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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (21510)	1/16/2005 11:01:59 PM
From: mishedlo	Respond to of 116555

I am disappointed that I could not find it I expected it to be here: hoisingtonmgt.com Mish

To: NOW who wrote (21510)	1/16/2005 11:07:47 PM
From: mishedlo	Respond to of 116555

UK Companies hit by profit squeeze news.bbc.co.uk The rise in crude oil prices hurt many businesses The number of profit warnings issued by UK companies rose 40% in 2004, research has found, as declining consumer confidence took its toll on business. According to a survey by Ernst & Young, nearly 300 UK firms issued profit warnings last year, about 90 more than the previous year. Successive interest rate rises, the escalating cost of oil and the weak dollar all impacted on company profits. This trend may continue in 2005 if confidence erodes further, E&Y said. Deteriorating conditions The last quarter of 2004 saw the highest number of profit warnings - 85 in total - since the first three months of 2003. Trading conditions deteriorated over the period, with manufacturing output declining in November and retail sales falling in December. The much vaunted 'soft landing' is now looking slightly bumpy Andrew Wollaston, Ernst & Young Ernst & Young said the annual increase in profit warnings was higher than expected, reflecting the impact that five interest rate rises since November 2003 have had on consumer spending. "The impact has been much stronger than many anticipated and the much-vaunted 'soft landing' is now looking slightly bumpy," said Andrew Wollaston, Ernst & Young's corporate restructuring partner. Broad-based squeeze Companies operating across a host of different industries found their profits squeezed in 2004 as sales fell and costs rose. According to Ernst & Young, the support services sector was the most affected, producing 32 profit warnings during the year. Computer services firms and general retailers also struggled, being forced to issue 31 and 25 warnings respectively. Profits have been under pressure for some time Doug Godden, Confederation of British Industry Prospects for 2005 hinged on whether consumer confidence would erode further and whether oil costs would hit companies' supply chain operations, Mr Wollaston said. "While there is no cause for concern in the short term, should the trend continue and the warnings level rise towards the one hundred mark, this could indicate a significant deterioration in the state of corporate UK." Right offering Many High Street retailers including Marks & Spencer, Woolworth's and Next have reported disappointing sales over the Christmas period. Ernst & Young said businesses needed to be mindful of the fact that consumers were increasingly cautious about their expenditure. Shoppers have become more cautious "Despite a generally benign economic environment, 2005 has already seen a number of warnings," Mr Wollaston said. "The focus will be very much on how company management controls costs, improves margins and continues to deliver the right offering to cautious customers." The Confederation of British Industry said British businesses were under pressure from intense global competition, the strong pound and tax and regulatory burdens. "Profits have been under pressure for some time," said Doug Godden, the organisation's head of economic analysis. "Companies are going to have to redouble their efforts to control costs, become more efficient and stimulate demand with innovative new products and services."

To: NOW who wrote (21510)	1/16/2005 11:29:28 PM
From: mishedlo	Respond to of 116555

Group Frets Mortgage Rates Could Rise if Market Loses Confidence in U.S. Backing By JAMES R. HAGERTY Staff Reporter of THE WALL STREET JOURNAL January 17, 2005 ORLANDO, Fla. -- The National Association of Home Builders, complicating White House and congressional plans to rein in Fannie Mae and Freddie Mac, warned that mortgage rates could rise if investors lose confidence in the government backing of the two companies. At its convention here, the industry group approved a resolution stating that it will oppose steps that would undermine the government's "implied guarantee" of the two mortgage companies' $1.7 trillion in debt. Though the U.S. Treasury regularly denies there is any guarantee, investors' belief that the government would rescue Fannie or Freddie in a crisis helps them borrow money cheaply in the bond market. online.wsj.com

