THE INTERNATIONAL FORECASTER August, 2002 ( 4 ) Part 2
Moody's has downgraded the state of North Carolina's General Obligation rating to Aa1, from Aaa, affecting $3.5 billion in long-term debt. The outlook for the state is stable. Of course, the state blames everything but its own shortcomings. They are adverse economic and fiscal events, legal judgments related to tax policy, costs for hurricanes and floods, the recession and the stock market bubble. Their problem, like that of many states, is that incompetents run the state. Their answer is a sales tax increase and a lottery. Why don't they try cutting expenses? Or is that politically unacceptable?
The unemployment rate was 6.8 per cent in June. The Rainy Day Fund was drawn down from $522 million in 1999 to $125 million at the end of fiscal 2002. Reserves over the last four years dropped from $445 million to a deficit. Tax collections for fiscal 2000 were $141 million below budget. There has been three years of deficits and the state refused to come to grips with the problem. The shortfall was almost $600 million in fiscal 2001. What were these people thinking about? The economy is going deeper into recession and they want to raise taxes and get their citizens to gamble. Almost every state is in the same fix and we have at least another 2-3 years of recession or depression coming.
Preliminary indications show that mutual fund investors probably pulled $50 billion more out of funds in July than they invested. This would easily exceed the record withdrawal of $30 billion in September 2001. $50 billion would represent 1.6 per cent of fund industry's stock assets. The loss was $18 million in June. In July, investors added a net $30 billion to bond funds and $60 billion to money market funds.
Socialism and Marxism have been shown to be failed systems of government and economy, but those lessons were apparently lost on the majority of Californians. Moscow in the west trudges on to disaster. Governor Gray Davis, another Jerry Moonbeam, signed a $3.5 billion increase in workers' compensation benefits, after rejecting a virtually identical bill three times as a job killer. He also signed a bill on greenhouse gas emissions from cars and trucks, which will mean higher auto costs for everyone in America. He previously rejected that as well. Mr. Davis wants to get reelected so he'll sign just about anything for environmentalists, labor unions and trial lawyers, liberals all. He will next sign legislation mandating binding arbitration in disputes between farm workers, most of whom are illegal aliens, and growers. He will also sign a bill allowing local governments to develop their own labor laws, such as living wages or that business hire only union workers if it wants government contracts. Soon the People's Republic of Santa Monica Senator Sheila Kuehl, from the home of Hanoi Jane, will pass a bill to force nearly every business in the state, no matter how small, to offer paid family leave. Paying workers for not working while breeding will cost businesses $2 billion a year. Trial lawyers want to limit confidential lawsuits, a way to guarantee more litigation and longer trials. They want expanded rights to sue health plans and require employers to retain two different accounting firms and a rule that if companies offer severance pay to any worker they must offer it to all workers. Then there are the Native Americans, a misnomer, bill to block development by designating sacred tribal sites on either public or private land. The legal precedent will be oral Indian history. This bill would be anti-development and pro-racial identity. There will be no George A. Custer monuments in California. These decisions are the product of the flower children of the 60s and 70s. A whole generation, at least in California, virtually destroyed - at least mentally. All this as the state economy is overrun by illegal aliens who have become objects of worship, a budding recession and a structural state budget deficit of some $50 billion over the next five years. How's that for irresponsibility? Wait until the inmates of this asylum see the tax increases after the election. There has been an exodus of middle-class whites over the last 13 years, which will now accelerate. Businesses can't move fast enough. Our sage advice is if you live there sell your house and move out. You soon may be stuck there in what is becoming a foreign land.
Big business and big labor continues to champion unbridled illegal immigration, irrespective of the ultimate consequences. Legacy never enters their mind, only profits. There is ample evidence that Americans derive no net benefits from mass immigration legal or illegal, which means there is no argument for amnesty. Illegal aliens are taken advantage of by employers who are loath to pay minimum wages. These poor souls become virtually indentured slaves. Even if increased immigration were in America's interest, which it is not, it is disgraceful to prefer those who have deliberately broken our laws to those who do the right thing and follow the procedures we have set. We need reinforced border enforcement and criminal prosecution of business and labor who hire illegals. Our government is supposed to enforce our laws and protect us from illegal immigration and they refuse to do it. Remember that when you vote next time.
The Idaho, Washington and Texas Republican Parties have petitioned Congress to remove us from the UN. That is reflected in the American Sovereignty restoration Act HR 1146. Let's get behind this and get a similar bill going in the Senate.
