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Wasn't there some chatter in Congress a little while back that essentially amounted to rebates on investment losses? Wouldn't that be something? Can't you hear Bernie Ebbers saying, "Get those damned longshoremen back to work so they can pay some taxes and cover my margin losses!" <LOL>
I don't recall that the government was throwing in vacation time, though--.
George,
This is essentially the way I see things, too. I'm worried about the fact that so many folks -- individuals on the threads, newsletter gurus, Street analysts -- are all lined up looking for the late-October rally. But the big players are going to have to change the direction here soon in order to make some easy money again. On the Nasdaq, for example, that long basing pattern from 1995-1996 is only about 10 percent below current levels. That should be a bit harder to break than any support levels we've seen for quite some time.
I totally agree with Newman's assessment of sentiment: Exhibit A in support of his claim being that we are all here, finger cocked, ready for an uptick that looks convincing. <G>
Thanks, Rick; I did see it. I'll go to PM if we decide to discuss this further, since I barraged the board with many posts on the lockout a couple of days ago.
hamvestor and Rick,
More precisely, the key issue is that the union wants operators of the new technologies to be unionized, whereas the PMA wants them to be non-union. So it's not really a jobs-versus-technology negotiation, but rather haggling over the union status of the employees who will work the new technologies.
Regarding money issues, it appears that the ILWU has been making a pretty hefty demand for its pension plan in order to use that demand as a bargaining chip to win the technologies issue. They offered it up over the weekend and were turned down.
Rick,
Sure, but the question is: what is the legal threshold that distinguishes a "slowdown" from a "normal" rate of work? It's one thing for the PMA to say there's a slowdown, but another to prove it legally and have sanctions brought against the union and its leaders. It's especially difficult when the union is explaining its work rate in terms of safety concerns: five ILWU members died on the job last year, so those claims would have some resonance. Add to this the precarious position of the Bush Administration with labor, and I just think it'll be extremely hard to bring enforcement action against the union.
In saying this, I'm really not trying to argue the union's case or to bash the PMA; I'm just trying to tell you how hard the scenario you have in mind will be to implement under the law. If you're right about the PMA's motive -- and it certainly does sound plausible -- then I would say that they've overestimated the Bush Administration's desire to stand up with them and face down the union.
Edit: submitted by mistake. <EOM>
mlsoft--
It's a pretty funny exercise, trying to handicap the currency markets right now. The dollar should be collapsing, but the situation in Japan is even more desperate, so the yen is winning the race downward. The euro is hanging in there, but again that's in spite of terrible weakness throughout key sectors of the Eurozone. There are the various PPTs at work, probably at odds with each other by this point as they all seek to defate their currencies. "Strength" is a product of the perception that your own collapse is more of a slow-motion phenomenon than your neighbor's.
TBL--
There must be provisions for the government to step in and enforce "work discipline" in the event of a slowdown; but I don't know how those provisions are defined, and I don't know what standards exist to trigger additional government intervention. Regardless, I don't think the Bush Administration would intervene again in the weeks leading up to the election. The Administration already has a labor problem now and wouldn't want to do anything more to alienate all of those Reagan Democrats in the swing states.
As I said the other day, I find it very strange that the PMA chose a lockout as its strategy in this dispute. It was obvious that we would reach this point, with a federal injunction to reopen the ports and a legal continuation of the slowdown. In 80 days, we'll probably be right back where this started, looking either at a strike or another lockout -- only with harder feelings on both sides the next time around.
Eleven days: nothing gained, billions of dollars lost to the global economy. It's tragic that there's been so much waste, but no progress toward a resolution of the real issues that are being contested.
They took the XAU apart about an hour after the JPM news hit -- maybe anticipating that the PPT will be in there helping JPM defend its short position in the commodity?
TBLebowsky--
I don't think Taft-Hartley raises Constitutional problems in the event of a government injunction against a strike. Strictly speaking, Taft-Hartley orders the striking party not to prevent a business from operating; it doesn't say that the individual strikers have to return to work. The 13th Amendment on slavery and involuntary servitude applies to individuals, so it would prevent the government from conscripting the individual strikers themselves and forcing them back to work. (An exception to this could arise in a time of war -- declared wars only? or "undeclared wars" also? -- when the government has much broader powers over individual citizens. The draft, for example.)
