live. If you make money on it, great, count your blessing. When we talk about diversifying your portfolio to include "real estate" we are specifically NOT talking about your house. Going in to ANY market conditions and expecting to "flip" a house for a big profit in a couple years is pure speculation, not investing.

[UpInArms]

12. markets are open at 9:36 EST

Dow 10,219.93 +56.77 (+0.56%)
Nasdaq 1,921.38 +8.67 (+0.45%)
S&P 500 1,111.54 +4.85 (+0.44%)
10-Yr Bond 4.434% -0.051

dollar not so happy

Last trade 87.49 Change -0.50 (-0.57%)

Last tick: 2004-07-16 09:06:08 ET
30-min delayed quote.

[54anickel]

15. Inflation gauge is facing competition

http://www.dallasnews.com/sharedcontent/dws/bus/stories/071604dnbuscpi.a4701.html

The Consumer Price Index is the government's best-known measure of inflation. But is it really the best?

With inflation dominating the economic debate recently, stock traders and investment advisers have kept an anxious eye on the Labor Department's monthly CPI report. The June figure is due out today.

But some experts – including no less a figure than Alan Greenspan – are starting to favor a lesser-known index computed by the Commerce Department. It's the Personal Consumption Expenditures Deflator, or PCE.

The differences run deeper than just competing calculations from different federal agencies, and it has relevance to more than the economic eggheads and financial wizards on Wall Street. The pace of price changes affects everyday Americans, too.

snip>

Nearly three years into an economic recovery, many companies still can't increase prices either, especially in high-tech and manufacturing industries, noted Donald Hicks, a professor of political economy at the University of Texas at Dallas.

"Pricing pressures have been really, really oppressive, and they don't feel comfortable passing their increased costs along," he said.

And if this picture weren't complicated enough, cost-cutting – not booming sales – is driving many strong corporate earnings reports, Dr. Hicks said.

more...

[UpInArms]

19. Consumer Sentiment numbers

9:49am 07/16/04

U.S. JULY UMICH CONSUMER SENTIMENT 96.0 VS 95.6 IN JUNE

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38184.4110648148-816003614&siteID=mktw&scid=0&doctype=806&

Consumer sentiment improves a bit in early July, UMich By Greg Robb
WASHINGTON (CBS.MW) -- Consumer sentiment improved slightly in early July, according to researchers at the University of Michigan. The consumer sentiment index rose to 96.0 from 95.6 in June. The increase was below the consensus forecast of Wall Street economists who had expected sentiment to improve to 96.6.

(edited to add text)

[54anickel]

20. Worldwide PC sales up 15%

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373761788&p=1012571727304

The worldwide personal computer market grew as much as 15 per cent in the second quarter as Dell extended its narrow lead over rival Hewlett-Packard, according to preliminary data from two market research groups.

The PC market share data, roughly in line with expectations, comes amid growing indications the global IT rebound is not as strong as many had hoped and does not appear likely to get stronger any time soon.

But research groups IDC and Gartner said recent tech jitters do not appear to have affected the PC market, which has been buoyed by digital media applications for consumers as well as corporate PC replacement programs.

"Despite warnings from some sectors of the information technology industry, the recovery seems to be holding steady for now," said Roger Kay, PC analyst at IDC. "This trend should persist at least through the end of the year."

more...

We've discussed this here on SMW before. It's a return of the normal cycle of PC replacement after everyone went gaa-gaa for Y2K. That fancy infrastructure for the network does not get updated on a cycle but rather when the changes and improvements in technology require it. There's not been a lot of advancements made in these areas lately. Just my 2 cents worth.

[UpInArms]

21. dollar miserable - stocks happy

9:58 EST

Dow 10,214.99 +51.83 (+0.51%)
Nasdaq 1,917.01 +4.30 (+0.22%)
S&P 500 1,110.34 +3.65 (+0.33%)
10-Yr Bond 4.417% -0.068


Last trade 87.27 Change -0.72 (-0.82%)

Last tick: 2004-07-16 09:26:14 ET
30-min delayed quote.

[UpInArms]

33. dollar continuing to slump

Last trade 87.15 Change -0.84 (-0.95%)

Last tick: 2004-07-16 09:59:13 ET
30-min delayed quote.

[54anickel]

27. Around the World, Markets Are the Dullest in Years. Is That Good News?

http://www.nytimes.com/2004/07/16/business/16norris.html

MAY you live in boring times. For those familiar with the old Chinese curse about living in interesting times, boring may sound like a blessing, and it may well become one for investors. But it is flustering money managers this year.

It is not that they are losing money, although some are. It is just that few seem to be making much money. It has been more than a decade since stock markets have traded in such a narrow range for the first half of a year.

One hedge fund manager complains that nothing is working this year - for him or his competitors. It is a bit like what they say about New England weather: if you don't like the trend, wait five minutes and it will change.

snip>

Perhaps dull markets are correlated with discontent with politicians. The economic news has generally been good around the world, but this has not been a year of joy for political parties in power. The Spanish government was voted out of office. The European parliament elections saw the governing parties rebuffed in nearly every country. In Japan, the upper house elections were a setback for the ruling party. The approval ratings for President Bush have declined.