The UN Security Council's new Counter-Terrorism Committee (CTC) is trying to achieve on an international scale what measures like the Patriot Act are doing domestically, and that is expand the reach and power of government in the name of fighting terrorism. The consequence for Americans is dire indeed. It is our opinion that the Patriot Act and the formation of the Fatherland Security Department are outgrowths of compliance to UN CTC mandates. Don't forget both these acts were formulated prior to 9/11. Napoleon Bush is behind this measure with full force despite phony occasional outbursts of anti-globalism. That is just to keep conservatives happy. There is absolutely no question we live in a police state that will eventually be run under UN mandate. We are being taken over piecemeal so Americans don't notice what is happening to them.
Our president is spending hundreds of billions of dollars on new wars, but refused to adequately fund veteran's health care. In fact he vetoed a proposed $275 million emergency package to help the VA over the financial hump. As a result most local health care systems are about to run out of funding for the year with six weeks to go. What most don't know is that VA health care is not an entitlement program. It has to be funded every year by Congress and approved by the president. Presently the bulk of the health care funding goes to New York, Ohio, Pennsylvania and Michigan. There are no waiting lines there, but the older vets, those with the most problems, either live in Florida or visit there in the winter. Politics as usual has left vets in Florida with 90-day waits to see a doctor and in each district there are thousands waiting. Most initially wait six months even if they are in the VA system in Los Angeles or New Hampshire. It is a major problem when Bay Pines health care system increases 80% and funding goes up 30%. Our president should be thrown out of office for screwing our veterans. These are the men who almost lost their lives for their country and this is how Mr. Bush treats them.
This is the same Mr. Bush who is getting $393 billion for the Pentagon of which $25 billion goes for Fatherland Security and $25 billion for foreign aid, but no budget increases for veterans.
Former Enron executive Michael Kopper has snitched on his fellow thieves and pleaded guilty to money laundering and conspiracy to commit wire fraud. He will surrender $12 million he gained illegally, which will be returned to Enron shareholders. He now faces limited jail time. Next is Andrew S. Fastow, former CFO, from whom the government wants to separate $22.1 million. This is the way the system is supposed to work all the time. Next Mr. Ken Lay.
Congress is considering allowing investors to exclude limited amounts of interest and dividends from taxes.
The Treasury and IRS officials' interpretation of a 1997 law will allow an increase in the number of people who can avoid owing capital-gains when they own a home for less than two years and sell it at a profit. If you are single you can exclude $250,000, if married $500,000. That will help the flow of funds into consumer pockets for spending.
Money market funds grew $1.8 billion last week taking assets to $2.23 trillion. Retail added $1.28 billion and institutions $522 million. 7-day compound yields fell to 1.26% from 1.27% and 30-day yields fell to 1.28% from 1.29%.
Salomon Smith Barney has downgraded Goldman Sachs, Lehman Bros., Bear Stearns, Morgan Stanley and Merrill Lynch due to a weaker third quarter due to a drop-off in fixed-income revenue. Last week S&P put its AA-/A+ counter-party credit ratings on Merrill Lynch, Morgan Stanley and JP Morgan Chase on credit-watch with negative implications. S&P sees a deteriorating environment for profits in the investment banking industry.
Finally Moody's has placed the $42.4 billion of long-term credit of JP Morgan on review for a possible downgrade. Their current and prospective profitability, as well as earnings volatility, relative to other major banks is of concern. Plus, there are the trillions of dollars of derivative exposure. A downgrade will likely make their rigging of gold prices more difficult. Total notional value of all derivatives is orders of magnitude greater than total US debt or total free world economies or both added together. Banks like Morgan evaluate their own derivatives just like they did at Barings Bank before it went bankrupt.
Florida added 77,100 non-agriculture jobs last month to lead the nation. Returning teachers accounted for 63,000 of those jobs. Services and retail added 9,800 jobs and 3,200 jobs respectively followed by 3,200 in construction. Losses were in finance, insurance and real estate, 1,200 jobs and 900 in manufacturing. The pattern is still with us. We gain ever lower paying jobs and lose higher paying ones. Unemployment was 5.3% versus 5.9% for the nation, if you believe those figures. Tourism was off 2% versus 20% in the final quarter of 2001. Florida has an aged population and lower interest rates kill their buying power and that will be reflected in future numbers.
We have spoken of and recommended TIPS (Treasury Inflation Protected Securities) in the past. The Treasury now seems to be discounting 1.6% inflation looking at the spread in the 10-year TIPS and comparable Treasuries. That spread is well above the 60BP hit after the LTCM crisis, which means a true deflation scare, could bring nominal yields down sharply.
