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To: TobagoJack who wrote (5039) 6/16/2001 7:08:41 AM From: Box-By-The-Riviera™   Read Replies (1) | Respond to of 74559   Economic Dune

To: TobagoJack who wrote (5039) 6/16/2001 8:40:36 AM From: smolejv@gmx.net   Respond to of 74559   Reminded me of the verse from the Acts ". 2:2Suddenly there came from the sky a sound like the rushing of a mighty wind, and it filled all the house where they were sitting. 2:3Tongues like fire appeared and were distributed to them, and one sat on each of them. 2:4They were all filled with the Holy Spirit, and began to speak with other languages, as the Spirit gave them the ability to speak." Great post J. Nice meeting you. the rest is silence. dj PS: AND, then comes the grand non-finale, copied from the "little big man"... Remember the end? When the big red chief decides to do his last dance and die/give his soul back to the great spirit... and then he gets rained out (sg). It will be more prosaic, is all I wanted to say. PPS: are we not dragging our ships to the mountain tops ("47 hours and counting...") and other very well known symptoms? IOW doing the eschatology of Wall Street?. "Yeah, that's what the first PS is hinting at, you dodo." PPS: still - "dont fight your heart".

To: TobagoJack who wrote (5039) 6/16/2001 4:55:27 PM From: $Mogul   Respond to of 74559   The NBER's Recession Dating Procedure in the Light of Current Developments Robert E. Hall National Bureau of Economic Research June 4, 2001 This report is also available as a PDF file. This memo will appear on the NBER's website, NBER.org, during the period of uncertainty about the state of the economy. The purpose of the memo is to explain the Bureau's procedures for dating recessions, not to indicate whether or not the economy is in a recession. That determination is made only by the Bureau's business cycle dating committee, which has not yet met. More than anything else, this memo explains why the committee has yet to meet. This version of the memo refers to the most recently revised data--important revisions to the employment data became available at the beginning of June. In summary, the data normally considered by the committee indicate the possibility that a recession began recently, but the economy has not declined nearly enough to merit a meeting of the committee or the determination of a peak date. In April, employment fell for the first time in the past six months and fell again, slightly, in May. The total decline in employment is only a small fraction of the decline that has occurred in recessions. Industrial production peaked in September 2000 and is now down 2.6 percent from its peak. The contraction appears to be limited to the sector covered by industrial production, manufacturing, and has not spread to other sectors. The NBER's Business Cycle Dating Committee does not determine the start or end of a recession until we have at least six months of data beyond the peak date, and often even more time is required to make the determination. A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and trade. A recession begins just after the economy reaches a peak of output and employment and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; recessions are brief and relatively rare. Figure 1 shows a measure of output compiled by the Federal Reserve Board, its Index of Industrial Production, since 1955. Although economists generally measure output by gross domestic product (GDP), the determination of peak and trough dates is done by months, whereas GDP is measured only by calendar quarters. Hence industrial production plays an important role in deciding when recessions have begun and ended. But industrial production measures the output of a small and declining part of the economy. There is no monthly measure of output for the entire economy. Figure 2 shows industrial production during the most recent recession in 1990-91. In 1990, starting in October, industrial production fell precipitously. It raced down to a sharp minimum in March 1991 and reversed course in that month. The figure shows the peak and trough dates for the entire economy determined by the National Bureau of Economic Research, July 1990 for the peak and March 1991 for the trough. Notice that the peak in industrial production occurred two months later than the peak date determined by the Bureau for the overall economy. Figure 2 shows the movements of another key monthly indicator, total non-farm employment, during the 1990-91 recession. Employment also collapsed during the recession. It reached a peak in June 1990 and a trough in May 1991, though employment did not rebound in parallel with output. Figure 1. Industrial Production in the Most Recent Recession Source: federalreserve.gov Figure 2. Employment in the Most Recent Recession Source: stats.bls.gov, Most Requested Series, total nonfarm employment, seasonally adjusted The figures illustrate the principle that the determination of the month of the peak and trough involve a compromise when the major indexes disagree. The NBER picked July as the 1990 peak date because it lay between the June peak in employment and the September peak in industrial production. Although industrial production and employment are the two most important measures considered by the NBER in developing its business cycle chronology, there is no fixed rule about which other measures contribute information to the process. An important additional measure, for example, is personal income adjusted for inflation ( bea.doc.gov. A recession involves a substantial decline in output and employment. In the 1990-91 recession, industrial production fell by about 4.5 percent and employment by a little less than 2 percent. A small decline in output--say one or two percent--not matched by a corresponding decline in employment would not enter the Bureau's chronology as a recession. As a result, the Bureau waits until the data show whether or not a decline is large enough to qualify as a recession before declaring that a turning point in the economy is a true peak marking the onset of a recession. The Bureau announced in April 1991 its determination that July 1990 was a peak, and in December 1992 announced its determination that March 1991 was a trough. The particularly long lag for the trough date resulted from the slow pace of growth in 1991 and 1992--had the economy reversed course and declined below its March 1991 level during that period, the period would have been counted as a single longer recession. The Bureau could not set a date for the trough until, in late 1992, the economy had regained its July 1990 peak and a subsequent contraction would have been considered a separate recession. Figure 3 shows the movements of industrial production over the past two years, through April 2001. A peak occurred in September and the index declined over the next 7 months by 2.6 percent, still below the size of the decline typically experienced in a recession. Figure 4 shows the recent movements of employment. After falling by 70,000 in July 2000 and by 62,000 in August, employment resumed growth through March 2001. Employment fell by 182,000 in April 2001 and by another 19,000 in May 2001. These declines are small in comparison to the total decline in the 1990-91 recession, shown in Figure 2, of about 1,900,000 workers. The committee also considers retail trade, adjusted for price changes, shown in Figure 5. Real trade grew rapidly through March 2000. Apart from occasional random movements, it has continued to grow at a more moderate rate during the past year. The data continue to suggest that the only substantial declines in real activity in the U.S. economy are in manufacturing, the sector reflected in the industrial production index. Broader aggregates, such as employment and real retail sales, have stalled in recent months, but have not fallen significantly. For more information, see nber.org. Figure 3. Current Industrial Production Figure 4. Current Employment Figure 5. Current Trade -------------------------------------------------------------------------------- December 1999 How the NBER's Business Cycle Dating Committee Uses Dates: The NBER identifies turning points, that is, dates when economic activity turned in the opposite direction. For example, our most recent turning point was March 1991. Sometime during that month, the economy stopped contracting and started expanding. March 1991 was a trough date. Similarly, July 1990 was a peak date. Sometime during that month, the economy stopped expanding and started contracting. We measure the length of an expansion by the number of months between the trough and the following peak. The longest expansion in the entire NBER chronology started in February 1961 and ended in December 1969, a period of 106 months. Where the Current Expansion Ranks in Terms of Length: If December 1999, contrary to all current indications, proved to be a peak turning point, the current expansion would be 105 months long. If a peak turning point occurs in January, then the expansion will tie the longest previous expansion. If the economy continues to expand past January, then the United States will be in record territory. The 106-month expansion of the 1960s included the period of the Vietnam war. Similarly, the fourth-longest expansion in the chronology, 80 months in duration, contained World War II. The longest peacetime expansion was from November 1982 to July 1990, a period of 92 months. The current expansion outlasted that expansion more than a year ago. nber.org

To: TobagoJack who wrote (5039) 6/16/2001 6:47:56 PM From: Ilaine   Read Replies (1) | Respond to of 74559   This is what your vision made me think of.:) >>About suffering they were never wrong, The Old Masters; how well, they understood Its human position; how it takes place While someone else is eating or opening a window or just walking dully along; How, when the aged are reverently, passionately waiting For the miraculous birth, there always must be Children who did not specially want it to happen, skating On a pond at the edge of the wood: They never forgot That even the dreadful martyrdom must run its course Anyhow in a corner, some untidy spot Where the dogs go on with their doggy life and the torturer's horse Scratches its innocent behind on a tree. In Breughel's Icarus, for instance: how everything turns away Quite leisurely from the disaster; the ploughman may Have heard the splash, the forsaken cry, But for him it was not an important failure; the sun shone As it had to on the white legs disappearing into the green Water; and the expensive delicate ship that must have seen Something amazing, a boy falling out of the sky, had somewhere to get to and sailed calmly on. << jough.com Notice the tiny legs in front of the ship - ibiblio.org

To: TobagoJack who wrote (5039) 6/17/2001 11:59:51 PM From: Stock Farmer   Respond to of 74559   Jay - you have interesting visions Jay... Maybe you should slow the gyrations a bit. Or speed them up. I've got Dire Straits playing at the moment... Looks like things are starting to get serious. From what I hear, the blame-guns are out on capital hill (we are officially in a mess, and it's all Clinton's fault). Which reminds me of my boss' joking advice when I got promoted to management the first time. He told me "It works like this. When you get promoted you get three envelopes. Numbered 1, 2 and 3. To be opened in that order. Each contains a "get out of jail" card. Whenever you get in a mess, you may open the envelope. No matter how bad things are, the contents will rescue you. Use them wisely (and he gave me 3 envelopes). I took them home of course and steamed them open right away. I think he figured I'd do this. Because in the first envelope was a piece of paper. On it was written "Tell everyone 'It was like that when I got here'" In the second envelope was "Say: 'I didn't know how bad things were back then, so of course my actions were ineffective. But I learn fast and now I know, and I have a plan.'" In the third envelope was "Make three new envelopes!" John