Dull markets could reflect an uncertainty over the state of the world that has frustrated investors and voters.

Going back to 1928, when the S.& P. 500 began, only two previous presidential election years produced an index that had as listless a first six months as in 2004, and in each case the news was bad for the incumbent party. In 1952, the range was 8.1 percent, and the Democrats were swept out of office. In 1992, the range was 7.3 percent, and President Bush failed to win re-election.

The probable explanation this year is that the good economic news was foreseen by the markets, leading to the market gains that began in the fall of 2002 and petered out this year. Higher interest rates, or fear of them, often act as a sedative on markets, causing them to slow down until more evidence appears to show how high the rates will go and what economic effect they will have. Investors may be waiting for that evidence, as they did in 1994. The end of rising rates that year was followed by a very good 1995.

more...

[54anickel]

28. China's Economic Growth Unexpectedly Slowed to 9.6% (Update6)

http://quote.bloomberg.com/apps/news?pid=10000080&sid=acSaofOyZAu0&refer=asia

July 16 (Bloomberg) -- China's economic growth unexpectedly slowed in the second quarter, suggesting government lending curbs are cooling the world's fastest-growing major economy.

Gross domestic product rose 9.6 percent from a year earlier after climbing 9.8 percent in the first quarter, the government said in Beijing. The gain is less than the median 10.5 percent increase forecast in a Bloomberg News survey of 10 economists.

Chinese shares rallied as the report showed Premier Wen Jiabao has been able to slow investment growth, reducing the need for the central bank to raise interest rates for the first time in nine years. Companies including Finland's Nokia Oyj and Cleveland-based Eaton Corp. say the government may avoid a sudden economic slowdown that would limit demand for their products.

``Economic growth is slowing so the market doesn't have to worry about an interest rate increase,'' said Stella Lau, who helps manage more than $1 billion at East Asia Asset Management in Hong Kong.

more...

[54anickel]

29. Japan Is `Half Way' to Overcoming Deflation, Government Says

http://quote.bloomberg.com/apps/news?pid=10000101&sid=aWxyXtMX5VCg&refer=japan

July 16 (Bloomberg) -- Japan's economy is `half-way' toward overcoming deflation, the government said in its annual report on the world's second-largest economy.

While deflation has shown signs of easing, rising raw material prices still haven't affected consumer goods, signaling that price declines will continue, the Cabinet Office said in its white paper on the economy.

The Bank of Japan pushed interbank overnight loan rates close to zero by raising its target for reserves available to lenders in March 2001, a policy known as quantitative easing. It has pledged to preserve the policy until core consumer prices, which exclude fresh food, stop falling and it's sure they won't decline again. Core prices have risen in one month from year-earlier levels since April 1998.

The central bank needs to consider more specific conditions under which it will end the quantitative easing policy, including the use of an inflation reference target and other measures to present a clearer timeframe for the current monetary framework, the government said.

Core consumer prices must stop falling to ensure that deflation won't threaten growth, the report said. Japan's economy expanded at an annual 6.1 percent pace in the first three months of 2004, its longest expansion since 1997.

more...

[54anickel]

31. Taiwan Central Bank Pledges to Curtail Run on Funds (Update3)

http://quote.bloomberg.com/apps/news?pid=10000080&sid=az9nhIF07vdM&refer=asia

July 16 (Bloomberg) -- Taiwan's central bank said it may step in to ensure stability in the island's NT$2.9 trillion ($86 billion) mutual funds industry after investor withdrawals forced five funds to halt redemptions.

An estimated NT$240 billion worth of bond funds have been redeemed this week, according to the Commercial Times. The rush is ``irrational'' and sufficient money will be made available to provide ``liquidity to stabilize money markets,'' the bank said in a statement. The government didn't release any figures on size of redemptions.

The problem ``was probably caused by Procomp,'' Jong Huey- jen, deputy director-general at the Securities and Futures Bureau, said in a phone interview. She was referring to Procomp Informatics Co.'s default on a bond payment due on June 16. ``Everybody now panics when hearing about bonds. This is an issue of confidence.''

Procomp Informatics Co., which makes chips used in communications and networking equipment, said it was unable to make payment on NT$2.98 billion of debt. The company's shares were halted by regulators on June 23. About 10,000 investors were hurt by the default, the Securities and Futures Investors Protection Center said.

`Crisis of Confidence'

The default sparked a ``crisis of confidence'' in the quality of financial reporting by companies in Taiwan, Standard & Poor's said in a report earlier this month.

more...

[54anickel]

32. Dollar falls vs euro after US asset flows data (OUCH!)

http://biz.yahoo.com/rf/040716/markets_forex_assetflows_1.html

NEW YORK, July 16 (Reuters) - The dollar dropped against the euro on Friday, after a U.S. report showed a fall in May net foreign inflows into the United States, signaling a moderately declining appetite for U.S. assets.

U.S. net capital inflows reached a total of $56.4 billion in May, down from a revised $76.0 billion in April. This was the lowest net capital inflows since Oct. 2003.

bit more...

