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As for the new choice seems that many peopelare literally speechless. Hardened GOP supporters that I know were really pissed yesterday.
I was surprised at the choice, too, having strongly anticipated the next Treasurer would be closely tied to Wall Street, with a small chance Bush could go for a "shock-value" candidate like Jack Kemp. The last thing I saw coming was another industrialist, cut from the same mold as Paul O'Neill. On the surface, Snow looks like he got the nod because he's part of the Cheney pack from the Ford Administration. He'll be a good team player, doubtless is more politically disciplined than O'Neill, has solid GOP credentials on tax policy and deregulation.
But there may actually be one important reason he was chosen--. Heading into 2003, there is one guaranteed economic crisis that's going to happen in the next year: the United Auto Workers contract with the Big Three is going to expire in September. That's going to give the Big Three an opportunity to restructure operations, and the initial word is that they're looking to make extremely deep cuts in their U.S. employee base. Through the auto-industry multiplier effect, one layoff at a Big Three firm generates four or five additional layoffs throughout the rest of the auto supply chain. We could easily be looking at a loss of a half-million high-paid manufacturing jobs in late 2003 . . . just as the 2004 presidential campaign ramps.
My thinking is that maybe Snow, as a heavy industrialist, a transportation guy, is tied in somehow with the folks at F and GM and can talk turkey with them -- convince them to scale back slowly in 2003 and 2004 so they do not drive the economy off a cliff. Throughout the past two years, the auto industry has been keeping the U.S. economy afloat; the Big Three has literally been subsidizing the entire U.S. economy by paying workers it does not need, by pumping out cars at a record pace even in the face of weakening consumer prospects, and by providing deep discounts to keep consumers spending. Perhaps Snow is tied in to these guys and will talk them into continuing this for awhile longer, at least through the 2004 election cycle--.
I don't know -- it looks like a disappointing choice if there's no background motivation of this magnitude. Bush hardly needs a "better salesman" for tax cuts: the Republicans control all branches of the government, so they can simply do what they want on this, regardless of the Secretary of the Treasury. It's a confusing choice.
zhina--
Did you end up playing UAL today? Pretty amazing intraday action--.
Yup . . . for anyone playing in size, hesitating at 1375 for a 1363-1378 bounce is cutting it kinda close! <LOL>
It looks like we could be hunting for 38.2 Fib retraces on all the major indexes: Dow 8353, COMP 1364, SPX 883.
mlsoft--
The volume is amazingly light today. It's surprising that there isn't more positioning taking place here, as we have loads of technical indicators in play within a band of about COMP 1363-1378. One would expect more speculative accumulation for a bounce or a pickup of selling in anticipation of a breach. But with 1.2 billion shares on the Naz at 3:30 p.m., the silence is deafening.
mlsoft--
There was a report out earlier this month saying that there would be a 25 percent increase in DRAM capex in 2003, versus a 4 percent rise in the rest of the chip industry. It also said the SIA was projecting DRAM revenue growth of 25 percent in 2003, to $20B, and another 43 percent in 2004, to $29B.
Like you say, insanity--.
Yes, and ditto South Korea, where Hynix basically serves as a state-funded jobs program. BTW, Hynix evidently postponed a scheduled meeting of its reform committee that was supposed to take place overnight. Have you heard anything on that? I just know that the postponement was reported, not why it happened or what it means.
Indeed, the fundamentals of the DRAM market are so distorted that there can actually be price-fixing and a lawsuit brought against the price-fixers -- and yet DRAM itself is still selling for less than the cost of production! How many times have price-fixing cases been brought to court when the product is selling below cost?
mlsoft--
Agreed on the fundamentals. However, thinking as a fundamental-less, if they decide to start moving DRAM prices up, even without a good fundamental reason, the DRAM makers will probably go up, too. This would just be a swing trader based on the fact that DRAM prices usually display high beta manifested over swing timeframes.
lurqer--
Could be, although Christmas usually prices in earlier and the past month has basically been post-Christmas doldrums. I don't want to make too much of one data point, but the reason I mention it is that DRAM pricing moves more in straight lines -- straight up, straight down -- than any other market I watch. So even the first sign of a change in trend catches my attention and goes high up on my watch list.