To: NOW who wrote (21510)	1/17/2005 9:17:47 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Consumer inflation expected to be tame in Dec. Saturday, January 15, 2005 12:06:05 AM afxpress.com WASHINGTON (AFX) -- Federal Reserve officials have put the spotlight squarely on consumer inflation, and it looks like the consumer price index had stage fright in December The minutes of the Fed's Dec. 14 meeting showed increased nervousness among some Fed officials about the outlook for inflation, but private-sector economists do not expect anything to be concerned about in the December data, which will be released next week "There are no real red flags in this report that would make you expect a bad number," said Lou Crandall, chief economist at Wrightson ICAP Gasoline is expected to hold down consumer prices in December, economists said. The retail prices of gas fell about 7 percent in the month The benign producer price data released on Friday has also lowered anxiety levels on Wall Street. The consensus forecast of Wall Street economists is for the consumer price index to be flat in December and for the core rate to rise 0.2 percent. The CPI and the core rate, which excludes food and energy prices, each rose 0.2 percent in November. But annual averages show consumer price inflation accelerated last year. If the December CPI comes in as expected, the index would be up near 3.6 percent for 2004, much higher than the 1.8 percent rise in 2003 The core rate is expected to rise 2.3 percent in 2004, compared with a 1.1 percent rise in 2003 Richard Yamarone, chief of economic research at Argus Research, said the high pace of inflation is already causing consumers "to spin their wheels." He noted that retail sales excluding autos rose only 0.3 percent in December. "Consumers didn't have the additional money to have them spend at an accelerated pace," he said [Retail sales excluding autos rose .3% huh? I expect retail sales FELL. I do not believe autos rose as announced. I think inventory is stacked out the wazoo on dealer lots. mish] Other economists are troubled by behind-the-scene activity that is pointing to higher inflation pressure in coming months "The broad underlying trend is towards higher inflation," said Peter Hooper, chief U.S. economist for Deutsche Bank "I'm not in the camp that thinks there is a big inflation problem in the works right now," said Bill Cheney, chief economist at John Hancock. But he said Fed officials are right to be concerned about inflation over the longer termHousing starts are expected to rebound 7 percent to 1.90 million units, after a steep 13.1 percent decline to 1.77 million units in November. Housing starts will also be released on Wednesday morning [This will be an important number. Let's see. If it is bad, weather will be blamed. Mish] Experts say the housing sector can't match its stellar 2004 performance this year, but activity would remain reasonably good. [Experts always say things will remain good. That's why they are experts. If they said things would be bad, no one would listen to them even if they were correct. Of course if no one listens to you, you can't be an expert. It's that simple. The only way to be an expert is to always say good things. Mish's theory of experts explained in full.] Mish

To: NOW who wrote (21510)	1/17/2005 9:23:21 AM
From: mishedlo	Respond to of 116555

Germany´s Schroeder reiterates call for softening, reform of EU stability pact Sunday, January 16, 2005 6:23:47 PM afxpress.com Germany's Schroeder reiterates call for softening, reform of EU stability pact HAMBURG (AFX) - German Chancellor Gerhard Schroeder reiterated his call for a comprehensive reform of the EU's Stability and Growth Pact, according to his editorial to be published in Financial Times Deutschland tomorrow "Proper economic policy that fosters stability and growth equally cannot be judged exclusively by the three-percent-deficit-rule," he wrote The EU Commission ought to take into account social reforms, expenses aimed at stimulating the economy and extraordinary burdens before imposing sanctions And if the EU's deficit criteria are "largely satisfied", the Commission ought not to impose sanctions at all, Schroeder said The German Federal Statistics Office announced earlier this week Germany's 2004 budget deficit came in at 3.9 pct of GDP, exceeding the EU Stability and Growth Pact deficit criteria for the third year running

To: NOW who wrote (21510)	1/17/2005 9:32:14 AM
From: mishedlo	Respond to of 116555

No delay in OPEC meeting despite Iraqi request - president Sunday, January 16, 2005 8:17:25 PM afxpress.com KUWAIT CITY (AFX) - OPEC ministers will hold their next meeting on Jan 30 as scheduled, Kuwait's energy minister and cartel president said, despite Iraqi calls to postpone it after its landmark election. "The OPEC meeting still stands," after a request by Iraqi Oil Minister Thamer al-Ghadban to push back the Vienna gathering was turned down, Sheikh Ahmad Fahd al-Sabah told reporters. Ghadban requested a delay of "a few days" because of Iraq's Jan 30 national poll, but due to technical matters related to flight bookings the meeting could not be delayed, Sheikh Ahmad said. The OPEC chief also said oil prices had started to rise again due to "geopolitical reasons" which include a fuel shortage in the US and "fears and concerns" in the Gulf region and Iraq. "But there is no shortage on the market as oil supplies remain sufficient, and the difference in the price of heavy and light crudes is still high," said Sheikh Ahmad

To: NOW who wrote (21510)	1/17/2005 9:34:50 AM
From: mishedlo	Respond to of 116555