To: TobagoJack who wrote (5039) 6/19/2001 2:07:20 AM From: TobagoJack   Respond to of 74559   The order of battle is now clearly identified, a three front synchronous attack, with a multitude of exotic weapons and tactics, based on an overall strategy of overwhelming the debt-ed, with no prisoners allowed ... defense is naked, holding 400 basis points of arrows at the ready economist.com QUOTE Signs of a slowdown Jun 18th 2001 From The Economist Global Agenda Evidence is accumulating that growth in all three of the world’s largest economic areas is slowing sharply. And in all three, for different reasons, there are constraints on the use of a traditional weapon for fending off recession: interest rates FOR those hoping that the present economic slowdown is a short-lived dip, the persistent drumbeat of depressing data is disappointing. Last week saw the publication of gloomy numbers in Japan, the eurozone and, most important of all, the United States. Japan’s immediate plight is most serious, since policymakers there seem to have no idea how to stop their country from drifting back into recession. But in Europe, too, official growth forecasts have been cut in the past week, while America’s central bank, the Federal Reserve Board, noted that US economic activity was “little changed or decelerating”. The private forecasters polled regularly by The Economist have steadily been cutting their predictions of this year’s global growth. In Japan, where, after a decade of stagnation, economists have almost become inured to bad news, the release of first-quarter GDP figures still managed to disappoint. They showed that the economy had shrunk by 0.2% since the previous quarter. Japanese GDP figures are notoriously erratic; but on this occasion, few observers seem to doubt that the economy is hovering close to recession. Businesses are still cutting their investment plans, export volumes are declining in face of slowdowns in other countries, and surveys indicate that Japanese consumers have no plans to go on a spending splurge. So it seems likely that second-quarter GDP will also shrink. That implies that, for the fourth time in a decade, the economy will meet the technical definition of a recession (two successive quarters of negative growth). Will anything wake Japan? The ability of the central bank, the Bank of Japan, to respond to this slowdown by cutting interest rates faces the most obvious of obstacles: rates are already virtually at zero. Nevertheless, the Bank’s announcement on June 15th that its monetary policy remains unchanged was criticised by politicians as insufficient. Many politicians want the Bank, in effect, to print more money by buying more government bonds, or by “unsterilised” intervention in the foreign-exchange markets (ie, issuing yen to buy dollars and not mopping them up through sales of government bonds). The Bank has long argued that, for monetary policy to be effective, the government will need to deliver its promised structural economic reforms, allowing loss-making companies to go under, and freeing banks of the burden of lending them yet more money that will never be repaid. Europe’s predicament is much less frightening. But there too, evidence is mounting that output growth is slowing. The European Central Bank (ECB) has cut its forecast for eurozone growth this year from a 2.6-3.6% range in December, to 2.2-2.8% now. On June 14th it gave warning that unfavourable developments in the “international environment” could make even that forecast too sanguine. It also faces a monetary-policy dilemma: that, while the slowing euro-economy suggests it should be cutting interest rates, its mandate is to keep a lid on inflation. Eurozone price-rises are now well above the ECB’s target range of 0—2%. Figures released on June 18th showed eurozone inflation at an annual rate of 3.4% in May, up from 2.9% in April. Among the biggest fears of both European and Japanese policymakers is that America’s slowdown turns into a recession. There the evidence continues to be inconclusive. Figures published on June 15th showed that industrial production fell by 0.8% in May, leaving it 2.8% lower than in the same month last year, and that the use of industrial capacity—at just 77.4%—was at its lowest level since 1983. Manufacturing industry has suffered acutely from the drop in demand in many parts of the economy. Falling demand means falling order books and rising inventories, which generally lead to production cutbacks and layoffs. The high-tech sector has also found the past year or so a particularly painful experience. Yet, confusingly, the American consumer has carried on spending throughout the slowdown. Consumers tend to respond to surveys of confidence in a downbeat way; on June 15th, the consumer-sentiment index produced by the University of Michigan again edged lower (from 92 in May to 91.6, still above the 88.4 recorded in April). But they have not been keeping their wallets closed or leaving their credit cards at home. Consumer spending is an important part of economic activity in America, so retail therapy has helped the economy, so far, to avoid all-out recession. Perversely, too, America’s energy crisis has turned out to have a silver lining for the economy. High energy-prices might have contributed to the downturn in the first place. But they have also triggered substantial new investment in oil and gas pipelines, refineries and generating capacity. All this means new orders for some sections of manufacturing industry and new jobs in the energy industry itself. So the Federal Reserve faces difficult judgments. It has certainly used its policy tool—interest rates—aggressively this year. Rates have been cut five times, on two occasions in between regular meetings of the Fed’s main policymaking body. This body, the Federal Open Market Committee, is due to meet again on June 26th-27th, when it is still expected to announce a further rate cut. This assumes that, as the Fed likes to put it, the risks in the economy are still geared towards further economic weakness. But, like the ECB, the Fed is also preoccupied with price stability, and on June 15th, the publication of the main gauge of American inflation showed that it had risen more than expected in May. The Consumer Price Index rose 0.4% in the month, and was up 3.6% on a year earlier (though “core” inflation, excluding food and energy costs, was up by only 2.5%). The Fed’s chairman, Alan Greenspan, said this month that he thought America’s inflationary pressures were likely to remain subdued for some time. But he also knows that there will come a point at which the balance of risks shifts. It is notoriously difficult for central bankers to pinpoint the moment when this shift occurs, and the Fed has often overshot in the past. Since 1980, on most occasions when the Fed has loosened monetary policy by cutting interest rates, prices have subsequently risen. There is no reason to think Mr Greenspan and his colleagues will pick their moment any better this time. UNQUOTE

To: TobagoJack who wrote (5039) 6/19/2001 2:07:30 AM From: TobagoJack   Respond to of 74559   The artillery bombardment of the red clan field HQ area starts in the early dawn ... news.ft.com QUOTE Five reasons for gloom about global growth Policies adopted by governments are doing more to exacerbate than to remedy current economic difficulties Published: June 18 2001 18:59GMT | Last Updated: June 18 2001 19:05GMT The growing prospect of a global slowdown will be the story of coming weeks. But what sort of story? Many of the financial media are treating the downturn as a pure fable of markets, company earnings and business personalities. On Friday, for example, as the Nasdaq completed its worst week so far this year, American press and television commentators concentrated on delivering post-mortems of Nortel's job losses and on assailing General Electric's chairman Jack Welch for failing to build rapport with the European Commission. On the surface, this focus on the tickertape may seem to make sense. Internet stock prices were too high. Company forecasts and profits do underlie market movements. But underlying those forecasts and profit reports there is another, even more important force. It is policy, as promulgated by governments. Every time governments change policies, they also reset the curve of global growth, if only by an increment. "Markets are mirrors of policy and not the other way around," says Brian Wesbury, an economist with Chicago-based Griffin, Kubik, Stephens and Thompson. And there is a strong case to be made that the past month has delivered some very damaging policy news. The case is a free market one: anything that gets in the way of growth is deemed to be negative. Not everyone will agree with it. Still, if growth is our paramount goal, we can count at least five policy events that spell trouble, no matter how unrelated they appear. Start with the street protests over President George W.Bush's opposition to the Kyoto treaty. These seemed, in the US perception, to ratify European leaders' disapproval of the Bush opposition. Overall, it is becoming increasingly clear that both sides must gird up for lengthy battles and that, in turn, some form of co-ordinated regulation on greenhouse gas emissions that includes the US is likely be forthcoming. Since everyone from European Union authorities to Japanese carmakers believes such global regulation will slow the growth of companies and economies, this is bad news. The second cloud on the horizon is the decision by European commissioner Mario Monti to block the giant GE and Honeywell merger. When it became clear that the marriage would not win Mr Monti's blessing, US television focused on damage to Honeywell's stock price and its "ripple effect". But last week's GE-related equities downturns were not merely about "markets catching a cold". Even if we allow that Mr Monti's action in this instance is one that promotes efficiency, the precedent he set will disturb those who had viewed Europe as a new growth frontier. Mr Monti is signalling that unified Europe will use its gatekeeping power aggressively - even more aggressively than US antitrust authorities. In other words, in the new global economy there will be more second-guessing when companies seek to rationalise, rather than less. This is especially bad news during a downturn, when companies need extra leeway to navigate, not extra regulation. The third blow was the recent UK election. Coverage of this story has focused on the Labour landslide, or the boost it gave to the political future of certain competitors of William Hague, the outgoing Conservative leader. Pundits across the political spectrum insist the election was not a referendum on economics. But these observers missed two facts. The first was that neither party put forward a coherent plan to boost the UK's relative competitiveness. UK prime minister Mr Tony Blair and Gordon Brown, his chancellor of the exchequer, yesterday rushed to rectify this with a "competitiveness programme" that included a valuable plan to slash the tax on capital gains. But the victory of pro-Labour Europe increases the likelihood that relatively free-market Britain will allow itself to be absorbed by a less freedom-oriented continent. The fact that sterling did not jump for joy yesterday at Mr Blair's good news showed how markets remained concerned about the Europe factor. Fourth in the gloomy landscape is the disappointment of Junichiro Koizumi, Japan's new prime minister. Mr Koizumi was a relatively unknown quantity at election time - hence the early obsessive attention to his coiffure. But observers hoped he would back monetary or fiscal shock therapy for Japan's paralysed economy. But it has become clear that Mr Koizumi will merely deliver more of the same old austerity. The key, he has even said, "will be whether the government can persuade the public to bear the pain". He may still surprise the world and rescue Japan but his behaviour to date suggests to free marketeers that the likelihood that Japan will stall the global growth engine has increased. The fifth cloud in the sky is the changeover in the US Senate. It cost the Bush administration 1½ years (the period before the next congressional election) in which it might have energetically pursued pro-growth measures. With a Democratic Senate, the Bush team is forced to make anti-growth concessions such as its recent decision to seek protection for steel producers. Not everyone, not even all the free marketeers, would agree on my five points. One could also make my argument from the left, where the goal, instead of growth, might be social equity or environmental regulation. From that vantage point, things have just become rosier. The point here, though, is that neither side is absorbing the policy lesson. Thus far, Congress's sole response to the downturn has been to hold hearings bashing technology stock analysts, as if spanking the industry will push internet stock prices back up. While these bulls failed us, we also failed ourselves. In economics, as in life, you find wisdom only if you look for it. UNQUOTE