Something to watch for a potential trend: prices on 128MB DDR DRAM ticked up overnight on the spot market, and 256 DDR prices held stable. They've been in a relentless decline for a month. We'd need confirmation that DDR pricing has firmed up at these levels, but if we get that confirmation the DRAM stocks may be a good swing play as MU, etc., track spot pricing fairly closely.
OT
mlsoft--
Very well said! Your approach is exactly the opposite of the critics I had in mind. Like I said, I agree that there is much to criticize in Carter's public life -- and your message demonstrates very clearly how we can identify specific points to debate. You and I would come to different conclusions on some things, though probably not as many as you would think. <G> But what I really respect and appreciate is that we could have a good-faith discussion of the issues, rather than trading screams about whether Carter is good or evil, or stupid or smart, or whatever.
I think the recent personal attacks on Carter in the conservative and right-wing Christian community have been utterly disgraceful -- and, in the case of the Christians, deeply hypocritical. That's why the "idiot" comment from overnight set me off this morning--.
I really will stop now!
OT
what you point out shows the duplicity and demogoguing(sp) nature so many have.
Perhaps, but what concerns me personally is when our ideological and political positions become so dominant in our lives that we sacrifice our spirituality and our sense of moral judgment to mere partisan expediency. I stopped going to church almost 20 years ago, while in college, because church felt like a political rally followed by a coffee hour. It was a liberal church that was more concerned with political causes than with the spiritual mysteries or the cultivation of community in faith. It nurtured a cult of contented self-righteousness and defied all that the Bible has to say about the humility and longing that everyone should derive from their own personal sense of sinfulness and distance from the divine.
In this day, there are too many opportunities to celebrate our own worldly achievements and to congratulate ourselves for our own personal virtue. It disgusts me when I see our religious institutions encouraging, rather than questioning, this cult of worldly self-aggrandizement.
Because this is OT, I'll say not more about all of this on the No Politics thread -- just thought it was important to clarify my motives regarding the earlier, pre-market post.
OT
In response to this, I have to say that the relentless ad hominem attacks on Jimmy Carter from the right-wing and Christian Coalition types have always baffled me. There's certainly much to criticize in his presidency and his naivete regarding the prospects for good-faith negotiation and peace with regimes like North Korea and Iraq. But has this country ever had a president who has committed his life more fully to the words Jesus spoke in the Sermon on the Mount? All of this "idiot" talk -- or talk that makes Carter out to be a virtual anti-Christ -- concerns a man who has tried sincerely to live the Christian life that he believes the Bible instructs him to live. Carter is a sinner, just like all humans. We can debate his understanding of the Bible and the way it has shaped his public life: we might well conclude that he has not understood and lived the Bible in a way that a public official should. But to deny the sincerity of his faith and the intensity of his effort to wrestle with the Bible and live a Christian life . . . this goes further than any mere human creature is qualified to go in casting judgment on another person.
Zeev--
I agree on both points. If you're going to buy UAL, make sure you're at the very top of the payout list. But for the most part it's an industry to avoid: collectively, the airlines are in the red over the entire history of the industry. LUV is a wonderful exception as a company, and I've worked the common nicely as a cyclical play a few times; but the stock is too loved and too richly valued in this economy.
zhina--
Uhm, UAL has about $2 billion in liquid assets and $1.5 billion in receivables -- against $7 billion in current liabilities and $9 billion in long-term debt. Net tangible book is $1.3 billion and market capitalization is $50 million. Something tells me this isn't going to wash well for the common shareholders.
That said, traders on the right side of the speculative frenzy as the common goes to zero can get lucky and make some green. Those people who rode WCOM from 0.06 to the 0.20s--. I'd never go for it, but these stocks often have a lot of volatility in their dying days. Just be sure you're out, instead of in, when the music stops.
mlsoft--
Here's a link to an interesting New York Times article on the mobilization of reservists; it contains various clues that may be helpful in handicapping the timing issue.
http://story.news.yahoo.com/news?tmpl=story2&cid=68&ncid=68&e=4&u=/nyt/20021205/ts_n...
TG--
Even more amusing is that fact that the Household Survey Data and the Establishment Survey Data -- the two components that go to make up the monthly employment report -- are themselves often completely out of whack with one another. Different samples, different methodologies. . . .
