Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (50393)	7/6/2004 11:00:11 AM
From: stockman_scott	Respond to of 89467

Is there a housing bubble, and could the Fed rate hike be the first prick? sfgate.com

To: Jim Willie CB who wrote (50393)	7/6/2004 11:04:00 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Reaction to Kerry's selection of Edwards ____________________________ By The Associated Press July 6, 2004 Reaction to John Kerry's selection of Sen. John Edwards of North Carolina as his running mate: "His roots in the Carolinas, growing up as the son of a mill worker and spending his life standing up for ordinary people against powerful interests will resonate with Democratic voters, rural voters, independent and Republican voters alike, from North Carolina to South Carolina and from Colorado to Oklahoma." -- Sen. Jon Corzine, D-N.J. * * * "John Kerry was against John Edwards before he was for him. But now he's his running mate. Who is John Edwards? A disingenuous, unaccomplished liberal and friend to personal injury trial lawyers." -- The Republican National Committee. * * * "There are clear choices in this election and the president looks forward to a spirited discussion of the choices and differences voters face this November." -- White House spokesman Scott McClellan. * * * "South Carolina congratulates our native son. The Kerry-Edwards ticket will compete in every region of the country, and boost our candidates to victory in November. John Edwards' refreshing optimism attracted Democrats, independents and Republicans to our South Carolina presidential primary. His positive campaign message pulls Americans into the political process at a time when harsh negativity on both sides is driving people out in droves." -- South Carolina Democratic Party Chairman Joe Erwin. * * * "He has a lifetime of experience. ... It's going to be a ticket that's going to bring us victory." -- Mary Beth Cahill, Kerry's campaign manager. * * * "I love John Edwards. He's great. He has a lot of charisma. He's like a bolt of lightning." -- Mary Gerqschat, 52, of Pittsburgh. * * * "Combined with Kerry's steadiness and experience, I think, is going to generate super enthusiasm in this country." -- New Hampshire State Sen. Lou D'Allesandro, who was chairman of Edwards' New Hampshire campaign. * * * "I welcome Senator Edwards to the race as Senator Kerry's running mate. Senator Edwards is a committed liberal and spirited messenger for his party in an election that will decide the course our nation takes in turning a recovery into prosperity for all Americans, and in the War on Terror." -- Gov. Marc Racicot, Bush-Cheney Campaign chairman. * * * "I think it's an excellent choice. I think he will bring not only balance to the ticket but excitement. I think he will do very well in rural America where the Democratic ticket has to fare well. I'm very pleased." -- Rep. Ike Skelton, D-Mo. * * * "John is a very good senator, and I think will make a very strong vice presidential nominee. I wish him the best of luck. I think John Edwards is a man of high character, strong integrity and will be a very good vice presidential candidate." -- Senate Majority Leader Bill Frist, R-Tenn. latimes.com

To: Jim Willie CB who wrote (50393)	7/6/2004 11:18:39 AM
From: stockman_scott	Respond to of 89467

Global: Growth Risks ______________________________ By Stephen Roach (New York) Morgan Stanley July 06, 2004 It had to happen at some point. After a stunning revival in the global economy over the past year, the numbers have turned a bit soggy. In response — or possibly in anticipation— bonds have rallied, cyclical stocks have slipped, and commodity prices have tailed off. Is this just a momentary pause, or is a more sinister force at work? In a US-centric world, America is obviously the place to start. And the high-frequency (i.e., monthly) data have certainly been on the soft side recently. Weak shipments data point to a loss of momentum on the capital spending front in April and May, and motor vehicle sales were nothing short of terrible in June. But the big story was a “surprising” moderation of labor market activity in June — easily the single most important data release of any month. It’s not just that job growth was weak last month — a puny increase of 112,000 in nonfarm payrolls that came in at half the consensus guesstimate. It’s that the June trend fits in all too well with the character of the “jobless recovery” — one of the most distinguishing features of the current cyclical upturn. This expansion is now 31 months old. In only two of those months — March and April of 2004, when gains in nonfarm payrolls averaged 338,000 — did job growth surge decidedly above trend as it normally does when recoveries finally get traction. Yes, job growth was strong in May at 235,000, but that’s actually pretty close to a trend increase for a US economy in expansion. By contrast, in past cycles, cyclical overshoots typically last at least 6 to 9 months. It turns out that private nonfarm payrolls are up only 0.3% from levels reached at the trough at the last