[54anickel]

34. UPDATE 1-UK's Brown urges IMF to revalue gold for debt relief

http://www.reuters.com/printerFriendlyPopup.jhtml?type=bondsNews&storyID=5633567

VATICAN CITY, July 9 (Reuters) - UK Chancellor of the Exchequer (finance minister) Gordon Brown on Friday called on the International Monetary Fund to revalue its gold reserves as a way of releasing more money for debt relief for the world's poorest countries.

Brown, who is also chairman of the International Monetary Committee, the IMF's policy-setting group, told a seminar organised by the Catholic church in Vatican City that debt relief is both a moral and economic issue.

snip>

Most of the IMF's gold is valued at $40 an ounce under a 1971 agreement, though some was revalued at market prices in the late 1990s to finance the Highly-Indebted Poor Countries (HIPC) debt relief initiative. That delivered more than $2.5 billion of debt relief through off-market gold transactions.

snip>

Brown also used the seminar to raise pressure on the United States and Germany in particular to back his idea for an International Finance Facility.

He said the creation of the IFF could double aid to the world's poorest countries to $100 billion a year by issuing bonds in the international capital markets using donor countries' long-term commitments as collateral.

snip>

More than 50 countries, including France, are supporting the creation of the IFF but the United States and Germany have so far not given the plan their full backing at Group of Seven meetings.



Related article

http://www.321gold.com/editorials/phillips/phillips071504.html

U.K. Chancellor of the Exchequer Gordon Brown did not suggest the actual sale of gold by the I.M.F. just the revaluation of their gold. With the valuation of Gold at around $40 an ounce, by the I.M.F. he highlighted an archaic issue at the I.M.F. that has lain 'dormant for decades and should be addressed.' The valuation stems from the Articles governing the I.M.F. Chancellor Brown, a man who would have been wiser to have stayed quiet on the issue, given his complete failure in handling U.K. gold reserves, highlighted this pertinent issue at the I.M.F. His anti-gold stance is a matter of record and one that has resulted in his exclusion from the present discussions on gold currently taking place amongst Eurozone Bankers.

He will have no part in these discussions which cover the handling of Eurozone gold. The U.K. relinquishes its part in European gold sales when the "Washington Agreement" expires in September. They were absent from the "2004 Central Bank Gold Agreement," which commences in September of this year. Was that because the Eurozone Bankers hold a different view to his on gold's role as a reserve asset? - Likely so!

The outcome of these discussions is significant and will determine just what sales will, actually, take place under the 2004 Central Bank Gold Agreement, irrespective of the ceiling of 500 tonnes per annum set within this agreement.

So in view of these Eurozone discussions, the issue of the valuation of Gold by the I.M.F in its reserves happens at good time.

more...

[54anickel]

35. UPDATE 1-U.S. Treasury says likely to hit debt limit in Oct

http://www.reuters.com/printerFriendlyPopup.jhtml?type=bondsNews&storyID=5670968

WASHINGTON, July 14 (Reuters) - The U.S. government will likely reach its federal debt limit in early October, a top Treasury official said in written remarks, giving fresh details on when the politically sensitive ceiling will need to be raised.

The $7.384 trillion debt limit may need attention before the November election, Timothy Bitsberger, Treasury's nominee for assistant secretary for financial markets, said in a document obtained by Reuters on Wednesday.

snip>

Lou Crandall, chief economist at Wrightson ICAP, said the potential timing of a vote on raising the debt limit, just before the November election, could worry markets.

"Congress doesn't want to have to deal with it, and the bond market doesn't want to see Congress have to deal with it," he said.

"The bond market at this point tends to take a pretty complacent approach to debt ceiling problems because they do tend to come and go with minimal disruption in the end," he said. "However it becomes a question that you would just rather not have hanging over the market."

Treasury has been reluctant to pinpoint exactly when the debt ceiling will be reached, with officials saying recently it could happen in "late summer or early fall."

In his remarks, Bitsberger said Treasury might be able to stretch the limit out until "early October to late November" if it were to use various accounting measures.

[Maeve]

36. 10:47 numbers

Looks like someone let the air out around 10:15 or so...

Dow 10,170.23 +7.07 (+0.07%)
Nasdaq 1,904.46 -8.25 (-0.43%)
S&P 500 1,105.97 -0.72 (-0.07%)
10-Yr Bond 4.409% -0.076

[54anickel]

37. Re-Slicing the Economic Pie

http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8111

The American economic pie is growing at a solid pace. The odd thing is how the pie is now sliced between the portion going to profits and the portion going to wages. According to the Commerce Department, the wage slice is now smaller than it's been in 38 years, while the slice going to after-tax corporate profits is bigger than it's been since the government began tracking profits back in 1947. This wage squeeze is hurting middle-class families who, even if they own shares of stock, depend mainly on wages.

What's going on? One possibility is that this lopsidedness is just the lingering - and temporary -- effect of an unusually long jobs recession. So many Americans have been unemployed or underemployed so long they've lost a lot of bargaining power. As we come out of the jobs recession and the demand for employees returns to normal levels, workers will get raises, and the slice of the pie going to wages will grow to a more normal portion.

But there's another, more disturbing possibility -- and it seems somewhat more likely. The wage slice will stay historically low, and the profit slice high, because employees have permanently lost bargaining power. Unions now represent fewer than 8 percent of private-sector workers, a figure that's been dropping steadily for many years.