Japan Dec consumer confidence index falls to 44.3 from 47.9 in Nov Monday, January 17, 2005 5:32:31 AM afxpress.com TOKYO (AFX-ASIA) - Japan's consumer confidence index fell to 44.3 in December from 47.9 in November, the first fall in three months and the second fall in six months, the Cabinet Office said The survey also found that a majority of Japanese surveyed continue to be pessimistic about their economic wellbeing, indicating consumer spending may remain weak The consumer confidence index is based on replies to a survey asking about four aspects of consumer sentiment - perception of general economic wellbeing, income growth, employment conditions and willingness to purchase durable goods. Numbers above 50 mean that respondents foreseeing improvements in the economy outnumber those expecting conditions to worsen. Numbers below 50 mean that the pessimists prevail The headline index and the four sub-indices all remained below 50 in November The sub-index for general economic wellbeing fell to 43.4 from 46.4 in November, while the income growth sub-index tumbled to 42.3 from 46.2 in November and the employment conditions sub-index dropped to 44.0 from 48.9 in November The willingness to buy durable goods sub-index fell to 47.6 from 49.9 in November

To: NOW who wrote (21510)	1/17/2005 12:02:05 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Hoisington Investment Management Company Quarterly Review and Outlook Fourth Quarter 2004 By Van R. Hoisington and Lacy H. Hunt, Ph.D. snips: Our judgment is that long term yields will move irregularly lower during the year, and that the yield curve will continue to flatten with the 30 year bond moving closer to its historical average yield of only 10-20 basis points above the 10 year note. Therefore, the profit potential will again lie in the long end of the market. This view is importantly related to the inflation and economic growth trends in 2005. DEBT PROBLEMS Household debt levels imply that the financial condition of the typical American household is stretched. Household debt was a record 115.3% of disposable personal income in the third quarter, an all time high for the series. The financial condition is only slightly better when household debt is viewed in terms of assets or net worth. This is surprising since the value of homes has increased sharply in recent years, and stock values have somewhat recovered. In the third quarter, household debt was 18.1% and 21.3% of total assets and net worth, respectively, mere fractions below their all time peaks reached two years earlier (Chart 2) OIL SHOCK In the first two months of the fourth quarter, total consumer fuel expenditures jumped to 8.3% of wage and salary income, the highest energy burden since 1990 (Chart 3). Fuel expenditures now require an additional 2.1% of total wage and salary income from the lows in 2001. The current oil shock now stands as the third largest of the five events that have occurred since the early 1970s. Each of the preceding oil shocks were associated with recessions. MODEST PROSPECTS FOR CAPITAL SPENDING AND HOUSING new orders for non-defense capital goods actually peaked in July 2004, and moved irregularly lower, with the November level about 0.5% below the July peak. The tax expiration should result in a significant deceleration for the early part of this year. The housing sector is 5% of real final sales to domestic purchasers. The problems in this sector include more restrictive monetary conditions, over investment, and loss of momentum in key leading indicators. Housing assets could be considered over-owned as nearly 70% of the population now own their home (Chart 5). If consumers were to realign their housing assets relative to the more normal relationships vis-à-vis income, housing could soften, perhaps for an extended period. Some of the best leading indicators of the housing sector suggest that the beginning of that realignment process may be near. Single family building permits, which are a component of the Leading Economic Index (LEI), averaged a 1.55 million annual rate in October and November, almost 1% below the quarterly peaks reached in the second and third quarters. Single family housing starts, which were in the LEI for many years, were at a 1.54 million annual rate in the last two months, 6% below the peak level reached in the fourth quarter of 2003. EXPORT PROSPECTS: NOT WHAT THEY SEEM Most forecasters expect U.S. exports to improve this year because of the two year decline in the dollar, but this view may be too optimistic. The stagnant economies of our trading partners do not point to much, if any, improvement in U.S. exports. Indeed, two factors have pushed the global economy into a slump: (1) monetary conditions were tightened in many key economies in 2004 (the U.S., China, Canada, Australia, and Great Britain), and (2) rising oil prices have hurt many foreign economies heavily dependent on imported oil. THE FED'S SUCCESSFUL WAR AGAINST INFLATION when the Fed says that it wants low inflation, and that it is willing to further tighten monetary conditions, the record suggests that it should be taken at its word. Future tightenings by the Fed will dampen the already sluggish growth in the monetary aggregates, supporting our view that economic activity will soften in the year ahead. Thus, the macro economy will be characterized by too many goods chasing too little money, the condition that produces disinflation. The rate of increase in M3 like that of M2 dropped to a nine year low in 2004, effectively isolating the higher oil and other commodity prices. The CPI should reverse sharply to the downside this year, and the multi-year low in the core inflation rate lies ahead. REAL YIELDS STILL ELEVATED in real terms, current long term rates remain attractive, particularly when coupled with the steep 10/30 yield curve. Accordingly, long-dated Treasury bonds should continue to be a safe and very rewarding investment. investorsinsight.com