recession in November 2001. Normally at this stage in a cycle, the increase is closer to 7.5%. If the current hiring cycle had conformed to the average hiring cycle of the past six upturns, private nonfarm payrolls would have been 8.0 million higher than they are at present. The current hiring cycle is even tracking 2.9 million workers below the profile of the so-called jobless recovery of the early 1990s. In recent months, the growth optimists have drawn great comfort from the long-awaited revival on the hiring front. The latest evidence suggests they may have been a bit quick to jump to that conclusion. But there is a second dimension of US labor market activity that is equally worrisome — a decided shortfall of real wage growth. This is of critical importance for the consumer — mainly because it is the combination of increases in employment levels and the pay rate that drive personal income. For three months in a row — March through May 2003 — the monthly data on average hourly earnings hinted at a long-awaited revival on the wage front — average gains of about 0.3% at a monthly rate, or close to a 3.5% annual rate. The June number — a fractional increase of just 0.1% — draws that optimism into serious question as well. This series is up just 2.0% on a year-over-year basis through June 2004 — well below the 3.1% increase in the headline CPI in the 12 months ending in May and barely above the 1.7% rise in the core CPI over the same period. The basic point is that we are fully 31 months into a so-called economic recovery, and American workers are seeing virtually no improvement in real wages. That development, in conjunction with the hiring shortfall noted above, has left the all-important wage and salary component of personal income fully $263 billion below the path of the typical recovery. I should note that this comparison only goes through May 2004 — the latest month for which personal income data are available; based on the June labor market surveys, it seems reasonable to believe that there has been a further widening of this shortfall. Little wonder that income-short American consumers have morphed into asset-dependent spenders (see my 21 June dispatch, “The Asset Economy”). Or little wonder why the recent “mini oil shock” apparently took such a toll on discretionary consumption in June. In the end, there is far more to this story than just the numbers. I continue to believe that the extraordinary sluggishness of US labor market activity is part and parcel of one the most important mega-trends of our time — the global labor arbitrage. At work are two powerful forces — vast offshore reservoirs of well-educated, low-wage workers and IT-enabled cross-border connectivity of knowledge workers. In the absence of meaningful pricing leverage — after all, the core CPI is still rising at only a 1.7% annual rate — cost cutting remains an absolute imperative for competitive survival in high-cost countries like the US. With labor accounting for the bulk of Corporate America’s cost structure, the global labor arbitrage has become a principal tactic of competitive survival. This puts extraordinary pressure on headcount and real wages, alike. And it blurs the lines of distinction between tradables and nontradables, as IT-enabled connectivity opens up the possibility of offshore sourcing for a broad array of services companies. Unusual sluggishness of America’s labor market has been a hallmark of this expansion. The global labor arbitrage suggests it is not an accident. A disappointing June labor market survey should not be dismissed as a statistical aberration. As was the case in the first 27 months of this recovery, the June report is probably a much cleaner read on the underlying trend than were the two aberrant observations in March and April. Half way around the world, the China slowdown continues to play out according to script. The most abrupt deceleration has been concentrated in the fixed investment sector, where year-over-year growth comparisons have plummeted from 53% in January and February 2004 to just 18.5% in May. Deceleration has also been evident in bank lending, the principal means by which the investment bubble was financed. And growth in the all-important industrial output barometer has begun to moderate, as well. For both bank lending and industrial output, however, year-over-year comparisons were still running in the high teens through May — not nearly slow enough, in my view, to qualify as even a soft landing. That should come over time. But, in the meantime, the Chinese have opted to take determined administrative actions in the one sector where excesses are most extreme — fixed asset investment. The new project approval process has slowed to a standstill and completion of previously started projects has been delayed in several instances. I continue to be in the China soft landing camp — an outcome that would be consistent with both a halving of peak comparisons of industrial output (from 19.5% in early 2004 to 8% to 10% by late this year or early 2005) and import demand (from 40% growth in early 2004 to 