Pfffft, Kudlow -- I didn't realize he was a cokehead until reading something about white-collar drug use a few weeks ago. I'm glad he got out of that scene, even if that condemned me to countless hours of Lawrence of America on CNBC. (Thank goodness I finally pulled the plug on CNBC, my own dirty little addiction.)
LOL! I think the Bushies would rather see him behind bars for making those phone calls to O'Neill about ENE. They definitely need to find someone with his Street savvy and aura of competence, though.
B_B:
It's hard to find any serious person anywhere on the ideological spectrum who thinks O'Neill was truly up to the job. O'Neill has zero credibility on Capitol Hill, among either Democrats or Republicans. Wall Street despises the guy. Main Street thinks he's sold out to Wall Street. It's not merely ideological or partisan to face up to the facts here. O'Neill's resignation is long overdue and will almost certainly lead to an improvement of the White House's economic team.
PH--
Actually, I expect a strong appointment this time around -- not necessarily someone I'd agree with on policy and principles, but someone trusted by the Street who can make those backroom calls like Rubin used to make. Bush burned himself badly by turning to a smokestack guy as Treasury Sec., and I think he'll turn to someone in finance the next time around. I don't know much about the GOP bench here and so don't have any early betting line on who gets the job, though.
wahz--
I've been wondering about this, too -- very strange, and I have no idea what it means. It's like all the arbs have been told to take the day off. This is going to be a fun day to watch. Not likely I'll risk much money, though, as there's just too much going on here. Be careful out there, everybody.
Joe--
How many of these headlines can we afford less than three weeks before Christmas?
(1) Saddam Says He's Clean; Bush Says 'Horse Hooey'
(2) Unemployment Soars; Treasury Sec. Paul O'Neill Latest Addition to Jobless Lines
(3) Dow Plunges on Double-Dip Dosey-Do
I'm looking for the PPT to hit hard on a good-riddance-Paul and can't-get-any-worse ramp job.
mlsoft--
Those cunning operators at AMD stole INTC's thunder. INTC upping its midpoint 3 percent from $6.7 to $6.9 billion looks kind of skimpy next to AMD's 17 percent increase from $600 to $700 million. <LOL>
they just gave the rest of that gern at the 3.70, now bid ask is a penny lower!
On behalf of Chairman Greenspan, the PPT, and the people of the world, I'd like to thank you for keeping GERN propped up in the face of the relentless and cowardly onslaught of un-American sellers who were trying to dump the stock. Next time, might I recommend that you direct $1 billion to your friendly SPOOS dealer in order to have a more substantial impact on the major indexes.
Thank you again--.
Bob,
Well, make of it what you will, but I think the site offers an extraordinary range of data, straight news, and analysis as well as links to external government, multilateral, thinktank, academic, and media resources. I haven't found many other sites where so much useful information is so easily accessible.
As for the liberal bias underlying some of the analysis, three thoughts:
(1) I think the site justifies itself just by bringing together so many sources of data, news, and external thought, so you can filter out any analysis you don't like and still take value out of the site.
(2) Regardless of whether one agrees or disagrees with the analyses, conservatives and liberals should at least agree that the questions raised on the site are of fundamental economic importance: the crises in Asia and Latin America, corporate governance, U.S. monetary and fiscal policy, the structure of the global banking system, the role of multilateral institutions such as the IMF and World Bank. All to say: this site is a pretty good place to scan if you just want a headline sense of the important policy issues of the day, even if you don't want to be "demagogued" on the issues.
(3) The biases argued here almost always are trying to participate in good-faith debate rooted in widely accepted frameworks of economic and policy analysis -- the exceptions being the partisan screeds of Paul Krugman, linked from the New York Times site. <NG> The analyses here are genuinely interested in establishing common intellectual ground so there can be honest debate of the priorities that policymakers should heed. This isn't the mindless partisan screamfests we get on the cable news networks, where no one cares about alternate views or rational grounds for discussion.