What would be more interesting, from a Constitutional perspective, would be the use of Taft-Hartley in a lockout where the company did not want to reopen for work. Would the government then have the right to seize the company's private property and put it back into production? The Constitution isn't exactly friendly to the idea of federal seizure of private property, although there obviously are very specific times of need when the government has powers over private property: times of war, buildout of the railroad and Interstate highway systems--. I don't know how the current case, for example, would fall under the Constitution and the federal laws of private property.
Perhaps you'd be kind enough to email CNBC and recommend party hats if they have the opportunity to air a Nasdaq 1000 special. <GGG>
I actually like Biggs. Sure, he's just another cog in the Wall Street machine--. But I have a spot in my heart for those few contrarians in the wilderness, and I genuinely respect the fact that he has reversed his stance and is now trying to make a bullish case, instead of resting on his laurels saying "Ha -- I told you so! On to zero!" He was telling people to get out at Naz 5000 and now he's telling people to get in at Naz 1100: that's better than most. Of course, he was also telling people to get out at Naz 1100 on the way up! <G/NG>
George,
It will be a strong negative signal for those of us looking for a trading rally out of October lows if we go back to the pattern of low-volume declines. It's an odd time because the economic fundamentals are worsening, the business fundamentals are more dire than the economic fundamentals, the charts look awful, and sentiment seems to be accelerating toward the negative -- and yet the Big Boys make money by yo-yoing the market, so it's necessary to ask wonder much more they're going to squeeze out on the downside before whipsawing us back up for a run. Trying to think like a criminal. <LOL>
Just to be clear, I don't think an October rally would mark the beginning of a new secular bull market, as all of the analysts and other CNBC blabbermouths would doubtless be saying, in the event of even the most modest lift. I'm simply trying to anticipate the opportunity to make money going north instead of south for a change.
LOL. It's striking that we're seeing more volume go through with little price movement and no serious attempt at a ramp job, even on the news of the past couple of days. Like many on the thread, I'm expecting a trading rally out of October lows. Are we now churning at the lows, basing for an eventual trade to the upside? Are we seeing more aggressive activity by sellers -- dumping into those who are buying the news -- which could generate another spike down when the news-buyers go away?
These past two days are the first in quite awhile where we've seen significant churn on higher volume.
Yes; I just chimed in because mlsoft's updates on the dollar are usually calibrated for intra-day movements and wasn't showing up on the one-year chart you posted. I don't think mlsoft was making a statemernt about the broader trend of the USD -- just trying to gauge market management (or manipulation) for extreme short-term trading purposes.
The USD made a pretty significant downturn around 7:30 a.m. On the daily:
http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=s
It's amazing that the NDX is up only 27 points from its lows, after Bush's Iraq speech and the move to reopen the West Coast ports. Maybe the relief rally will kick into gear soon, but yesterday sure looked like a distribution day with the increased volume and moderate price action, and they aren't exactly burning it up today. These are usually the ideal conditions for a 300/50 Dow/Naz bear-market spike.
bear markets are tough on everyone, even chambers. We can differ on opinions as to his integrety.
Sure enough.
Hey no one will buy LU with its debt will they.
Yeah, but I can dream, can't I? <LOL> I'd love to see that patent portfolio in CSCO's hands: a company that knows how to read future technology trends, that has a good track record at turning innovations into products, that executes well. I feel sickened whenever I think of the tremendous waste of intellectual property at companies like LU and XRX. CSCO could cover the debt -- it's one of the very few companies that could -- but would probably rather continue buying back stock with that all of that money. I'm sure the market would rather see CSCO buy back shares than try to absorb a wreck of a company like LU--.
I agree that they've overpaid to get into storage, but they'll probably do well in the long run by leveraging their market position and operating efficiencies. It seems a natural way to grow off of their core competencies.