To: TobagoJack who wrote (5039) 6/19/2001 2:07:38 AM From: TobagoJack   Read Replies (1) | Respond to of 74559   Special forces of the Green Tribe sneak across the lines in multiple locales on armed recon mission ... news.ft.com QUOTE Euro-zone inflation jumps as growth outlook worsens By Tony Barber in Frankfurt Published: June 18 2001 19:45GMT | Last Updated: June 18 2001 19:57GMT The euro-zone was hit by disappointing news on two fronts on Monday with annual inflation soaring above 3 per cent and two German institutes cutting their forecasts for German growth. The cocktail of rising inflation and a deteriorating economic outlook creates a dilemma for the European Central Bank (ECB) over whether to cut interest rates. Inflation rose from 2.9 per cent in April to 3.4 per cent in May, its highest level since the euro's launch in January 1999 and far above the ECB's target ceiling of 2 per cent. The core inflation rate, which excludes volatile energy and food prices, rose from 1.9 per cent to 2.1 per cent, breaking the 2 per cent barrier for the first time since the start of European monetary union. "The May data are not welcome," a European Commission spokesman said, adding that headline inflation was unlikely to fall below 2 per cent this year. Julian Callow, economist at Crédit Suisse First Boston, said he expected annual inflation to average 2.8 per cent in the third quarter of this year and 2.6 per cent in the fourth quarter. The ECB said in its June monthly bulletin that it expected inflationary pressures to ease later this year, partly because of the euro-zone's economic slowdown. The depth of the slowdown was underlined by the decision of two of Germany's leading research institutes to slash their growth forecasts for Europe's largest economy. The Kiel-based Institute of World Economics cut its forecast for this year from 2.1 per cent to 1.3 per, and the Hamburg-based Archive of the World Economy reduced its prediction from 2.3 per cent to 1.7 per cent. Both estimates are lower than the German government's latest forecast of 2 per cent growth. Many financial market participants hope the ECB will react to the slowdown, which is spreading from Germany to other euro-zone countries, notably France, by cutting interest rates. But Nigel Anderson, economist at RBS Financial Markets, said the May inflation data posed a considerable obstacle. "It will be very tough for the ECB to explain a rate cut until there has been some clear improvement in inflation," he said. The main factors behind the surge in inflation last month were higher prices for energy and unprocessed foods. However, both the ECB and the European Commission say the medium-term outlook is more reassuring. "Medium-term inflation prospects remain good, particularly as inflationary pressures emerging from the demand side are under control," the Commission spokesman said. The ECB's policymaking Governing Council will meet in Dublin on Thursday but is expected to keep its main interest rate unchanged at 4.5 per cent. All 12 euro-zone countries except Ireland and Italy reported a rise in inflation last month. The highest rates were 5.4 per cent in the Netherlands and 4.9 per cent in Portugal, according to Eurostat, the European Union's statistical agency. Among all 15 EU member-states, only the UK at 1.7 per cent had an inflation rate of under 2 per cent. UNQUOTE

To: TobagoJack who wrote (5039) 6/19/2001 2:07:45 AM From: TobagoJack   Respond to of 74559   The watering hole is poisoned ... and an entire industry is at risk news.ft.com QUOTE Tokyo bars EU report on risk of BSE in Japan By Michiyo Nakamoto in Tokyo Published: June 18 2001 19:46GMT | Last Updated: June 18 2001 19:58GMT The Japanese government has blocked the publication of a European Union report on the potential for an outbreak of BSE, or mad cow disease, in Japan, which continued to import meat and bone meal from the EU until recently. "We have been negotiating with the EU on certain parts of their assessment," an official at the Ministry of Agriculture, Forestry and Fisheries said on Monday. The Japanese object to the assessment method and the use of some data obtained independently by EU officials, he said. The move highlights growing concerns in Japan about the dangers of imported foodstuffs and is being made at a time when domestic beef, which is expensive, faces growing competition from cheaper beef imported from the US and Australia. The Japanese authorities came under fire from consumer groups for dragging their feet over genetically modified organisms. To add to the concerns, StarLink, the genetically modified corn, has been found in corn imported from the US, forcing food companies to pull products off supermarket shelves. The Japanese authorities initially co-operated with the assessment programme of the European Commission's scientific steering committee (SSC) and provided data for its assessment. The committee has concluded that while there is no evidence of BSE in Japan, the risk cannot be ruled out. While the ministry objects to the SSC's assessment, it is one that Japanese scientists appear to agree with. "We believe that the chances of BSE in Japan are very low," says Takashi Yokoyama at the National Institute of Animal Health. Although Japan fed its cows meat and bone meal imported from the UK and other parts of Europe, the amount was very small, Mr Yokoyama notes. However, it is also true that Japan stopped importing meat and bone meal from the UK only in 1996. As BSE has an incubation period of about five years, it is only now that any signs of the disease would start to be detected, he conceded. "Nobody can say there is zero risk," Mr Yokoyama said. The best way to deal with that risk is to inspect cows that die from any disease, a procedure Japan introduced in April. UNQUOTE

To: TobagoJack who wrote (5039) 6/19/2001 2:07:51 AM From: TobagoJack   Respond to of 74559   Red clan fumbling in the dark and grasps on to faulty strategy due to lack of faith for free markets ... news.ft.com QUOTE Power price curbs promised for western states By Nancy Dunne in Washington and Christopher Parkes in Los Angeles Published: June 18 2001 19:30GMT | Last Updated: June 19 2001 03:48GMT Federal regulators on Monday promised relief to electricity consumers in the west and put in place a wholesale "price mitigation" plan for California and 10 other states. With California on alert for rolling blackouts, Curtis Hebert, the Republican chairman of the Federal Energy Regulatory Commission, which met in a special session on Monday, said prices would be brought "under control" but at levels high enough to provide incentives to develop infrastructure. "It is time to stop blaming and start solving problems," he said. However, he took credit for the recent drop in prices, attributing the fall to a plan Ferc put in place on April 26. The Democrats on the commission saw the situation differently. William Massey, another commissioner, said the plan "moves in the direction" he has long advocated and that the lower prices in California were due to a confluence of events including reduced demand and more available hydropower. The Ferc decision came as the first heatwave of the summer swept California and officials warned of the chance of the first blackouts since May. It was reached less than a month after the commission showed the first signs that Washington was ready to relax its opposition to price controls. That shift, limited to days when emergencies were declared in California, was seen as an attempt at political damage control. Although other western states covered by the commission's latest decision face less critical shortages, they have warned of economic damage caused by rising prices. Smelting plants and other heavy power users, for example, have been closed for months because it is more profitable for them to sell power than use it themselves. The plan passed on Monday will bring prices down all over the west, predicted Erie Nye, chairman of Edison Electric Institute. "The ultimate resolution is not to share a shortage. This just stabilises things until more generating capacity comes on line." Ferc had come under intense political pressure from Democrats to impose price caps. Democrats have made political gains portraying the administration as unsympathetic to western rate payers. Senator Joseph Lieberman, new chairman of the government affairs committee, has called all five commissioners to testify Wednesday at a hearing, that will also include California governor Gray Davis. Meanwhile, Republicans are raising up to $25m for an advertising campaign blaming California's energy crisis on Mr Davis. Barry Abramson, an analyst with UBS Warburg, on Monday said that a "soft price" cap, imposed by Ferc, would have little effect on the earnings of wholesale generating companies. UNQUOTE