One last thing on this: before you paint all of NYU with the same brush, you should bear in mind that Orrin Hatch got his M.B.A. from there some years ago. There's actually a pretty active and energetic conservative presence on campus, though it certainly isn't Liberty University or Brigham Young. <G>
As for the prospects of war: my views on this haven't changed, and from my vantage point it appears that the preparations continue to ramp up. I'd be very surprised if we haven't moved by the end of February 2003. I have half a mind to put money down on 16 January 2003 as the start date, in honor of the 12th anniversary of the start of the Gulf War bombing campaign. Before I bet the farm buying options contracts for the start date, though, I'll be doing thorough DD at this site:
http://www.bibletime.com/bt/headlines/gulfwar/
(Please, no one disrupt the thread by flaming me -- just a little joke for Bob, all in good mutual fun, since we've got some history on these issues!)
PH--
I've been worried all along that we'd end up right back where we started with the Security Council; and, as you say, it certainly looks like Iraq is playing its hand to put us back in that spot. Tariq Aziz was on the wires the other day, saying very bluntly that Iraq knows it can't beat the U.S. militarily and so will have to beat the U.S. politically. Translation: reinforce European sentiment against the U.S. and Israel, stoke anti-American and anti-Israeli militancy throughout the Arab world and cast the conflict as a war of civilizations.
Americans in general tend to underestimate the importance, to us, of our standing and credibility within the international community. I think any backlash we might suffer from the international community would come as a great surprise and could well have an impact on our markets, especially if:
(1) the rest of the world decides that the trade deficit is our Achilles heel and proceeds to attack us on that by diverting capital away from us;
(2) other regions make intra-regional and inter-regional alliances in order to reduce their economic, political, and perhaps even military dependency on the U.S. Brazil's new president (Lula) is moving very aggressively to shore up the South American trade alliance with the explicitly stated purpose of distancing itself from the U.S.; he's even initiating an incursion into the U.S. "sphere of influence" by lobbying Vicente Fox in Mexico, and I wouldn't be surprised if Fox bites because he's very embittered about U.S.-Mexico relations right now. The ultimate nightmare scenario is some kind of mega-deal involving China: the EU and China, Russia and China, India and China.
nwsailor--
Thanks for the tip. Since you pointed to it, let me throw in my own plug for this tremendous Web site, the Global Macroeconomic and Financial Policy Site, maintained by Nouriel Roubini of New York University. It's packed with interesting data, news, and analysis and well worth a regular visit.
I'll repeat the link you gave:
http://www.stern.nyu.edu/globalmacro/
Joe,
I think you're right on that, although for some reason I didn't write it in my notes from the CC.
As for being a "virgin" at being wrong, for the past hour, I have been a brazen hussy - a harlot.
I really hope I can get this image out of my head pronto-like. I'm going to put "The Wiggles" in the CD player in hopes of cleansing my mind--.
LOL!
Maybe at 2X sales it looks interesting but it could be 4X sales next year without the stock pricing budging(if you know what I mean).
Joe--
Well said! I probably should never use the expression "long-term hold" because what I really have in mind is something more like a glorified position trade, trying to ride a trend that I might anticipate for 12-24 months or so, a timeframe short enough to steer clear of disruptive technologies that may be at the research stage but not yet ready for commercialization.
The thing I like about BRCD, potentially, is that the stock is pricing in a whole train of negatives, including some that will eventually be fixed. For instance, interoperability: BRCD is going to figure out how to get this right at some point, but the stock is being hurt right now because they haven't yet gotten it right. Another example is Rhapsody: the analysts hate this acquisition right now because they feel BRCD overpaid, but once BRCD has integrated Rhapsody and makes the technology available to the sales force, the analysts may start to like the deal a bit more. Near term, there's also the backup in the channel, which contributed to the lowered guidance for the current quarter.
Of course, the CSCO factor is the most important one right now, and I wouldn't buy BRCD for any duration until getting some handle on that question. Can BRCD survive in a market with CSCO? When will CSCO do the most damage to BRCD's market share, and when can we expect BRCD's comps to stabilize or improve? How radical is the market going to be in discounting CSCO's presence in the market?
mlsoft--
I think you're absolutely right about the disconnect between the market's expectations for a push-button war and the potential reality of a street-by-street ground war. Unlike most of the talking heads, I just don't see the Republican Guard emerging from their bunkers -- conveniently located under schools, hospitals, mosques -- and weeping tears of gratitude as they surrender to their American liberators.