Tim,
Where CSCO failed, in my view, is in the perceptions game. Going into that call, CSCO was perceived by most everybody as a company that intensively manages its numbers to keep analysts happy. The fear was the their quarter would suffer because closer scrutiny would cut down their ability to fudge the books. Then they came out with an amazing quarter and put a lot of emphasis on the reasons it was a clean number. As usual, the analysts bought the message.
You're right that they did say B2B was under 1 and they had to eat away at some bookings, but they didn't say they had in fact devoured the bulk of their backlog in order to make the quarter. The magnitude of this drawdown is what caught the attention of the analysts, and the analysts have responded with drawdowns of their own. The big money looks like it's deserting the stock, too, from my read of the tape.
CSCO's a company I will buy again some day, because I think it's the winner in its space. I'm actually hoping they do something incredibly bold right about now, like buy NT or LU in order to lock up the carrier business -- an investment in the future that anticipates the upturn in business five years down the line. Could you imagine CSCO with the patent portfolio assembled by Bell Labs?
I think Chambers is an excellent manager and obviously is a great cheerleader, but I believe the stock is suffering at the moment from an excess of cheerleading and a deficiency of sober expectations-management. To his credit, Chambers seems at the moment to be taking a page from MSFT's book, giving some hard-nosed assessments of his business. That recalibration of expectations will be good for CSCO shareholders over the long run, despite the short-term pain they are experiencing now.
BullDawg--
I think CSCO lost a lot of big-money credibility through its handling of its earnings announcement last quarter. They came out in the conference call emphasizing its policy of openness -- answering detailed questions about how they weren't padding their earnings by reversing earlier component write-offs, etc. -- but then snuck the news about their eroding backlog into the 10Q. As soon as I saw news of the backlog cross the wire, I could hear in my mind's ear a whole host of analysts saying: "John Chambers is such a horsesh*t liar!" And then CSCO doubled the insult by saying that backlog is a poor measure of future performance anyway, so no big deal.
I think the New Sobriety we're now seeing out of Chambers is a desperate attempt to win back the big money with some straight talk.
mlsoft--
Yes, ditto on GM. They're certainly performing much better than F on an operating basis, but the hole in their pension plan is much bigger, and I agree with your assessment of a coming downturn in the core auto business. The Big Three will get to restructure next September when the current UAW contract runs out, but I don't think that'll be a magic bullet for any of them with the prospect of a simultaneous market slowdown and financial crunch looming.
BTW, congrats on those big gains from your GM shorts -- saw you posted closes on those recently.
I can't believe this market hasn't been able to generate more of a lift today, with Bush's speech last night and the probable re-opening of the West Coast ports within the next 48 hours. Gravity is really having its way right now.
Thanks, mlsoft--
I certainly agree with your macro sense of the economy and the geopolitical situation and see the bull case for gold over the next few years. I guess my concern is more focused on the next 12-18 months or so, because I think it'll take at least that long for the PPT either to engineer a soft-landing failure for JPM or to unwind JPM's short position in gold. I would be surprised to see a breakout move higher in gold until the PPT eradicates the systemic risk JPM has imposed on the global financial system. Of course, anything can happen at any time in the wild and woolly gold markets, so I could be proven wrong tomorrow! <LOL>
The SOXX looks like it wants to chase that 190 closing low from October 1998.
It's interesting, also, to see another day of divergence between the BKX and the broader market. The financials are really off in their own orbit right now.
Michael Soucie--
I've had F targeted for bankruptcy for awhile now. My timeframe has been 2006-2008, as F has to move more and more aggressively to fund its pension plan. But the credit markets are already abandoning F, so F could conceivably fail much sooner than I had originally anticipated. I hope I'm wrong, but Mr. Market looks like it's trying to price in failure, and it's very, very tough for credit-dependent companies like F to survive when the momentum in the debt markets turns against them. News crossed the wires this morning that F's bonds are being quoted on the floor in dollars, rather than spreads -- like junk bonds.