To: TobagoJack who wrote (5039) 6/19/2001 2:15:15 AM From: TobagoJack   Respond to of 74559   Red clan mortgages the future in last ditch attempt at holding off the barbarian hordes ... nni.nikkei.co.jp QUOTE Skilled, cheap work forces in other Asian nations attracting Japanese firms Enlargement Japanese companies have been shifting production to other parts of Asia to take advantage of the region's cheaper labor costs, ever since the domestic economy began to slump as the yen appreciated sharply in the 1980s. Recently, however, there have been some changes to the type of operations being moved offshore, with an increasing number of firms even transferring research-and-development activities, once considered the epitome of Japanese industrial excellence. Kaga Components Co., a switching-power-unit manufacturer in Tokyo, plans by the end of this fiscal year to build comprehensive manufacturing operations in Malaysia that will handle product development through to production of finished goods. The planned move follows the company's establishment of a production unit in Malaysia in fiscal 2000. "Many major Japanese electric machinery makers have production units in Malaysia. We are being forced to move R&D operations there to supply parts that meet customer needs," a company executive said. Kaga Components thought its biggest challenge would be recruiting skilled engineers, but that proved easier than anticipated. The state of Penang, where the company set up its unit, is the hub of Malaysia's high-tech industry and has a plentiful supply of skilled engineers. Malaysia, China, India and other Asian countries are becoming major providers of skilled labor in cutting-edge industries. According to a survey by the Fuji Research Institute, 1.1 million students enrolled in university or college-level science and engineering-related courses in India in 1998. In China, the number was around 900,000 in 1999. These figures contrast with 280,000 science majors graduating in the U.S. in 1992 and 150,000 in Japan in 1994. It is not only the number of students in these fields in other parts of Asia that attracts Japanese companies, but the quality of the students as well. "The deteriorating quality of science/engineering students is becoming a problem in Japan. The education standards in the field of cutting-edge technologies has been rising sharply in many other areas throughout Asia, thanks to improvements in their education systems," said Takeshi Onoda, a consultant to Mitsubishi Chemical Corp. NEC Corp. plans to hire a total of around 500 software engineers in China and India in the current fiscal year as part of its drive to strengthen its consignment software-development business. The number of new employees in these countries almost matches the company's entire recruitment of recently graduated science and engineering students in Japan this spring. Command of English can be a major advantage when securing tie-ups and cooperation agreements between companies and colleges and universities in the U.S. and Europe. Neighboring Asian countries have an advantage over Japan in this area. Scores in TOEFL, an English language proficiency examination, are regarded as a reliable measure of assessing the level of a nonnative English speaker's ability in the language. When broken down by nationality, the average TOEFL score recorded from July 1999 to June 2000 in China was 559, followed by Malaysia at 535, South Korea at 533 and Japan at 504. Japan may still lead the world in manufacturing but it is beginning to fall behind the U.S., Europe and some Asian countries, such as South Korea, in software development and other information-technology fields. In South Korea, former researchers at major local companies and returnees who studied in the U.S. have been thriving in Internet-related businesses. A Net go-between business in Seoul has been receiving an increasing number of inquiries from Japanese companies seeking to establish contact with South Korean Internet venture companies. These Japanese companies are especially keen on teaming up with IT ventures that have settled along Teheran Road in the new urban area of Seoul. According to the president of the go-between company, Japan leads South Korea in cellular-phone-related technologies but South Korea is ahead of Japan by two to three years in the area of Internet technologies. One of the major factors that created the Net technology gap between Japan and South Korea is the difference in the development of telecommunications infrastructure in the two countries. In South Korea, digital subscriber line services have a 2.8-million subscriber base, but the number is just over 100,000 in Japan. In South Korea, aggressive competition among telecom companies and strong support of the government have quickly made DSL popular. In contrast, DSL services did not take off until recently in Japan because Nippon Telegraph and Telephone Corp., which has an overwhelming influence on the country's telecom market, had been pushing the integrated services digital network (ISDN), which offers a much slower data transmission speed. Japan is also lagging in Internet penetration. Despite the government's declaration that it will work toward making Japan an IT superpower, only 20% of Japanese people report regular access to the Net, far below the 30-40% range for Singapore, South Korea and Hong Kong. With the declining standard of science and engineering education and the slow progress of deregulation, some experts now worry that Japan's standing in the industrial world will begin to decline unless immediate action is taken. UNQUOTE

To: TobagoJack who wrote (5039) 6/22/2001 8:42:12 PM From: TobagoJack   Respond to of 74559   Hi Jay, nothing to worry about concerning the red clans savings rate, as long as one can treat appliance and SUV purchases as an investment ... economist.com QUOTE Economics focus Saved! Jun 21st 2001 From The Economist print edition Are the finances of American consumers in better shape than people fear? IS IT a bird? Is it a plane? It is not even Superman who has, so far, saved the world’s largest economy from sinking into deep recession, rather than merely slowing down. The hero has been the American consumer, who has carried on spending—albeit at a slowing rate of growth—in defiance of many predictions. Most forecasters expected worse because of a sharp decline in America’s “savings ratio”, which measures savings as a percentage of personal income. The ratio, calculated from national accounts data, turned negative last year and is now -1.3%, suggesting that people are spending more than their after-tax income. In the 1970s and 1980s the savings ratio averaged over 9%. It has turned negative only once before, during the Great Depression. Economists feared that consumers believed that share prices would go on rising for ever, and that capital gains on shares were making saving unnecessary. As share prices tumbled, by this reasoning, consumers would sharply increase their saving—reducing consumption and so wreaking havoc on the economy. Yet in practice, the negative “wealth effect” of falling shares has been remarkably muted, at least until now. Some new studies suggest why that might be. Martin Barnes, of the Bank Credit Analyst, a newsletter, argues that the savings ratio is flawed and its fall an illusion. Measured correctly, he says, saving has been strong in recent years. As it is now calculated, the ratio takes into account taxes paid by individuals when they realise a capital gain from selling shares, but ignores the increase in income when the capital gain is banked. This could be corrected by adding back the tax, which would have increased the savings rate by 1.8 percentage points last year, pushing it into positive territory. Or it could include realised capital gains in full, amounting to fully 6.7% of personal income last year. Pension-fund benefits are not treated as income, either. But contributions to personal pensions by employers are. Thanks to the stockmarket boom, many firms have been able to take a “pension holiday”. The addition to the income side of the savings ratio thus seemed lower, at a time when pension benefits (the money consumers actually had to spend) were rising strongly. Adjusting for this would have added three percentage points to the savings ratio last year. Mr Barnes also argues that spending on consumer durables, such as cars, should be treated largely as investment, not consumption. For accounting purposes, their cost should be spread over several years, just as the cost of a company’s new machinery is depreciated over time. Consumer spending would have been $233 billion lower in 2000 had durable purchases been depreciated over ten years. That adds 3.3 percentage points to the savings ratio. All told, the ratio may have been as high as 13.9% last year (if capital gains are included), or 7.8% (if only gains tax is added back), compared with an average in the 1990s, similarly adjusted, of 12.7% and 9.9% respectively. A new study by the Federal Reserve takes another tack*. Analysing financial flows data (the financial counterpart of the national accounts) and the Fed’s survey of consumer finances, it found that between 1992 and 2000, the savings ratio of the richest fifth of households, which owned four-fifths of shares held directly by individuals, had dropped from 8.5% to -2.1%. But households in the middle fifth of the income distribution slightly increased their savings ratio, and those in the poorest two-fifths almost doubled theirs, to over 7%. In short, many of the worst-off consumers actually improved their finances during the 1990s. Only the richest fifth slashed their saving, though even this may be overstated: the Fed study does not include realised capital gains in its savings ratio. This suggests that any fall in share prices may affect only the consumption of the rich. The bulk of Americans own few shares, and thus have little sensitivity to stockmarket changes. Indeed, so far, there seems to have been little impact on consumption from the $3.4 trillion decline in household wealth, over the year to March 2000, that was caused by the fall in share prices. An argument rages inside the Federal Reserve about whether this is because the wealth effect happens only gradually†, or is minimal in the first place‡. Certainly, the rich can afford to react more slowly than the rest of the population to declines in wealth. A survey of “high net worth” families published this week by US Trust, a private bank, found that many are hopeful that share prices will rise steadily later this year, and perform well thereafter, suggesting little need to tighten purse strings. Even in a prolonged bear market, barely half would be at least “somewhat likely” to postpone capital improvements to their homes, or stop buying things like furniture, electronics and expensive clothing. Barely one-quarter said they would be somewhat likely to cut everyday expenses. A bigger threat to consumption than lacklustre shares may be unemployment, which now seems to be rising. Even if consumers have been ignoring the need to save during the good times, they still have something put aside for a rainy day. And that may yet save the economy from catching a really bad cold. UNQUOTE