Meanwhile, advances in telecommunications now enable many more companies to outsource to places like India and China, where wages are far lower. Or they can easily substitute computers and software for employees who might otherwise expect a raise. If these trends weren't enough to keep wages down, consider that big corporations are bigger and more powerful than ever. Think of Wal-Mart, now employing more Americans than the entire U.S. auto industry. Employers with this kind of clout can keep wages low just by refusing to raise them.

bit more...

[ozymandius]

39. Hi folks! Robert Reich spoke about this recently.

He did a guest commentary on Marketplace. He spoke of the pressure the average worker is under to save when the cost of living, notably uncharted items like food and energy, continues to rise. Conversely, corporate valuations continue to rise because of the cost cutting measures exemplified by outsourcing of labor.

[54anickel]

38. Global Property Bubble? (Part I)

http://www.morganstanley.com/GEFdata/digests/20040715-thu.html#anchor0

Asset markets have moved to center stage as drivers of economic growth. In one important respect, this trend was borne out of necessity: With subpar job creation and ongoing real wage compression putting earned labor income under unusual pressure, wealth effects derived from asset appreciation have increasingly filled the void. The equity market led the way in the latter half of the 1990s, but now the impetus is coming largely from property. The biggest risk to this new strain of economic growth is the time-honored tendency of asset cycles to go to excess. That was certainly the case when the equity bubble popped in early 2000 and could well be the case again for the property cycle. Therein lies the greatest peril for the Asset Economy as we peer into the future (see my 21 June essay, "The Asset Economy").

This not a US-centric issue. The new asset-driven growth dynamic is increasingly global in scope. That was true of equities and is now true of property. In a companion report, Morgan Stanley's global economics team assesses the state of play in 23 geographic segments of the global property market (see "Global Housing Round-Up"). While this tabulation is far from all-inclusive, the countries covered in our round-up account for 94% of world GDP (as measured on a purchasing-power-parity basis) and approximately 96% of the value of the housing stock in the developed world. By our reckoning, housing bubbles currently exist in about 25% of the global economy, whereas we would put another 40% in the "bubble watch" category — defined as a housing market that has some of the characteristics of a cycle that has gone to excess. In other words, we believe that property markets in about two-thirds of the world economy either are in a bubble or are at risk of moving into bubble territory. Just as the world had to come to grips with the bursting of the equity bubble a little over four years ago, the possibility of a post-bubble shakeout in global property markets cannot be taken lightly.

How did this condition come about? There are numerous factors that shape housing values — from demography and tax considerations to the physical balance between supply and demand. Financial conditions are also key — not just the breadth and depth of residential mortgage lending markets but also the level and direction of interest rates. Of all these factors, I believe that the interest rate, or financing, cycle is the most important consideration that separates this housing cycle from those of the past. Twenty years of disinflation took nominal interest rates down steadily from the record highs of the early 1980s. The deflation scare of early 2003 was the icing on the cake — pushing rates down to levels not seen in over 40 years. Central banks unleashed the super-liquidity cycle that cast property investment in an entirely different light. As a result, housing affordability improved dramatically, only adding to the intrinsic demand for the asset class.

The bubble of extraordinary monetary stimulus and the super-liquidity cycle it unleashed pose the key risk to over-extended property markets, in my view. The excesses of the liquidity injection don't vanish into thin air. The concern today, of course, is that the surge of money and credit creation will eventually show up in the form of accelerating inflation. Those concerns are hardly surprising. After all, this is one of the fundamental conclusions of monetarism — that for a given velocity of financial turnover, increases in the money stock lead to an upward adjustment in the price level. Like all such mechanistic rules, special considerations can alter the predictable outcome. The lack of pricing leverage in today's global economy is precisely such a consideration. Reflecting the globalization of costs and price competition — first in tradable goods and now increasingly in what used to be called nontradable services — there has been a significant structural change in the forces shaping inflation.

Again, that doesn't mean that the excesses of the liquidity cycle mysteriously disappear. It simply may mean that the link between monetary expansion and the aggregate price level has changed. Here's one possibility:...

more...

[54anickel]

40. Al "the Shadow" Greenspan (bit gold-buggy)

http://www.gold-eagle.com/editorials_04/norcini071404.html

snip>

What I am referring to is Tuesday, July 13's, price action in the U.S. Dollar and by consequence, the price action of gold for the same day. The Commerce Department's release of the May trade balance of payments data revealed a deficit of "merely" $45.95 billion instead of a widely expected $49 billion. Traders reacted to the release with gleeful abandon causing another classic short covering squeeze in the U.S. Dollar. Naturally, gold was smashed close to $8.00 as a result before settling $6.10 lower on the day at $402.30.

Various reasons have been given for the violent reaction but the crux of the matter is that no one can offer a rational explanation for such an idiotic reaction. I can almost hear the voice of the Shadow Greenspan: "You will buy the dollar and you will buy lots of them. You do not want Gold. You do not want Silver. You want lots more paper. You love paper." Suddenly, as if driven by some impulse deep within them, traders mindlessly found themselves furiously banging away at the "Enter" key on their internet based trading platforms sending dollar buy order after dollar buy order into the pit while simultaneously jettisoning anything remotely resembling precious metals. Upon completion of their exertion, no doubt a sense of dumbfounded ness stole across their minds and they awoke as if from a dream. "What did I just do and why?" was heard uttering from their lips.