ColaCan--
The wildcard factor with gold is JPM. If JPM is suffering from high levels of derivatives risk, as a number of us on the thread believe, then it's likely that the Fed and its minions (PPT, Da Boys) will work to protect JPM's enormous short position in gold. There's got to be some big money out there thinking: "Let's bet against a bunch of JPM positions and then squeeze their gold position." But to break JPM you've got to break the Fed--. (To say nothing of the fact that such a strategy would bring the entire world financial system down like a house of cards in a tornado. <G>)
Mlsoft, do you have any thoughts on this? I've been meaning to ask you for awhile how you reconcile your bullishness on gold with your sense of the systemic risk surrounding JPM.
hamvestor--
Wow, let us know if you find anything on FDRY. Generally, it's not surprising to see it chase EXTR and CSCO down, since FDRY also gets the majority of its business by selling into the enterprise. And CSCO had really ugly estimate cuts from Bear Stearns this morning. But such an intense hammering for FDRY on no news is certainly striking.
FWIW, I think FDRY is one of the best-managed companies in techland -- well-conceived long-term strategy, disciplined focus on profitability, realistic assessment of the marketplace and both short- and long-run opportunities. I always make a point of listening to their quarterly conference calls because Bobby Johnson calls 'em like he sees 'em.
I don't own any because you just can't own this sector right now, but this is one I'm looking to buy when the market firms up.
OT
Bob,
It's a little bit of a stretch -- isn't it? -- to raise charges of treason because some dockworker put a container of almonds bound for Japan on a ship to Singapore "by mistake"--. It's not like the military has been doing a whole lot to disguise its shipments via public freight: after all, we pretty much get weekly updates from Qatar on cargo ships bound for the Gulf that are hired out by the military. I don't think they've so confused the ILWU that the dockworkers have "mistakenly" sent any almond containers packed with Stingers to Al-Qaida. <LOL>
OT
Bob,
Actually, I think you're describing a world that is much more like the East Bloc than I am. Workers with no right to organize, no right to good-faith collective bargaining, no right to define and legally pursue their interests as workers, no right to define the composition of their workplace--. Since when is it Communistic to define your interests and use the tools of the marketplace to pursue those interests? Many would say that this stands at the very heart of our (yes, mine too!) capitalist way of life. Capitalism invites us all to negotiate and compete in the marketplace. This is precisely what the ILWU and the PMA are doing.
The slowdown was definitely not in the best interests of the PMA. But between the interests of the ILWU and the PMA, one would expect the ILWU to pursue the interests of the ILWU, and that's what they're doing. I have yet to see the PMA make any heroic gestures in the interests of the ILWU. From them, what I've seen is a lockout that has served the interests of the PMA but has also, in doing so, put the global economy on much more precarious footing than it was before the lockout.
You might say: but the PMA was protecting its own self interest. That's right. So we have the ILWU pursuing its self-interest, and the PMA pursuing its self-interest . . . and what's getting lost in the middle right now is the national interest. So who's responsible for the national interest? The ILWU? The PMA? Both? Neither?
I just can't understand why you think it's okay for the PMA to pursue its self-interest, but wrong for the ILWU to pursue its self-interest -- that is, why the ILWU has obligations to the national interest, but the PMA does not. Why should there be a double-standard like this?
OT
JohnD--
The union's position is not that it wants to prevent the use of new technologies, but rather that it wants the operators of those new technologies to belong to the union, just like the clerks and other workers who are going to be displaced when the new technologies are introduced. All of this blather about the ILWU wanting to return us to the Stone Age is just inaccurate. In fact, historically the longshoremen have done quite well when new technologies have increased productivity on the docks: they know that their high compensation is tied to their high productivity--.
From the ILWU's perspective, the PMA's approach to integrating new technologies is a Trojan Horse designed to bust the union. The PMA is proposing to fire union workers (such as the clerks) and replace them with non-union workers who would operate the new technologies. The union is saying: we'll accept the technology, but the operators should belong to the union.
mlsoft--
It's harder to tell, today, if we're just seeing a continuation of the prop job or if there's some real accumulation going on in select areas today. I've been watching AMAT today, too, and see the same, even during intervals when the SOXX as a whole has demonstrated relative weakness. Nothing to get too excited about yet, but it's a change in the programming and thus worth noting.