To: TobagoJack who wrote (5039) 6/22/2001 8:42:25 PM From: TobagoJack   Read Replies (1) | Respond to of 74559   On the horizon, the Green Tribe in formation ... economist.com QUOTE Hard times all round Jun 22nd 2001 From The Economist Global Agenda Companies are continuing to ratchet down investors’ expectations and many have announced another gloomy set of results. This means things could get worse before they get better IT’S THE kind of record that Wall Street notices, although most people would rather forget. Within the next few weeks, more than 1,000 American companies are expected to tell investors that the outlook is gloomier than they once thought, and that profits (if they are making any) will be below expectations for the second quarter. This would smash the previous record, when 935 firms made similar downbeat warnings—and that was for the first quarter of this year. With the continued slowdown in the American economy now being reflected more starkly around the world, companies nearly everywhere are cautious about the future. For good reason: things are likely to get worse before they get better. Once again, technology firms have been hit hard. Nortel, a telecoms-equipment company, set the scene for the latest season of corporate announcements on June 15th with news of a staggering $19.2 billion loss for its second quarter. Since then, the statements by other firms have mostly been disappointing. Chip makers, for one, are facing tougher times as they fail to shift their inventories. On June 20th, Infineon, a big German chip maker, warned that it could lose up to euro600m ($512m) in the second quarter. The following day, shares in Transmeta, a Californian chip maker, fell by more than half when it warned of a slowdown in shipments. As producers of one of the essential components which are nowadays contained in nearly all electronic products, the troubles faced by chip makers indicate the extent of the pain being suffered in the broader technology industry. Personal computer manufactures have for months been engaged in a price war, led by Dell, which has used the downturn to grab market share from its rivals. The price-cutting has since spread to the makers of hand-held computers, such as Handspring and Palm, which are now offering reductions and promotions. A slowing economy makes both consumers and corporate purchasers think twice before they buy new equipment. The productivity gains offered by new models needs to be substantial, but for many potential customers there is still plenty of mileage left in their old PCs, printers and cellular telephones—as well as their cars, cameras and other goods. All that sales sluggishness puts pressure on component producers and sub-contractors. These are now located throughout the world so, to some degree, every region suffers. Stocking up to bust Part of the problem for tech firms is that during the final stages of the industry’s long boom, many were caught out by a components shortage which limited their ability to expand. So many rushed to increase parts inventories and then were caught with too much just as the slowdown hit. Others had secured supplies with long-term contracts, and these are proving just as a big a burden. Both Cisco Systems and JDS Uniphase, two firms which make networking and Internet equipment, have made huge write-downs in the value of their inventories. But it is not just tech firms that are suffering. Morgan Stanley, an American investment bank, has reported a 36% fall in second-quarter profits, although that did beat Wall Street’s already-lowered expectations. Its rivals, Goldman Sachs and Bear Stearns, are also looking at lower income. The cranking down of expectations goes from the high-flying financiers to the producers of basic materials. On June 21st, Germany’s BASF issued a profits warning and said it now expects zero growth in the second quarter. The firm, which is Europe’s largest chemical group, also said it would close 24 sites world-wide. Corporate profits have fallen at a spectacular speed. In the first quarter of 2000, profits among America’s S&P 500 were well ahead of those in the same period a year earlier, according to First Call, a research firm. But in the first quarter of 2001, they were down by more than 6%. For the second quarter, some analysts expect the fall could reach 14-16%. The technology segment of the S&P 500 was clobbered the most: its firms saw their combined profits fall by 40% in the first quarter year-on-year, and in the second-quarter some think the decline could reach 60%. In times of trouble many bosses like to get all the bad news over with as fast as possible. When business turns back up again, companies then appear to be growing quickly, although from a much lower base. Hence some of the lousy results reflect contingencies for restructuring. Nortel’s massive loss is mostly made up of huge restructuring charges due to acquisition write-offs. But even without that, Nortel would have lost $1.5 billion. During the boom years, many firms went on a buying binge and a lot of the firms they acquired—especially dotcoms—are now worth only a fraction of the money paid for them. Because of this, plenty more big write-offs can be expected in the coming months. Whenever the upturn comes, it seems certain that future growth will be less spectacular. During the 1990s, the S&P 500 firms saw their profits triple. They might do well to double their profits in the next decade. One of the reasons is that companies may become more expensive to run. Investors will be more cautious about pouring their money into the next bright idea, which could raise the cost of capital. The decline in the value of share prices has also destroyed many peoples’ paper fortunes. So, companies may have to fork out more cash earlier to attract new employees rather than relying on stock options. In the present sluggishness, however, for an increasing number of firms the more immediate issue remains one of survival. UNQUOTE

To: TobagoJack who wrote (5039) 6/22/2001 8:42:33 PM From: TobagoJack   Respond to of 74559   The heavy artillery is positioned, awaiting "weapons free at will" command ... economist.com QUOTE World economy Stagflation? Jun 21st 2001 From The Economist print edition As growth slumps, inflation jumps WHILE everybody’s attention has been on a slowing world economy, an unwelcome guest has crept in. Inflation in the G7 economies rose to an average of 2.8% in May, up from 1% in early 1999 and the highest for almost eight years. Inflation has edged up to 3.6% in America, from 1.6% in early 1999; and to 3.4%, from 0.8%, in the euro area. A big part of this increase reflects higher energy prices; core inflation rates have risen by less (see chart). The jump in inflation comes with more evidence of a sharp economic slowdown. In the five months to May, America’s industrial production fell at an annual rate of almost 7%. Industrial output in the euro area fell in both March and April. Falling output and rising inflation has spurred talk of a return to stagflation, 1970s-style. That would present a serious dilemma for central banks, especially the Federal Reserve and the European Central Bank (ECB). If they cut interest rates to prevent recession, inflation might rise further; if they raised interest rates to stem inflation, growth would slow. Yet stagflation is far too strong a word. Inflation is still low by the standards of the past 30 years. Forecasts suggest that inflation in America and Europe is likely to drop over the next year. The recent jump in inflation in the euro area, to well above the ECB’s 2% inflation target, was one reason why the bank held interest rates unchanged at its meeting on June 21st. To cut rates too fast would dent its credibility. However, most analysts reckon that inflation will drop sharply in June, opening the way for a rate cut this summer. America’s Federal Reserve next meets on June 26th-27th to set interest rates. Fears that the Fed’s easing so far this year could fuel inflation have driven up bond yields. But Alan Greenspan, the Fed’s chairman, is adamant: “Inflation is not a significant problem at the moment.” One clear concern in America is the sharp jump in the rate of increase in unit labour costs, to an annual figure of 6.3% in the first quarter, compared with a fall of 1.9% in the same period of 2000. This mainly reflects the plunge in productivity growth. However, in the current weak economic climate, firms with lots of spare capacity find it hard to pass on costs, so rising labour costs are more likely to squeeze profits than to push up inflation. Most economists expect the Fed to cut interest rates again next week, but they are split on whether it will by another half-point or by just a quarter. A quick glance at three of Mr Greenspan’s favourite economic indicators suggests that he may favour another half-point cut. The first is the personal consumer expenditure (PCE) deflator, which he believes is a better measure of inflation than the consumer-price index. This has risen by only 2.2% in the year to April. The second is the income measure of GDP. The most commonly quoted GDP figures, based on the expenditure of consumers, companies and the government, show that real GDP grew at an annual rate of 1.2% in the fourth quarter of 2000 and the first quarter of this year. However, Mr Greenspan has said in the past that an alternative “income” measure of economic activity that adds up labour income, profits and net interest payments may be more reliable. In theory, expenditure and income measures should be identical: one person’s spending is another person’s income. In practice, they diverge because of statistical errors. Jan Hatzius, at Goldman Sachs, notes that the income measure of GDP has risen by just 0.2% at an annual rate over the past two quarters. So the economy may have slowed more sharply than the official GDP data suggest. A third measure which Mr Greenspan is thought to watch closely is weekly initial jobless claims, a measure of labour-market conditions. These claims have risen at an annual rate of 50% over the past six months—the sort of sharp increase that has never been experienced before except during periods of recession. The rate of increase has accelerated sharply over the past two months. Three reasons to put your money on a sixth half-point cut. UNQUOTE