While this of course is meant to be a bit of lighthearted humor the simple fact is that today's reaction to the trade deficit figure was patently absurd no matter how one wants to look at it. After all the various reasons are given, under no circumstances whatsoever can today's numbers be considered "dollar friendly". How can it be when the cumulative total trade deficit from January through May of this year stands at $231 billion? On an annualized basis, that projects to $554 billion - that is half a trillion dollars that must be financed by foreign inflows of capital! Think about the repercussions of so staggering a sum. When combined with the expected federal budget deficit, which numbers were also released today by the Treasury Department and is expected to come in at $520 billion through the fiscal year, the total amount of foreign capital that will be needed to fund both deficits this year is over ONE TRILLION DOLLARS. When is the last time you actually wrote down the number, 'one trillion?' For those of you who are interested, here it is: $1,000,000,000,000.00

What I personally find so perplexing is that traders and investors could digest this kind of information with such a lackadaisical response. It truly is as if some great force has clouded men's minds making them seemingly oblivious to the fact that this situation is not sustainable. What are these seemingly hypnotized, hapless dupes going to do when suddenly foreigners decide they no longer want to play ball with us?

"Yes, but the deficit number declined," say some, inferring that the trade deficit is beginning to improve and the cause for concern is lessening. Two points -The first is that we had civilian aircraft exports increase from the previous month and reach $2.1 billion for the month of May. That number alone is nearly the difference between the $49 billion deficit the market was expecting and the $46 billion that it got instead. How many aircraft are sold each and every month? After all, they are not exactly like buying socks or underwear which need replacing every few months. Secondly, and more importantly - by bidding up the dollar upon hearing that the trade deficit improved, traders are actually working perversely to worsen the very situation they are extolling. A rising dollar will do nothing but exacerbate the deficit as it will raise the cost of our exports abroad while serving to lower the cost of imports from abroad. The end result is that we will import more and export less. If "Al the Shadow" had not clouded men's minds, the proper reaction to the release of the news of a trade deficit that narrowed would be to force the dollar further in the direction that was serving to help correct the problem thereby hastening the cure. What direction is that? Down of course! Assuming traders decide to follow the subliminal message they have received and continue to bid the dollar further up - what can they expect to see down the road in the upcoming monthly release of the trade balance figures - an improving of the situation or a worsening? It should be pretty obvious what the answer to that one is.

more...

[54anickel]

42. Mega Bank Merger Won't Impact Japan's Gold Buying

http://sg.biz.yahoo.com/040715/15/3lpm6.html

snip>

Wednesday, UFJ Holdings Inc. (8307.TO) proposed a merger with rival Mitsubishi Tokyo Financial Group Inc. (8306.TO) in a deal that would create the world's largest lender.

Such a move is seen by many as signaling a close to Japan's banking crisis as UFJ, the weakest of the nation's four "mega-banks" would be merging with the strongest of the lot.

"Such a merger would likely reduce the immediate need for safe-haven assets arising from a possible banking crisis," said Itsuo Toshima, the Japan-Korea regional director for the World Gold Council.

However, Toshima isn't expecting a rush to sell gold as he sees the banking problem as just one part of a broader economic landscape that has driven Japanese investors to embrace the yellow metal.

"There are still two distinct uncertainties hanging over the minds of Japanese investors, namely a possible collapse of the pension system and an unprecedented level of public debt, which now stands at around 700 trillion yen," said the council's Toshima.

more...

[54anickel]

43. WHAT THE FED'S ACTIONS FORETELL

http://www.gold-eagle.com/editorials_04/appel071504.html

July 15, 2004 - The past few years witnessed the orchestration of United States interest rates to their lowest levels in over 40 years. This was the result of the Federal Reserve's effort to reverse the mounting economic decline that our country was enduring. Economic deterioration began to unfold during the latter part of 2000, and was exacerbated a year later by the aftermath of 9/11.

We have heard and read that the Fed will continue to suppress interest rates until after the November elections, in their desire to support the reelection of President Bush. However, I believe that their real reason is to prevent the economy from relapsing into the recession that the recent interest rate cuts have to date successfully averted.

After a sharp decline, 2002 saw our economy appear to enter a period of expansion. The economic stimulation created by the lower interest rate environment was later augmented by the enormous level of home refinancing that they fostered. This, when homeowners used the money that they acquired from refinancing their homes, to making various purchases. Unfortunately, recent evidence is appearing that indicates that our short respite from a protracted economic decline, may have ended.

snip>

As an aside, it is amazing how few people seem to recognize the subtle change, and its enormous significance, that the Fed made to one of its most important, historical methods of effecting monetary policy changes. In the old days, prior to the past few years, the discount rate was altered by the Fed whenever they desired to either stimulate or restrain the economy. The discount rate is the overnight lending rate that member Federal Reserve banks pay when they borrow directly from the Federal Reserve Bank. This was typically done when the banks required capital to meet their daily reserve requirements. It was the primary interest rate upon which all other domestic rates were predicated. Originally, it was known as the rediscount rate, but later underwent a name change and became known as the discount rate.

snip>

When the Fed shifted their emphasis from managing the discount rate to the federal funds rate, they immediately bought themselves added leeway and time. They believed that this would help them in their fight to ward off the approaching recession that they obviously foresaw.