Perhaps we're setting up for a little relief rally tomorrow after W's speech. <?>
OT
Bob,
LOL! I'm not sure what your reasoning is, so I guess I'm not addressing your concerns. What on earth have I said that would make you believe I live in a Communist country, or that I want to see firemen and caboose crews back on trains? I did grow up in the People's Republik of California, though, and currently live in Taxachusetts. <G>
I agree with you that the economic consequences for the nation could be severe, long term. I don't think it'll involve losing out to other ports, because Mexico doesn't have either the ports or the overland infrastructure to replace the U.S. West Coast ports, and Vancouver is the only significant Canadian port of call on the West Coast and is already pretty maxed out. Also, the Panama Canal isn't large enough to handle the Pacific cargo fleet. But farmers and other U.S. exporters run the risk of being replaced as vendors into the Asian markets, and that would have serious consequences for certain U.S. producers.
In my view, our disagreement stems from our notions of how the national interest is served. You seem to be saying that the dockworkers are betraying the national interest by going on strike. My response is: wait a minute, the dockworkers aren't the only players here. What are the PMA's obligations to the national interest? This isn't even a strike, it's a lockout that the PMA initiated to close down the ports. Shouldn't the PMA open the ports and bring the longshoremen back to work, if it's in the national interest?
More generally, how often do we hold corporations accountable for serving the national interest? Do we expect CSCO to serve the national interest, or MCD? Who says that MO violates the national interest by contributing to billions of dollars in annual healthcare costs that are subsidized by taxpayers?
Maybe it's time to hold the PMA accountable to the national interest -- or at least to concede that the PMA and the ILWU both bear some responsibility for this mess we're in.
OT
Bob,
If we're talking about what's in the national interest, then the PMA should have kept the ports open, slowdown or not. The slowdown wasn't costing the economy as a whole billions of dollars--. Recall that the ILWU had been working for several months without a new contract, on the assumption that contract negotiations would continue in good faith, a condition that the ILWU felt wasn't met by the PMA. Hence a slowdown which still allowed the ports to fulfill their function within the global economy.
The issue seems to be: who's going to take a hit in the national interest, the ILWU or the PMA? Who's going to subsidize the national interest (and the global economy), the dockworkers or management? Well, why not the PMA? Why should we simply assume that the ILWU should foot the bill in the national interest, and not the PMA?
For better or worse, the way we deal with these issues in this country is through displays of power in the marketplace. That doesn't seem to bother many people when that results in management squeezing labor, as is normally the case. In this case it's the same system at work, only the dockworkers seem to have leverage on management.
Augie--
Just got a chance to read your post on Hamilton's SPX/VIX ratio. Thanks for all the hard work on this and the many other useful charts you share. Thorough TA -- and spiced with good humor to boot! <GGG>
OT
extelecom--
I didn't see the Lehrer interview, but it sounds like the union guy on the show was making some pretty stupid claims. Given what all was happening, I doubt those jobs could have been saved under any circumstances. A union may have been able to apply more concentrated political pressure and gotten better severance terms, but that's a very different claim to make.
Regarding 401(k) plans, some unions do play a pretty active role in monitoring retirement plans, so it's conceivable that a union could have worked for more diversification. But it's a stretch to say a union definitely would have done that and been successful at it. If I were interviewing the union guy, I would have asked him where the UAW has been all these years as the pension plans at GM and F have become more and more gravely underfunded. That's a disaster unfolding in slow-motion, and the UAW has been sitting on its hands for a long time, idly trusting management to deliver on its promised retirement plans.
I'm not so much pro-union as pro-worker. Unions are deeply flawed instruments, and I wish workers could reform their instruments of organization to blast the corruption and hypocrisy out of them. That said, we live in a country where the CEOs of our largest corporations make, on average, 43 times more than the average employees at their firms. I think that's wrong morally, and I also think it's bad for the economy when our wealth and income accumulate in too few hands. I'd rather have J6P make a couple of thou more per year than see Dennis Kozlowski buy more shower curtains or set up more offshore accounts. As bad as unions can be at times, they're still the only significant vehicle for workers to organize and try to share in the spoils of our economy.