To: TobagoJack who wrote (5039) 6/22/2001 8:43:05 PM From: TobagoJack   Respond to of 74559   The red clan is breaking formation, even before the big one goes off ... economist.com QUOTE Corporate profits Where did all the money go? Jun 23rd 2001 | NEW YORK From The Economist print edition The days of bumper profits appear to be over for most companies. Things will probably get worse before they get better THE bad news keeps on coming. On June 15th Nortel, a telecoms-equipment firm, announced the second-biggest quarterly loss ever by a company, of $19.2 billion. This was followed by other miserable revelations, including a 24% decline in quarterly profits at Goldman Sachs. Europe is suffering too. On June 20th Infineon, a German chip-making giant, shook stockmarkets with a warning that it could lose up to euro600m ($512m) in the second quarter. The list will grow as the pre-announcement season hits its stride in the coming weeks. Overall corporate profits seem certain to deteriorate further, even if the American economy rebounds in the second half of this year—and that is a big if. So bad have things already got that when Oracle said on June 19th that it had beaten forecasts by a whisker (even though profits were 83% lower than a year earlier) and Larry Ellison, the software group’s boss, said it “may” have reached bottom, he inspired widespread euphoria—never mind that Mr Ellison has been over-optimistic before, long protesting that Oracle would be immune to the economic slowdown. Profits have fallen at a dramatic speed. In the first quarter of 2000, profits at S&P 500 firms were well up on a year earlier, according to First Call, a research firm (see chart). In the first quarter of 2001, they were down by 6.1%. Analysts expect the fall to be 14-16% in the second quarter. They are now forecasting that profits will start edging up again in the fourth quarter. But judging by the recent spate of profit warnings, that upturn may be postponed until early 2002. There are a few glimmers of hope amid all this bad news. One is that, after a record crop of profit warnings in the first quarter, the pace of negative pre-announcements may be slowing slightly this time round (although the number for the second quarter might still top 1,000). Nor is the picture uniformly dire across the economy. It is true that profits in the technology segment of the S&P 500 fell by 40% year-on-year in the first quarter, and are expected to decline by 60% in the second quarter. But some 57% of the firms in the S&P 500 have actually delivered increasing year-on-year profits in each of the past four quarters, points out Aeltus Weekly, an investment newsletter. It is also possible that analysts may be overdoing the gloom, just as they were too optimistic during the boom. They are expecting lower profits this year than the macroeconomic forecasters are, which is almost unprecedented. Certainly, companies are keen to get as much bad news as they can out of the way now, in the hope of being able to grow rapidly from a low base when the recovery begins. Nortel’s huge loss reflected restructuring charges due to acquisition write-offs—although even without those charges it would have recorded the biggest quarterly operating loss ever, of $1.5 billion. Nortel bought 21 firms between 1997 and 2000. Analysts fret that similar write-offs may await other big high-tech acquirers such as Cisco, with 40 takeovers during the same period; or Lucent, with 23; or Sun, with 21. Massaging the numbers down According to Abby Joseph Cohen, a famously bullish analyst at Goldman Sachs, “profits will remain somewhat gloomier for longer than is justified by fundamentals”, as firms manage their earnings downwards to create growth potential. There are, however, other reasons to expect pessimism to spread even further. For one thing, the economy is continuing to slow—to such an extent that the Federal Reserve looks likely to cut interest rates by a further 50 basis points on June 27th. Industrial output fell by 0.8% in May. Over the past six months, manufacturing output has fallen by 8% at an annual rate. According to Stephen Roach, an economist at Morgan Stanley, having slashed all the technology spending they could, company bosses are now turning eagerly to the most painful cuts of all, jobs. That means unemployment will continue to rise. Even if the economy rebounds in the second half of this year, it may not produce a matching bounce in profits, says Bruce Kasman of J.P. Morgan Chase. That is because the labour market would remain tight, so labour costs, which have been growing at over 6% a year, could continue to rise at an unsustainable rate. On top of this, the inventory correction that has been under way since last summer, as firms run down unexpected increases in stock, still has some way to go. Sooner or later, the business cycle will turn up again. The question then will be how fast profits can grow. It is extremely hard to forecast such things. As Pip Coburn of UBS Warburg points out, in 2000 average analysts’ estimates of profits at the start of the year differed from the actual end-of-year outcome by 20% or more in 62% of cases for technology shares, and in almost one-third of cases for other shares. In earlier years, the experts were just as far off the mark. Yet there are several reasons to think that profit growth may be slower in future than in the gung-ho recent past. First, productivity can be expected to rise at a slower rate than it has done of late. The first-quarter decline in productivity of 1.4% at an annual rate has led most economists to lower their view of likely productivity growth from the miraculous “new economy” rates they had been expecting. This will make it harder for profits to remain immune to rising labour costs. Another factor is the cooking of books. The spectacular growth in profits during the 1990s was partly due to dodgy accounting, which may be less helpful in future. According to Bob Barbera of Hoenig, an investment bank, thanks to the way in which employee share options are treated (or rather, not treated) in the accounts, the stated operating profits of S&P 500 companies rose at a much faster rate than profits measured in the national accounts, which treat option grants as an expense to the firm. Thus, in the 1990s, profits at S&P 500 companies tripled, but profits recorded in the national accounts merely doubled. If companies have to pay employees more in cash than in options in future, which seems likely, their costs will rise and profit growth will probably move closer to the more modest national accounts measure. Technological terrors Worries about future profit growth are greatest in the technology industries, as nobody really knows when capital spending will resume once the current panic is over. Between 1993 and 2000, technology was the first- or second-fastest sector for profit growth in seven out of eight years—but it is likely to be the worst performer this year. Whether technology-industry profits actually grew as fast in recent years as they appeared to do is increasingly being questioned. A recent study by Gary Schieneman, Steven Milunovich and Lisa Liu, all analysts at Merrill Lynch, examined 37 leading technology companies. The study found that accounting properly for options and non-operating expenses reduced the firms’ profits by 25% on average in 2000. Some firms may also have gained higher profits from not making contributions to their pension funds, because the value of the assets in the funds rose with the stockmarket in recent years. All told, accounting changes could have turned profits into losses at Brocade, eBay, Exodus, Juniper, Lucent, Siebel and Yahoo! On the other hand, the figures might have been better than reported at Amazon, Ariba and Nortel, among others. Ultimately, there is no reason to expect that overall profits will continue to grow at a faster rate than nominal GDP, says Josef Lakonishok, an economist at the University of Illinois who has studied long-term trends in profitability. Indeed, after a while, that becomes mathematically impossible. The period in which profits have increased as a share of GDP was drawing to a close even before the economic slowdown, as labour grabbed a larger slice of the pie. Profit increases of around 6% a year may become the norm in future—broadly in line with the speed at which American profits have grown during the past 50 years, says Mr Lakonishok. In the current climate, even that would feel like winning the lottery. UNQUOTE

To: TobagoJack who wrote (5039) 6/23/2001 9:00:29 PM From: TobagoJack   Respond to of 74559   The battle is beginning to cost in terms of income and mass psychology … forbes.com QUOTE Management & Trends Body Count Update: June 22, 2001 445,532 … Edited by Betsy Schiffman, Forbes.com, 06.22.01, 4:25 PM ET The latest casualties of the economic downturn ... Layoffs Since Jan. 1, 2001 1 of 26 Next page UNQUOTE

To: TobagoJack who wrote (5039) 6/23/2001 9:00:35 PM From: TobagoJack   Read Replies (1) | Respond to of 74559   … and in same terms for those ex-tra-special people who thought they were the gods, because they were … forbes.com QUOTE People Dropoffs Penelope Patsuris, Forbes.com, 06.22.01, 12:00 PM ET What's harder to do? Earn billions, or watch them disappear? Forty-six Americans have dropped out of our billionaire club since The Forbes Four Hundred was compiled last August. Check out our photo essay documenting 11 of the biggest falling stars. Ouch! Spectacular Flameouts It was a tough year for some of the country's most prominent billionaires. The 11 featured here lost a total of $21 billion in just ten short months. Click on each profile for more information. ... UNQUOTE