20% over the same period). Important data checks for the month of June on all these counts will be released later this week or early next week. If China continues to slow, as I suspect, collateral damage should quickly be evident elsewhere in Asia. Japan remains at the top of my personal watch list in that regard — in large part since it appears that between 40% and 50% of Japan’s recent growth spurt is traceable to China’s impact on Japan’s exports, capital spending, and inventories. In that vein, the latest fix on the Japanese data flow is not all that encouraging. Industrial production was surprisingly soft in May, with a 0.5% increase falling well short of our forecast (+2.5%) and the government’s expectations barometer (+3.5%); moreover, there was an ominous 1.6% increase in the inventory-to-shipments ratio, typically a portent of more production adjustments to come. Meanwhile, in Japan, there were mixed results from the latest Tankan survey. Although the overall diffusion index for large manufactures surged to a 13-year high, the sentiment gauges for small and medium size enterprises continue to lag — especially for nonmanufacturing companies. Our Japan economics team continues to express concern over this apparent bifurcation of business sentiment — suggesting that such a limited increase of corporate “animal spirits” could end up being important in restraining the emergence of a broader and more sustainable recovery in the Japanese economy (see Takehiro Sato’s 1 July dispatch, “Tankan: Bubble Déjà Vu”). For these and other reasons, we continue to look for only a 1.4% increase in Japanese real GDP in CY05 — well below consensus forecasts in the 2.5% to 3.0% zone and a marked downshift from the 5.0% increase we currently expect for 2004. Obviously, there’s more to a US$36 trillion world economy than conditions in the US, China, and Japan. But I continue to believe that it makes a good deal of sense to view the world as largely being driven by a two-engine growth dynamic, dominated by the Chinese producer on the supply side of the equation and the American consumer on the demand side. There’s little doubt, in my view, of the slowing in China that is now unfolding. It’s just questions of degree and timing that remain unresolved, in my view. Meanwhile, the American consumer has been a difficult nut to crack, but there are gathering signs that not all is well on this front either. In my view, you don’t have to go too far beyond China and the US to figure out the rest of the world. Get those two economies right and I would be willing to bet that you’ve figured out about 85% of the global puzzle. For that reason alone, I remain deeply suspicious of the seemingly autonomous Japanese growth miracle. Nor is there any reason to get overly enthusiastic about the prognoses for the other externally-driven economies of Asia; if China and the US fade, they will be quick to follow. And then there’s Europe — where “eurosclerosis” has become so bad again that 2% growth is actually starting to feel like a cyclical recovery. I have long argued that an unbalanced world draws the possibility of a sustainable synchronous upturn into serious question. Yes, I was wrong to miss the temporary cyclical vigor of the world over the past year. The lesson: Never under-estimate the political pressures for reflation. Yet with fiscal and monetary policy stimulus both having been taken to the max, such impetus will now be missing in the period ahead. Consequently, in that context and in light of the tough fundamentals that still exist, I still worry that a good deal of this year’s growth could have borrowed from gains that might have otherwise occurred in 2005 — in effect, setting the stage for the boom that begets the bust. Without a meaningful rebalancing of a lopsided global economy, such periodic distortions could be the norm — suggesting that the debate over sustainability will be with us for some time to come. In this climate, the growth risks that are now creeping into the data flow cannot be treated lightly. morganstanley.com

To: Jim Willie CB who wrote (50393)	7/6/2004 11:20:14 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Stagflation, anyone? The slowdown has begun _____________________________________________ All those bits of bad or mediocre economic and corporate news are not a coincidence. This isn't just a hitch in a recovery. By Bill Fleckenstein 7/5/2004 Stock bulls are sanguine and consumers are even more sanguine, at least if we are to believe last Tuesday's government-calculated consumer-confidence number. The feel-good mood is based on the belief that the economy is now firmly on the path of a self-sustaining recovery. My belief, however, is that we are starting a post-stimulus slowdown. What might get folks to readjust their perception? Earnings weakness or economic data that buttress this point. Last week arguably saw the beginning of that trend: * Friday's June employment number was far weaker than expected; only 112,000 jobs were added compared with expectations of 250,000 jobs. (I'll have more to say about this next