The reason that I state this is it gave them an extra 0.50% or so of latitude in cutting interest rates. For example, if the discount rate was at 1% and the federal funds rate was at 1.50%, under the old targeting of the discount rate they could only reduce the country's base rate by 1% before reaching zero. However, by focusing on the higher federal fund rate of 1.50%, they could effectively reduce rates by an additional 0.50%. In effect, the discount rate lost its importance...

more...

[UpInArms]

47. you know I could be wrong about this

but I am going to throw it out here anyway:

After a sharp decline, 2002 saw our economy appear to enter a period of expansion. The economic stimulation created by the lower interest rate environment was later augmented by the enormous level of home refinancing that they fostered. This, when homeowners used the money that they acquired from refinancing their homes, to making various purchases. Unfortunately, recent evidence is appearing that indicates that our short respite from a protracted economic decline, may have ended.

When most of the goods consumed are not manufactured in this country there is no way that consumption can hold up the economic status quo - so consuming and spending on products which are mainly produced elsewhere only feeds the "global" economy, not the US economy. Unless more goods are actually manufactured here for consumption those dollars only travel back into the US via "investment" in the stock of those multi-national corporations but can never truly "trickle" back into our economy.

So when the inflows into our "capital" markets fall, there is no slack.

Does anyone else read it this way or am I just off my rocker (again)?

[KoKo]

49. Yes, I read it that way. I think the writers at Financial Sense, Prudent

Bear, Gold Eagle, Daily Reckoning and the "Great Mogambo" would support this. Are they all "off their rockers?" Mogambo claims folks think he is...

What happens to a country that no longer manufactures enough to sell? How long can it just move money around and sell financial schemes to the rest of the world.

We do sell Weapons of Mass Destruction, though. And there are plenty of countries willing to buy those. Is that what we will be left with to support our GDP? Selling death and debt?

[54anickel]

50. Makes sense to me, and ties in with some of the articles posted

here recently. More of that "new economy". We went from manufacturing to service, now service is leaving and we have what Greenspin has referred to as the "wealth extraction" (or some such BS) economy - less working for your money, more having your money work for you.

Is it possible and feasible? I don't know, but it's scarier than hell. Sounds to me like it will just create a larger gap between the haves and have nots. If you have to work for your money, you'll work longer for less of it. If you're fortunate enough to have a few bucks to put to work for you to subsidize your measly wages, you'll fair OK.

:shrug:

[Media_Lies_Daily]

55. I think you're dead on. Good explanation of a complex issue.

[Chicago Democrat]

44. 4 Years and back where I started...

I hate Bush; he costs us money!!

My portfolio is exactly the same as 3/2001 in value! (just 3/2000 it was 150% higher, but I give him that 'clinton bubble')Thank alot George, my mattress would have been just as effective!!

[UpInArms]

45. Shaw's begins layoffs, transfers of 275 employees

http://enterprise.southofboston.com/articles/2004/07/16/news/news/news06.txt

WEST BRIDGEWATER — Shaw's Supermarkets this week began to lay off nearly 275 store workers in Massachusetts and Rhode Island or transfer them to lower-paying or part- time jobs, according to union officials.

Full-time workers who choose to stay with the company could see their hourly wages slashed from as much as $20 per hour to about $10, be switched to part-time workers or both, said Peter Derouen, spokesman for the United Food and Commercial Workers Local 791.

The company unveiled its plans Monday after announcing the layoffs more than a month ago, said Derouen.

"Simply put, Shaw's is putting profits before people," he said.

The union blasted the layoffs and "re-balancing plan" as "unprofessional, discourteous, mismanaged."

...more...

[UpInArms]

48. 12:14 EST Update and blather

Dow 10,193.39 +30.23 (+0.30%)
Nasdaq 1,905.51 -7.20 (-0.38%)
S&P 500 1,107.81 +1.12 (+0.10%)
10-Yr Bond 4.379% -0.106

12:00PM: If you're a market bull, then this morning's session has been a real disappointment... Armed with a number of bullish developments, stocks started strong - and then gave way to selling pressure... As it has been the case since Tuesday, conviction behind buying efforts has been waning, and not strong enough to support a broad-based rally... Once again, the semiconductor sector has been the culprit behind the pullback, dropping 1% and approaching 52-week lows...

Investors remain hesitant to commit new money with worries about end market demand slowing and analysts actively downgrading members (e.g. Texas Instruments by Lehman Brothers to Equal-weight from Overweight)... The blue chip averages, however, have performed much better and clung to small gains for most of the morning... Solid gains in homebuilding, utility (the last two off the tremendous rally in the treasury market), and energy have offset selling in retail... Energy itself has received a lift off the 1.5% increase in the price of crude oil to $41.55/bbl - near a 6 week high... Worries that OPEC nations will be unable to meet North American summer demand have renewed supply concerns...