Fred--
Now I'm totally with you when you suggest that teachers are grossly underpaid. That's shameful, and I've wished for a long time that we could motivate ourselves to get behind a "Manhattan Project" or a "Marshall Plan" for teachers -- and another one for nurses, while we're at it. Two areas of need where we are looking at severe shortfalls just 10-15 years ahead.
But why does it cause more amazement and outrage to learn that a hard-working blue-collar guy is making six figures than it does to see all of these CEOs with manicures making tens of millions? It seems to me that the billions of dollars that are now being lost every day say something about exactly how much value those 10,000 dockworkers deliver to the global economy. How many of those multi-millionaire CEOs could say they deliver as much value?
The world. Yesterday's NY Times mentioned a case where a non-union Florida port sent a ship to Japan. At the request of a U.S. dockworkers' union, the unionized Japanese dockworkers refused to unload the ship.
The thing is, the longshoremen realize that they hold all of global trade in their hands: a major port shuts down for the few weeks, and all hell breaks loose. All they have to do is stick together, and they have a history that extends back more than a century of doing just that.
Did you know (also from the Times):
(1) The ILWU has a contractual right to an annual day off on the birthday of its founder, Harry Bridges?
(2) And also has a contractual right to a day off on "Bloody Thursday" -- in memory of the day in 1934 when two striking longshoremen were killed in San Francisco?
As a practical matter, how is the PMA going to break a union with this kind of tradition and this kind of leverage within the global trade system? Say the PMA hires non-union replacements -- or even that the Bush Administration offers to replace the union with military personnel on an emergency basis: you still face the fact that unionized ports throughout the world won't deal with those non-union ports.
FWIW, I don't think it's a good thing when a union has such disproportionate leverage over a business sector. But what probably sets me apart from most of the folks on this thread is that I also think it's bad when management holds such disproportionate leverage over business sectors -- and this latter situation is far more often the case. I'd prefer in all cases to see a more equal balance of powers.
Personally, after seeing 1.5 million lost jobs these past couple of years -- and the disasters that befell employees at Enron, WorldCom, Global Crossing, and many other companies -- and the disasters that await American auto workers when their contracts are up in September 2003 -- I'd be glad to see the little guys win one for a change. Why should the union simply stand aside and let the PMA replace union workers with non-union workers? All the unions are asking is that operators of new technologies be folded into the ILWU. Is this so unreasonable?
fed--
It's not a strike; it's a lockout -- the PMA shutting down the docks and preventing shipments through their ports. There's a huge difference between a strike and a lockout.
Also, for any politics that may be involved, I think it's more reasonable to focus on the immediate stakes: the PMA is trying to bust the union, and the union is trying to ensure its continued existence. Should the union simply allow the PMA to employ non-union operators of new technologies? Why should they agree to give up union jobs and allow non-union hires in their stead? More than being party politics, it's a classic struggle between labor and management. Management took a big gamble by shutting down the ports, and the faster they figure out that they're going to lose, the faster they'll reopen the ports and the better off the economy will be.
The PMA is just going to have to suck it up and give in, because the longshoremen are by far the best organized, most cohesive, and most successful union on the planet. They can't be beaten: even if the PMA fired all union longshoremen and replaced them with non-union workers, other ports throughout the world would refuse to handle cargo arriving from or destined for a non-union port. The PMA is costing the global economy billions on this wild goose chase.
mlsoft--
The Financial Times had a story about the email, which was from Merrill Lynch to S&P. Another article I read (can't remember the source right off) said S&P reassured Merrill that everything was okay -- surprise! -- and also said Commerzbank was thinking about suing Merrill over the episode.
In the meantime, the BKX continues its freefall, and the Fed meets today to discuss the discount rate.
Uh, oh. Who's looking for handouts at the discount window?
Hilarious -- is this a thin market, or what--? Go get 'em, boys! <G>