The end of May saw US corporate debt at $3.9 trillion. Moody's says the nation is in the worst credit stress since the 1930's. This year 42 companies defaulted on $46 billion in loans in the second quarter setting a new record. This can't continue with unemployment rising, investment falling and investor confidence being crushed further.
Mutual fund investors are losing 25% of their load-adjusted returns to taxes. They have given up an average of 2.5% to taxes each year for the past 10 years, while bond investors have given up 1.3% based on the top 38.6% tax bracket or those earning $301,051 or more a year.
Based on our calculations recognizable deflation will be with us early next year and last for at least a year. If we emulate Japan it could be over 10 years. We can't be that lucky. Japan has a great savings pool and we have next to nothing. This means the FED's ability to grow and control the economy with stimulation and expansionary monetary policy is greatly restricted. Low interest rates are a two-edged sword. If there is no growth business won't want to invest, but on the other hand business will watch the real value of their cash on hand shrink. Considering this we cannot see economic recovery coming until 2005 at the earliest.
Napoleon Bush now has between 250,000 and 400,000 military personnel in and near Iraq. He cannot now cancel the invasion. He must go forward. Mr. Bush and the elitists will win their war, which is an object lesson as well as a business venture. The result of his actions will earn Mr. Bush and America the enmity of most of the world. The economic price could be devastating for our country, our Economy and our world leadership. Unless he takes Saudi Arabia and Iran we are sure oil in the future will trade in euros. Preparation for these actions began a year ago and all allied forces, due to planning and training, can all be in Iraq within four days. As you can see in spite of denials it has been the intention to invade from the beginning. We have the background information on preparation, but the litany of players and maneuvers is too extensive to relate. In summation, we say this could be the finest, most effective force ever used in combat by our country.
Jack Grubman has left Salomon Smith Barney with his $32 million reward for incompetence or criminality. Take your choice. Now we are hearing numbers that elitist Sandy Weill at Citigroup may have induced Mr. Grubman to give a more favorable rating to AT&T at a time Mr. Weill was offering $10.62 billion in tracking stock to finance its wireless-phone unit. The deal was done and the payoff was one of the biggest ever on Wall Street, $145 million each in fees for Salomon, Merrill Lynch and Goldman Sachs. Weill's part was that of an AT&T board member, who wanted to get the secondary financing done. The deal is under investigation and who knows where it will lead. It does, if nothing else, point out the incestuous nature of the relationships between Wall Street and corporate America.
Economists are correct less than one-third of the time. In a survey of 35 economists, one-third said the recession ended in 12/01. This is the recession the government said we didn't have. The other two-thirds had varying opinions and two said there has been no recovery. Even with phony figures why hasn't unemployment improved if there is no longer a recession? Why is it not taken into context that corporate earnings growth has fallen, deficits have risen and the only way the Dow remains at current levels is because of the government's interference in the market via the Plunge Protection Team? Incidentally, why doesn't the government report what this clandestine group does in the market? The economy is contracting again. Every time auto manufacturers put interest payments back on vehicle sales their lots fill up. The economy will slide even lower once the Middle East war begins, thus what economists think doesn't mean much when you have such powerful overriding events.
We find it unacceptable and stupid that Congress can't decide whether we should attack Iraq or not. No one wants responsibility for the political fallout. That's certainly understandable, when the budget deficit will be $160 billion not the $109 billion predicted.
In order to head off a trade war the US decided to exclude 178 steel products from protective tariffs. The exclusions now number 727. This whole episode has turned into a quagmire for the President, how inept.
Police can't as yet determine if Allen Meyerson jumped to his death or was pushed. He was the associate weekend business editor of the NY Times. He recently wrote "The New Rules of Personal Investing."
As we predicted, George Napoleon Bush has called on Congress to destroy the law that bans the military from participating in arrests, searches, seizure of evidence and other police-type activity on US soil. The law in question is the Posse Commitatus Act. This is an attempt via the Patriot Act and Fatherland Security to turn American into a police state. And you, who might be an enemy combatant, can be detained indefinitely. It looks like we are going to have to move again.
The Iowa National Guard's First Battalion, 194th Field Artillery, has been ordered to active duty. 350 soldiers are affected. They'll be mobilized at Fort Knox on 9/8/02 They were last called up during the Korean War and served in Germany in the US occupation force as so many of us did.