Computer hardware has also been a positive group - thanks to IBM's (IBM 85.47 +1.45) strong Q2 (June) report... The other news item that was positive in nature this morning was June CPI... The core CPI rose less than expected, by 0.1% (consensus +0.2%) and helped dispel inflation worries... Finally, the July Michigan Consumer Sentiment report rose near the market's expectations, at 96.0 (consensus of 97.0)...

dollar

Last trade 87.19 Change -0.80 (-0.91%)

Last tick: 2004-07-16 11:44:16 ET
30-min delayed quote

[UpInArms]

51. Hedge Fund Plan Fractures Civility of Republicans

(found the headline to be an oxymoron)

http://www.nytimes.com/2004/07/16/business/16secure.html

WASHINGTON, July 15 - The head of the Securities and Exchange Commission staked out his independence on Thursday as he came under heavy political assault by Republican members of the Senate Banking Committee for his plan to tighten oversight of the hedge fund industry.

In a hearing with odd political dynamics, William H. Donaldson, the Republican chairman of the commission, found allies among the Democrats as he fended off skepticism of the plan by the committee's chairman, Senator Richard C. Shelby of Alabama, and more pointed criticism by most other Republican members.

The Republicans largely reiterated the complaints of some hedge funds and a hedge fund trade association - whose executives in recent months have made more than $1.5 million in campaign contributions to the two major parties. Some in the industry object to a proposal that would require all funds to register with the S.E.C. in hopes of making them transparent to regulators and investors.

Hedge funds are pools of assets and are largely unregulated. Originally open to wealthy, informed investors, they are becoming more widely available to those of more modest means and are being used with greater frequency by pension funds and other institutional investors.

The criticism Thursday was the second in two days Mr. Donaldson faced. Officials said he was questioned about the plan on Wednesday by Treasury Secretary John W. Snow and the Federal Reserve chairman, Alan Greenspan, at a private meeting of an interagency working group on financial markets. Mr. Greenspan has previously testified that the registration of hedge funds could lead to more regulations with the effect of reducing financial markets' liquidity. Mr. Snow, who has talked with executives and lobbyists opposed to the plan, has privately criticized it along similar lines, officials said.

...more...

Is Donaldson going to be strong-armed by these thugs?

[54anickel]

54. Civility of Republicans???? Oh that's rich! n/t

[UpInArms]

52. 1:11 EST Update and blather

Dow 10,178.85 +15.69 (+0.15%)
Nasdaq 1,903.11 -9.60 (-0.50%)
S&P 500 1,106.65 -0.04 (0.00%)
10-Yr Bond 4.376% -0.109

1:05PM: Major indices continue to straddle the unchanged mark with few news items this afternoon to break them out of their range... Buyers continue to cling to the sidelines as the indices near their May lows... The fact that several economic reports have come in weaker than expected has raised eyebrows - particularly as we are in a tightening Fed cycle... A slowdown in economic growth in China, however, has been viewed as a good thing... The great nation reported a 9.6% increase in GDP, down from 9.8% in Q1...

Tightened bank lending (among other reforms) has helped rein in speculative investment, which has contributed to inflation... Hong Kong's Hang Seng spiked 1.0% as a result...NYSE Adv/Dec 1906/1241, Nasdaq Adv/Dec 1118/1764

12:30PM: Indices drift lower as the tech group continues to tug it lower... By and large, earnings news out of the Q2 (June) reporting season has not been that bad - as estimates for 23% in aggregate S&P 500 EPS growth remain intact... However, the market has chosen to concentrate on the outlying negatives that have stolen attention away from earnings... Crude oil, interest rates, and the fact that earnings, will, in fact, slow in Q3 have caused concern... Briefing.com would point out, though, that +13% is the touted number for Q3 EPS growth, and that in itself is still very strong...NYSE Adv/Dec 1885/1217, Nasdaq Adv/Dec 1124/ 1704

dollar

Last trade 87.16 Change -0.83 (-0.94%)

Last tick: 2004-07-16 12:42:31 ET
30-min delayed quote.

[54anickel]

53. 1:14 numbers & blather

And with this post I must say good-bye for the week-end. Heading up to Door County this afternoon and I still have a bit of packing to do!
Have a great week-end everyone! :hi:

Dow 10,184.33 +21.17 (+0.21%)
Nasdaq 1,904.38 -8.33 (-0.44%)
S&P 500 1,107.14 +0.45 (+0.04%)
10-yr Bond 4.379% -0.106
30-yr Bond 5.132% -0.086

NYSE Volume 809,135,000
Nasdaq Volume 950,794,000

1:05PM: Major indices continue to straddle the unchanged mark with few news items this afternoon to break them out of their range... Buyers continue to cling to the sidelines as the indices near their May lows... The fact that several economic reports have come in weaker than expected has raised eyebrows - particularly as we are in a tightening Fed cycle... A slowdown in economic growth in China, however, has been viewed as a good thing... The great nation reported a 9.6% increase in GDP, down from 9.8% in Q1...
Tightened bank lending (among other reforms) has helped rein in speculative investment, which has contributed to inflation... Hong Kong's Hang Seng spiked 1.0% as a result...NYSE Adv/Dec 1906/1241, Nasdaq Adv/Dec 1118/1764