To: TobagoJack who wrote (5039) 6/26/2001 2:21:57 AM From: TobagoJack   Respond to of 74559   Artillery barrage is relentless ... economist.com QUOTE Fighting off recession? Jun 25th 2001 From The Economist Global Agenda The fate of the American economy is under the spotlight again this week as the Federal Reserve’s main policymaking body meets on June 26th-27th. Can the Fed stave off recession? The “R” word. It seems nobody wants to be left out; Japan, America and now Germany, if not the rest of Europe, are all said to be on the brink of recession. But it is the position of the American economy which most excites economists, not least because of its enormous size (more than twice as large as the world’s second-biggest economy, Japan). After an unprecedented peacetime expansion, American economy activity has stalled. The main policymaking body of the Federal Reserve—America’s central bank—meets for a two-day session on June 25th-26th, at the end of which it is widely expected to cut interest rates for the sixth time this year. Attention is focused on the likely size of the cut—a half or a quarter percentage-point—and on its potential effectiveness. And yet many economists now believe that, even if the Fed does cut again, an American recession is now inevitable or, indeed, already under way. The pessimists can point to plenty of disturbing statistics. On May 25th, revised figures showed that American GDP only grew by 1.3% at an annual rate in the first quarter of this year, compared with a previously estimated 2%. (The eagerly-awaited final version of this figure will be published on June 29th). That means that, year-on-year, America grew by 2.5%: not a bad figure, perhaps, except that only six months ago, year-on-year expansion was 5.2%. Worse, industrial production has been falling fast: figures published on June 15th, showed that in April it fell by 2.8% compared with a year earlier. Unemployment is up, employment is down and even consumer confidence has begun to fall. Alan Greenspan, the powerful chairman of the Fed and the man who got much of the credit for successfully managing America’s spectacular growth during the 1990s, has been doing his best to sound reassuring. His reputation, as well as America’s economic future, is riding on the Fed’s ability to reverse the downturn and moderate its effects, before it turns into a full-scale recession. From the first interest-rate cut on January 3rd, Mr Greenspan has signalled his willingness to use monetary policy agressively to counter the sharp slowdown. And although consumer-price inflation remains stubbornly high, the Fed chairman has made it clear in recent weeks that he does not believe inflation is a serious economic risk at present. Most people have taken that as a clear hint that there is room for at least one more rate cut. Recollected in tranquility Mr Greenspan still seems to be hoping for a “soft landing” for the American economy, though for manufacturers the landing has already proved hard enough, as the recent downturn in industrial production has shown. Nevertheless, there is still hope of avoiding an outright recession. A report published this month by the National Bureau of Economic Research (NBER) offers some crumbs of comfort. Not broke yet? The NBER is America’s official recession monitor. Its business-cycle dating committee decides when recessions have occurred and how long they have lasted. Contrary to popular perception, a recession is not defined by the NBER as two consecutive quarters of economic decline. It says that a recession is “a period of significant decline in total output, income, employment, and trade, usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy”. The NBER's latest paper, written by Robert Hall, an economics professor at Stanford University and head of the NBER's business-cycle dating committee, argues that there is not yet enough data to judge whether or not the US has entered a recession, or even to merit a meeting of the committee. Specifically, Mr Hall points out that the contraction so far appears to be limited to the manufacturing sector and has not spread to other sectors of the economy. Neither employment nor real retail sales have yet fallen significantly. In other words, it is still too soon to say. In fact, the jury has not even begun to consider a verdict. Mr Hall notes that the 1990s expansion became the longest in peacetime; if it turns out that the economy continued to expand past January (and, as Mr Hall's paper points out, economic turning points cannot be identified with any certainty until well after they have happened), America will have broken all previous records, even taking wartime expansions into account. That is a tantalising prospect for Mr Greenspan: the right action might still avert recession—though it is probably fair to say that a diminishing number of people think it will. UNQUOTE

To: TobagoJack who wrote (5039) 6/26/2001 2:35:36 AM From: TobagoJack   Read Replies (2) | Respond to of 74559   ... and some good news, and that is ... "but maybe no inflation?" economist.com QUOTE The world economy Caught in the jaws Jun 21st 2001 From The Economist print edition Recession, not inflation, is the biggest risk for the global economy THE world economy is starting to look remarkably, even dangerously, vulnerable. America’s growth seems to have fallen close to zero in the current quarter. Japan has almost certainly slipped into another recession. And although the euro area is still growing, its pace has slowed more sharply than expected. Worse, a nasty complication has emerged: just as growth has slumped, average inflation in the big rich countries has gone up to its fastest rate for almost eight years, kindling fears that stagflation, the disease that spread around the globe in the 1970s, may return. If it did, the task of central banks would be a lot tougher: rising inflation would cramp central banks’ room to cut interest rates to ward off recession, and could even force them to raise rates. But fears of inflation are exaggerated. Recession remains by far the bigger risk. Over the past couple of decades, a slump in the United States has usually been offset by a boom in Japan or Western Europe. It is alarming, therefore, that the three big economies should now all be slipping at the same time. Moody’s estimates that, in the three months ending May, the total industrial output of America, the EU and Japan fell by 0.5% on a year earlier, compared with annual growth of more than 6% the previous year. This is the sharpest-ever dive for industrial growth rates within a 12-month span. If (a big if) consumer spending remains resilient, America’s economy may yet escape a recession, defined as two consecutive quarters of falling GDP, but the risk of one remains high. Industrial production fell in May for the eighth straight month. Earlier hopes of a strong recovery in the second half of this year are now fading. The slump in corporate profits and investment (see article) suggests worse news to come. Initial jobless claims, the most timely measure of labour-market conditions, have risen at an annual rate of 50% over the past six months, a pace that in the past has been seen only in recessions. Yet American inflation also rose in May, to 3.6%, and the bond market is betting it will rise further. Long-term bond yields seem to have been driven up by fears that the Federal Reserve’s interest-rate cuts may have gone too far. Meanwhile, Japan’s GDP unexpectedly fell in the first quarter of this year, and the current quarter may prove weaker still. Inflation, on the other hand, is certainly not Japan’s problem. On the contrary, it is suffering from an even deadlier complaint: deflation, which swells the country’s huge real debt burden and further discourages spending. By comparison, the euro area looks relatively healthy. But for how long? The recent slide in industrial production suggests that GDP growth in the euro area has slipped below its long-term potential rate of around 2.5%. Awkwardly, though, consumer-price inflation in the euro area too has jumped, to 3.4% in May, well above the 2% upper limit of the European Central Bank’s inflation target. Does that mean the ECB should continue to hold off from cutting interest rates? No. If growth in Europe has fallen below potential, it should cut them again. Nor should the Fed be put off by higher inflation (or by the views of the bond market) when it holds its next policy meeting on June 26th-27th (see article). It would be right, rather, to keep cutting rates. The return of stagflation may make catchy headlines, but today’s situation is not like the 1970s, when a jump in oil prices pushed inflation to double-digit levels. Average inflation in big rich countries was still less than 3% in May. They have not entered a recession with such low inflation since 1960. The pick-up in inflation may indeed complicate the task of central bankers, but it has not been anywhere near big enough to stop further interest-rate cuts if output continues to falter. A lot of hot air about inflation One reason not to fret unduly about the recent rise in inflation is that most of the increase has been due to higher prices of energy and, in Europe, to higher food costs as a result of BSE and foot-and-mouth disease. So far, such rises have not fed through significantly into other markets. The core rate of inflation, excluding food and energy, has risen, but it stands at a more modest 2.5% in America and 2.1% in the euro area. Second, inflation is a lagging indicator, which usually continues to rise through the early stages of recession and then falls as more slack is created. Because of lags in the operation of monetary policy, central banks have to think about future, rather than current inflation. The good news is that, unless energy prices continue to soar, which looks unlikely, inflation in both America and Europe is likely to fall over the next year. That is why the ECB was right to cut interest rates by a quarter-point in May, to 4.5%, despite rising inflation. It also means that it is safe for it to cut rates again this summer. Fears that the Fed’s rate cuts this year have been too aggressive are equally flawed. According to an index calculated by Goldman Sachs, overall financial conditions in America have hardly eased at all this year. The cuts in short-term interest rates have been almost entirely offset by higher bond yields, a stronger dollar and lower share prices. That means that any economic recovery (and hence inflationary pressures) is likely to be weaker than generally expected. Another reason why inflationary pressures should remain subdued in America is that overinvestment during the bubble era has left lots of excess capacity. Firms lack pricing power, so a jump in the costs of energy or labour will tend to squeeze profits rather than spur inflation. Falling profits will then force firms to cut other costs—jobs as well as capital spending—which will further reinforce the slowdown. Global capacity utilisation is close to a 15-year low. In such an environment, lower interest rates are less likely to push up inflation. Inflation will become a problem only if economies rebound strongly. As labour and product markets grew tighter, the Fed might then have to raise interest rates. But that would not matter if the economy were motoring along briskly. So long as the economy remains weak, inflationary pressures should subside on their own. Because of lags in monetary policy, there is always a risk that central banks end up easing too much, nudging up future inflation. But that risk remains small compared with the potential cost of a deep world recession. UNQUOTE