Others beside the Saudis have been pulling money out of US investments. The National Bank of Abu Dhabi, the United Emirates' largest bank has seen investors repatriate $10 billion this year. The $1 trillion lawsuit targets Islamic banks and charities, the Saudis and Sudan. The Gulf monarchs hold about $1.2 billion abroad excluding properties. In Saudi Arabia, the al-Waten newspaper, among others, has encouraged investors to repatriate their funds to the kingdom.
Shareholders want Tyco International's nine directors who served under CEO Dennis Kozlowski to resign.
The court that oversees the Foreign Intelligence Surveillance Act (FISA) showed that on several occasions authorities improperly shared intelligence information with criminal agents and prosecutors in New York. Given such previous disdain for the law, the court found that the new procedures proposed by Attorney General Ashcroft in March would have given prosecutors too much control over counter-intelligence investigations that would have affectively allowed the government to misuse intelligence information for criminal cases. Mr. Ashcroft has appealed the findings. The opinion is a public rebuke. The court since its inception has been a rubber stamp for government, so we haven't heard the end of this.
Both George W. Bush and A.G. John Ashcroft are a menace to every American citizen. They are in the process of tearing up the US Constitution. They are in the process of setting up a US prison camp system for those who happen to disagree with them. We are potential enemy combatants subject to immediate search and seizure and we have no constitutional rights. Our Attorney General, under direct orders from our president wants to be allowed to indefinitely incarcerate anyone who disagrees with their diktats. These people are totally out of their minds. If they are not they stand among some of the worst monsters in history. Our Constitution says we must defend our country against ALL foes, foreign and domestic, and that is what we must do. This is why the Radella and Hamdi court cases are so important. Their outcome will determine whether US citizens can be held without charges and be subjected to arbitrary and unchecked authority of the government. The elitists for whom Ashcroft and Bush toil want an America where security precedes freedom and where autocratic rule replaces our Constitution. The people must be kept in constant turmoil and in perpetual fear of terrorist attack is. This fear is to be the excuse for tyranny. John Ashcroft is just the messenger. The real culprits are lurking behind the scenes as always. America better wake up fast as they'll wake up in camps never to see their family, friends and freedom again.
It is only fitting the George W. Bush would call Bill Simon, California Republican candidate for governor, a breath of fresh air, or a proven businessman who can get things done. He can get them done all right. William E. Simon & Sons was just slapped with a $78million civil penalty for fraud. It's no wonder that scum like Gray Davis get elected. That is easy when Davis only has to face a crook. So much for saving our country through politics.
Both George W. Bush and A.G. John Ashcroft are a menace to every American citizen. They are in the process of tearing up the US Constitution. They are in the process of setting up a US prison camp system for those who happen to disagree with them. We are potential enemy combatants subject to immediate search and seizure and we have no constitutional rights. Our Attorney General, under direct orders from our president wants to be allowed to indefinitely incarcerate anyone who disagrees with their diktats. These people are totally out of their minds. If they are not they stand among some of the worst monsters in history. Our Constitution says we must defend our country against ALL foes, foreign and domestic, and that is what we must do. This is why the Padilla and Hamdi court cases are so important. Their outcome will determine whether US citizens can be held without charges and be subjected to arbitrary and unchecked authority of the government. The elitists for whom Ashcroft and Bush toil want an America where security precedes freedom and where autocratic rule replaces our Constitution. The people must be kept in constant turmoil and in perpetual fear of terrorist attacks. This fear is to be the excuse for tyranny. John Ashcroft is just the messenger. The real culprits are lurking behind the scenes as always. America better wake up fast as they'll wake up in camps never to see their family, friends and freedom again.
It is only fitting the George W. Bush would call Bill Simon, California Republican candidate for governor, a breath of fresh air, or a proven businessman who can get things done. He can get them done all right. William E. Simon & Sons was just slapped with a $78 million civil penalty for fraud. It's no wonder that scum like Gray Davis get elected. That is easy when Davis only has to face a crook. So much for saving our country through politics.
New York, Aug. 23 (Bloomberg) -- The loss is staggering: >From March 2000 to July 2002, the value of the U.S. stock market plunged by $3.7 trillion.
The bear grip will squeeze out the excesses in the U.S. mutual fund industry, says John Bogle, founder of Vanguard Group, the second-largest U.S. mutual fund manager, with $570 billion in assets. After a 28-month, 41 percent plunge in the Standard & Poor 500 Index, the $6.6 trillion fund industry is poised for a shakeout that could claim half of its 4,800 equity funds, he says.
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