12:30PM: Indices drift lower as the tech group continues to tug it lower... By and large, earnings news out of the Q2 (June) reporting season has not been that bad - as estimates for 23% in aggregate S&P 500 EPS growth remain intact... However, the market has chosen to concentrate on the outlying negatives that have stolen attention away from earnings... Crude oil, interest rates, and the fact that earnings, will, in fact, slow in Q3 have caused concern... Briefing.com would point out, though, that +13% is the touted number for Q3 EPS growth, and that in itself is still very strong...NYSE Adv/Dec 1885/1217, Nasdaq Adv/Dec 1124/1704

[UpInArms]

56. 2:36 EST Update and blather

Dow 10,156.59 -6.57 (-0.06%)
Nasdaq 1,890.85 -21.86 (-1.14%)
S&P 500 1,103.85 -2.84 (-0.26%)
10-Yr Bond 4.378% -0.107

2:30PM: The market drops off again as the Nasdaq and S&P 500 set new session lows... Buyers continue to be a skittish bunch and basically take cover if the indices show any sign of weakening... Right now, the Dow, Nasdaq, and S&P 500 are poised for their third week of losses as earnings reports have mostly just inspired selling... The focus remains on 2H04 and any guidance companies give... If it is less than perfect, traders swoop in and unwind shares... Next week, blue chip companies will be releasing, and so far, their reports and outlooks have been impressive...

A solid showing from those companies could help prompt a knee-jerk bounce...NYSE Adv/ Dec 1976/1218, Nasdaq Adv/Dec 1129/1843

2:00PM: The major indices remain locked in their trading ranges with few sector leaders to speak of... Technology and financial, which make up the largest weights of the S&P 500, have been weak for most of the day... Technology has barely peeked its head out of negative territory, and financial is showing slight gains... The lack of convincing industry leadership has undercut the market, and translated into lackluster breadth figures as well... Advancers and decliners are almost matching each other at the NYSE and Nasdaq, and down volume is exactly even with up volume at the Big Board...NYSE Adv/Dec 1966/1228, Nasdaq Adv/ Dec 1165/1764

1:30PM: The Nasdaq continues to trail the blue chip averages as buyers find favor in energy and interest-rate sensitive shares like utility, homebuilding, and insurance... The bond market continues to move higher, the 10-year note up 28 ticks and bringing its yield to 4.37%... Right now, 16 out of the 30 Dow components are showing gains, with Johnson & Johnson (JNJ 56.70 +1.35) at the head of the pack...

dollar

Last trade 87.16 Change -0.83 (-0.94%)

Last tick: 2004-07-16 14:06:18 ET
30-min delayed quote.

[UpInArms]

57. 3:22 EST Update and blather

Dow 10,158.36 -4.80 (-0.05%)
Nasdaq 1,892.41 -20.30 (-1.06%)
S&P 500 1,104.17 -2.52 (-0.23%)
10-Yr Bond 4.361% -0.124

3:00PM: Stocks stabilize around their lows of the session as the bears take a break from their recent activity... One group that has been noticeably weak today has been retail... The sector first turned lower on Wednesday, when the June retail sales report was released and fell more than the market expected, and has continued to head lower in the interim... Fears that the consumer will begin to cut back as interest rates rise and - more importantly - the economy cools have precipitated the selling efforts...

This week's economic data have not been particularly strong and indicated a bit of a slowdown in June...NYSE Adv/ Dec 1767/1460, Nasdaq Adv/Dec 986/ 1994

dollar

Last trade 87.10 Change -0.89 (-1.01%)

[UpInArms]

58. closing and blather

Dow 10,139.78 -23.38 (-0.23%)
Nasdaq 1,883.15 -29.56 (-1.55%)
S&P 500 1,101.40 -5.29 (-0.48%)
10-Yr Bond 4.361% -0.124

BRIEFING.COM] Like a lot of sessions this week, the market started with great promise - underpinned by a number of bullish developments - but finished noticeably lower as buyers backed away from their positions... Conviction was once again weak as market internals never assumed a bullish tone, and stocks began inching away from their highs at the open... A solid Q2 (June) report from IBM (IBM 84.28 +0.26), a strong day of trading in Asia (following reports that China's GDP decelerated from Q1's rate as government reforms appear to be working), and a basically in line June CPI report all set the stage for the higher start to the day... The latter proved to be especially key as the core CPI grew less than expected (+0.1% versus the consensus of +0.2%) and led to a bond market rally... The subsequent fall in interest rates helped out shares of homebuilding, insurance, gold, and other interest-rate sensitive stocks... Energy also performed well thanks to a nearly 1% rise in the price of crude oil to $41.30/ bbl - which was credited to concerns that OPEC's raised quota will not meet still high North American demand... Everywhere else, however, basically traveled south... Semiconductor was once again the largest laggard, falling 1.9% to 10- month lows... ..NYSE Adv/Dec 1697/1589. ..NASDAQ Adv/Dec 933/2109.

dollar

Last trade 87.14 Change -0.83 (-0.94%)