To: TobagoJack who wrote (5039) 7/5/2001 8:04:05 PM From: TobagoJack   Read Replies (2) | Respond to of 74559   I tried to find some positive news, as instructed by MeDroogies, but failed, unable to pull my eyes away from words like "Relentless" ... doesn't look so good for the red clan at the moment cbs.marketwatch.com QUOTE AFTER HOURS Relentless warnings from tech titans Advanced Micro, EMC outlooks wrack evening investors By Nicole Maestri, CBS.MarketWatch.com Last Update: 6:38 PM ET July 5, 2001 NEW YORK (CBS.MW) -- Corporate America's stream of earnings warnings showed no signs of letting up Thursday evening as chipmaker Advanced Micro Devices and data-storage giant EMC both warned that their second-quarter results would be well short of Wall Street's expectations. AMD, the second-largest chipmaker after Intel, said its sales were hurt by weak demand for its flash-memory devices and competitive pricing. As shares of AMD slid 16 percent, shares of rival Intel (INTC: news, msgs, alerts) fumbled 4.2 percent as the second-most active stock on the Island ECN. Watch video brief. Data storage giant EMC said second-quarter results were hampered by the global slowdown in IT spending, and its shares tumbled 16 percent. That spelled trouble for shares of data storage-related companies, with Sun Microsystems (SUNW: news, msgs, alerts) off 2.7 percent, Brocade (BRCD: news, msgs, alerts) down 7.2 percent and Network Appliance (NTAP: news, msgs, alerts) sliding 8.4 percent There was more negative news from the sector, as Tekelec, a provider of telecommunications signaling equipment, lowered its second-quarter earnings expectations. The company said it experienced an unanticipated number of customer order delays and postponements at the end of its quarter. Elsewhere, BMC Software said its preliminary first-quarter numbers were below previous expectations, as it failed to close some deals. See full story. Rounding out the session, there was a warning from winemaker Robert Mondavi and coffee retailer Starbucks reported June same-store sales. Marconi's warning put a drag on the broader markets in trading Thursday, fueling concern that the European market can't offer any safety from the plunge in U.S. capital spending. Both the Nasdaq and the Dow felt the heat of the negative news, trading 2.8 percent and nearly 1 percent lower, respectively. Read Market Snapshot. Advanced Micro Devices Advanced Micro Devices (AMD: news, msgs, alerts) reported its earnings will total 3 to 5 cents a share, well short of analyst expectations of 27 cents a share. Sales for the second quarter ended July 1 are expected to drop 16 percent from the year-ago period to $985 million, short of its target of $1.08 billion. AMD lost $1.12 to close at $28.64 on New York Stock Exchange volume of 6.25 million shares and traded at $24.05 in evening action.Read full story. EMC Data storage company EMC (EMC: news, msgs, alerts) said second-quarter earning per share will be 4 cents to 6 cents, with revenue of roughly $2 billion. Analysts had been expecting earnings of 17 cents per share, according to First Call's consensus estimate. The company said its results were being hit by "each unanticipated downward step in the global economy." EMC, which is due to report final results July 18, said it won't comment further on the quarter until then. Read full story. Shares closed down $1.59, or 5 percent, at $30.03 ahead of the report and backtracked to $25.36 in the third market after hours. Marconi U.K.-based telecom-equipment maker Marconi (MONI: news, msgs, alerts) issued an earnings warning on Wednesday. The company said that its profits would fall 50 percent, saying it faced a collapse of sales in Europe in the second quarter of the year, compounding the impact of the slowdown in the United States. The telecom equipment maker also said it will cut 4,000 more jobs on top of 4,000 already cut this year, leaving a work force of about 45,000. See full story. Shares closed down 52 percent at $3.35 on the Nasdaq but rose to $3.37 after hours. BMC Software BMC Software (BMC: news, msgs, alerts) said preliminary first-quarter pro forma net income is $15 million to $20 million, or 6 cents to 8 cents a share, on revenue of $338 million to $345 million. BMC had expected per-share earnings of 11 cents to 14 cents and revenue 3 percent to 5 percent higher. The software company said it failed to close some deals that it expected to close during the quarter. Shares closed down 63 cents, or 2.9 percent, at $21 and slipped to $20 in third-market trading action. Read full story. Tekelec Tekelec (TKLC: news, msgs, alerts) lowered its second-quarter earnings expectations after the closing bell Thursday, saying it experienced an unanticipated number of customer order delays and postponements at the end of its quarter. The Calabasas, Calif.-based company now sees second-quarter earnings per share between 2 cents and 3 cents, excluding merger charges. Analysts had been expecting earnings of 16 cents per share, according to the consensus estimate of analysts polled by First Call/Thomson Financial. The provider of telecommunications signaling equipment now sees revenue between $70 million and $71 million, down from prior expectations of $88 million to $90 million. Shares closed down $1.50, or 5.7 percent, at $24,85 ahead of the report and slipped $3.84, or 15 percent, to $21 on the Island ECN. Starbucks Same-store sales at Starbucks Corp. (SBUX: news, msgs, alerts) rose 3 percent for the June period that ended July 1. Net sales spiked 19 percent to $259 million thanks to the opening of 934 new stores. Starbucks opened 644 new units in North America and 290 international stores. Shares of Starbucks closed Thursday down 7 cents to $21.92 ahead of the monthly sales report and slid 67 cents to $21.25 on the Island ECN. Starbucks shares have traded in a 52-week range of $25.66 to $17.28. Robert Mondavi Winemaker Robert Mondavi Corp. warned that it expects a slowdown in earnings growth during 2002 because of a weaker premium wine market. Mondavi (MOND: news, msgs, alerts) said it expects to grow earnings at 13 to 15 percent during 2002, down from the Oakville, Calif., company's earlier estimate of 16 to 18 percent growth. Adjusted earnings per share in its first quarter are expected to be equal to last year's adjusted earnings of 70 cents a share, the company said. Wall Street analysts currently expect Mondavi to report a first-quarter profit of 77 cents a share on average. However, Mondavi reaffirmed previous earnings expectations for the fourth quarter and fiscal 2001, of 71 cents a share and $2.95 cents a share, respectively. Both figures match the consensus of analysts polled by First Call/Thomson Financial. Read full story. Shares closed down 80 cents, or 1.9 percent, at $41.10 and slid $3.10, or 7.5 percent, to $38 after hours. Nicole Maestri is a reporter for CBS.MarketWatch.com in San Francisco. UNQUOTE

To: TobagoJack who wrote (5039) 7/14/2001 9:36:39 PM From: TobagoJack   Respond to of 74559   The Arena is quiet now. The upward momentum is a fond memory of the Red Clan and the downward spiral a fresh nightmare of the Green Tribe. According to the latest Barron’s, a news weekly I used to read in a state of excitement from cover to cover and word for word, the stock indices that mattered to the world have averaged only modest gains since the middle of 1998. interactive.wsj.com <<The Dow, which closed Friday at 10,539, rose an average of 7% a year in the three years that ended in June. The S&P 500, now 1215, fared worse, climbing almost 4% per year, and the Nasdaq, which finished the week at 2084, advanced by less than 5% annually, trailing supposedly boring bonds. Measured by the Lehman Brothers Aggregate Bond index, bonds were up an average of 6.25% in each of the past three years.>> The case for stocks now appear clearly defined but as yet not settled. The bull case, hitched to a battle cry of “we have bottomed” says (a) Fed is ready to ease, (b) interest rate is low, (c) taxes are reduced, (d) consumer are still buying, (e) investors seem optimistic, (f) money market funds are flush, and (g) real estate markets remain firm. The hope is that, since we are at the bottom, then better get ready to go up. The bear case, garnished with inflation spice, deflation sauce, and explosive credit-blowup pepper, says (a) profit estimates falling, (b) dollar strong, (c) employment weakening, (d) economy slowing, (e) capex spending weak, (f) slowing overseas economies and markets, and (g) balance sheets are weak. The outlook is simple and straightforward: regardless of inflation or deflation, the recession is on, now, and matters can deteriorate fast because (a) future profits can disappear altogether, (b) past profits will be restated down, (c) dollar weakening will cause different and no less critical problems, (d) the economy is piling on more debt without equity backing, (e) further weakening corporate and private balance sheets, (f) credit market, minus equity backing, will seize up, (g) capex, less debt backing, has neither the motivation nor the power to recover anytime soon, (h) overseas economies and financial markets are on the verge of domino-chained and un-choreographed implosion, (i) US tax cuts will do nothing as it simply reduces government surplus which isn’t there in any case, and most importantly (j) there is no political leadership in sight anywhere, and finally, (k) Pezz’s cheap oil will obviously not saved this day. The world hangs at the edge of the precipice, holding on to the US consumer’s weakening hands. The brave J6P consumer is being pulled to the edge of the precipice, and, at the very edge, when he sees clearly the depth of the abyss, thinks about the number of years or months or weeks he has left to remain productively employed voluntarily or otherwise, when he reflects on his emptying wealth nest and look in the faces of his family, will panic and will let go of those hands, even if he has to cut off his own arms to do it. Panic always comes at the end, wildly, and with full conviction. There are several species of animals in the Arena: (a) the bulls hanging on at the edge, (b) J6P being hung on to at the edge, (c) the bears nudging J6P every-now-and-then with a helping hand, (d) the intended survivors either running away or already positioned to watching the drama through scopes attached to rifles, and (e) the governmental, financial and media cheerleaders urging the J6P to not run away or, better still, to transform themselves into willing or unwilling bulls. The choice is ours to make, explanation to others is not needed, and consequence is ours to bear, alone with our families. No blames, no tears, and no leaving the game where we did not make the rules and no longer understand the logic. Considerations such as heroism, macho-ness, nobility, humanity, nationality, ethnicity, creed, and religion are meant for other decisions. The game theory of risk vs. reward is our guide, financial survival followed by prosperity is our objective, and fun is the goal. Now I sit myself down to do this … planetunreal.com … and I feel better already, with the game map setup downloading, soon to be equipped with rockets, shielded in armor, and bathed in blood of another. Oops, no, no, get out of the way Maurice! … stop the machines, stop the machines! planetunreal.com … oh, oh, I hope you got out of killing range in time … planetunreal.com Um, now, I wonder who that nameless soul used to be … planetunreal.com Chugs, Jay

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