week.) In addition, results for April and May were revised downward by 35,000 jobs. * General Motors (GM, news, msgs) reported its June sales down about 15%, after Ford (F, news, msgs) stated that its numbers were down about 7%. (Those were the headline figures. When you get done slicing and dicing the numbers, they reported the declines about four different ways.) Suffice to say, those sales were worse than expected and, unequivocally, signs of weakness. * Wal-Mart (WMT, news, msgs) issued a sales-growth forecast that was dramatically lower, and in such a short space of time since its prior update. That tells me things must indeed have been quite weak in the last five to 10 days of the month. Musing on that interval may seem almost laughable, in the context of a $10-trillion economy. But given that Wal-Mart is basically a proxy for the U.S. consumer at large, I find it interesting that, after you factor in an inflation rate of about 4% (probably on the low side), its sales growth will potentially be zero or minus 2%. * Target (TGT, news, msgs) said that its June comps would be substantially below the 5% to 7% that had been forecast. * The Redbook Retail Sales index, according to a Bloomberg story on Tuesday, “fell sharply and now shows no gain at all for June, well below the targeted 0.6% gain for the month.” * The Chicago Purchasing Managers opinion poll results were released, and they were way below expectations. Last month's reading was 68. This month was supposed to be something on the order of 65, but it came in at 56.4. * Washington Mutual (WM, news, msgs) announced that its earnings would be substantially below what folks had thought, blaming the problems on improper hedges and expenses being too high. Financial companies basically can report whatever they want because the accounting is so lax. They get to pick what assets to hold -- and not mark to market -- and mark to market the assets they expect to take profits on. Similarly, they have this flexibility with their derivatives, which enables them to report whatever they want. Therefore, when they are finally forced to say, ahem, we're going to miss the quarter, you should usually believe that the problems started a couple of quarters ago, and they used all the tricks they could just to get this far. That's a representative sample . . . and that the best possible outcome is stagflation -- though there are permutations of events that could lead to far worse scenarios. At some point, people will ask: If everything is as wonderful as the Fed wants us to believe, how come it still has the Fed funds at the emergency rate of 1.25%, while inflation scoots along at 4% to 5%?" Clueless Greenspan and currency debasement Turning the calendar back to 1919, I would like to share some thoughts about inflation and currency debasement from the late John Maynard Keynes in his book “Essays in Persuasion.” (Thanks to a friend for forwarding this to me.) The following three excerpts are from the chapter titled "Inflation and Deflation": Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity (or fairness) of the existing distribution of wealth. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. (Sound like the last five years?) Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. It will come as no surprise that I think Keynes was exactly right, and I encourage everyone to read the above passage several times. I found it more illuminating on about the third pass. Trickle-down trouble in tech and Intel Back to present times, and technology in particular, I wanted to spend a minute on Intel (INTC, news, msgs), a company that has evolved to where it is basically in the marketing business. I have made no secret of my belief that Intel is in trouble, both in the near term and long term. (See my April 12 column, "Is Seagate's swoon bad news for Intel?") My longer-term conclusion has been that if Advanced Micro Devices (AMD, news, msgs) is widely perceived to have swooped Intel on the high end, that perception will do a lot to undercut Intel's reputation as a technology leader. That will affect not only the company’s earnings but the price-to-earnings ratio and expectations of future profitability and growth. Along that line, Intel's halo came in for a little tarnishing last Tuesday. According to work done by an analyst at Susquehanna Research (I'll give the guy the benefit of the doubt and not call him a dead fish, since I haven't seen his work before): "Channel checks indicate that Dell (DELL, news, msgs) is designing two dual-processor servers based on AMD's Opteron processors." Intel bulls disagree that Dell will ever endorse AMD's products, but I believe it is only a matter of time. Dell is facing competitive pricing pressures from Hewlett-Packard (HPQ, news, msgs), and customers are beginning to demand the Opteron products. When Dell endorses the Athlon and the Opteron, it's essentially going to be game over for Intel's image. This will, as I said before, impact its earnings and multiple. I continue to believe that the time bomb is ticking away for Intel. moneycentral.msn.com