I very much hope I'm wrong about the nature of the war, for the sake both of ourselves and of the Iraqi civilian population, but I've long had a sense of foreboding about this and fear the human costs of this war could be far higher than we are anticipating.
As an aside, another important risk factor that has emerged recently is that a war against Iraq could crush the rapidly growing pro-democracy movement in Iran. I don't have an intimate enough knowledge of Iran to know how important this movement is right now, but the reaction to the death sentence put on Hashem Aghajari seems quite extraordinary and potent. It would be a shame if the war sparked a fundamentalist backlash that swept away these courageous advocates of democratic reform.
The speech Aghajari gave that got him in trouble makes for remarkable and hopeful reading -- a call to reform the Iranian revolution of the Ayatollah Khomeini by proposing an Islamic humanism as an alternative to Islamic fundamentalism:
http://www.memri.org/bin/latestnews.cgi?ID=SD44502
akirsch--
All good points on BRCD: it just appeared you were looking for a quick hit on the conference presentation, and I wanted to make sure you were aware of this new CSCO news as a potential risk factor, since CSCO has been moving the BRCD stock in recent weeks.
I'm considering BRCD for a longer-term buy at some point myself, but am waiting for the stock to settle in the wake of the CSCO disruption and to see how the Rhapsody integration progresses. Their cash position is actually much stronger than you mentioned, since they plugged the cash from last year's big debt deal into the Long Term Investments line on the balance sheet.
Good luck!
George--
In addition to the points you've made, there's also the question: when do the markets begin again to price in the war? I think there's a great game of let's-pretend in progress right now, where we all pretend nothing is going to happen because we want to make sure people go out and do their Christmas shopping. How will the situation in Iraq look on December 26, though?
From within the industry, I usually listen to MSFT ahead of INTC or AMD or DELL because MSFT is the one company that consciously tries to beat down hype and spin in its business forecasting. While MSFT may not actually see orders and revenues come through until after the OEMs and the chipmakers, I don't think their forecasting lags at all because they're continuously talking to everyone and keeping tabs on industry trends.
This said, I haven't tried in any systematic way to track the forecasts from various sources to determine the ones that turn out to be most accurate in their projections -- so I don't know if listening to MSFT really is the best strategy.
akirsch--
Re: BRCD, from Briefing.com. (I'm not saying to avoid the stock at these levels, necessarily, but the stock's been responding badly to the CSCO threat for quite some time now, and this may fuel it more.)
09:37 ET Cisco Systems getting rave reviews for storage switch (CSCO) 14.58 +0.15: An article posted on Byte & Switch yesterday (the storage publication of Light Reading) reports that Reliant Energy is very impressed with its beta test of Cisco's new fibre channel switch, and may even switch over to Cisco entirely; Reliant currently uses MCDT and BRCD switches. The article says that CSCO will begin shipping the switches before year-end.
My point is if Southwest can do what they do so well, so can a lot of other airlines.
llewxam--
Actually, it's a lot harder for the major carriers to replicate the LUV model than you'd think. LUV was established in the mid-1970s, just as the industry deregulated, and thus was able to build itself from the ground-up on a business model that differs greatly from the longer-lived majors.
The essential problem the majors face, in my view, is that they serve too many markets. Back in the days of regulation, the federal government made the majors serve pretty much every mom-and-pop airport in America. The motive was virtuous -- to provide air service to as many cities as possible, giving them access to the convenience and potential economic benefits associated with commercial air travel -- but this scheme was sheer insanity for the airlines, from a business perspective. Deregulation has removed the legal obligation to serve all of these markets, and this deregulated environment has allowed LUV to pick and choose only the airports it wants to serve as it has grown from a regional into a national carrier.
Today, the majors still serve smaller markets through their hub-and-spoke systems, whereas low-cost carriers such as LUV serve only the markets they choose through point-to-point systems.
This has some significant implications that make it possible for LUV to be a far leaner company than majors like UAL, AMR, DAL, etc. One is that LUV can operate a highly streamlined fleet of aircraft: in fact, they only fly Boeing 737s. This means their mechanics and flight crews only need to be trained for this one aircraft, their hangars only need to serve this one aircraft, their inventory of spare parts and collateral equipment only needs to accommodate this one aircraft--. On the other hand, the majors need to have some diversity within their fleets in order to serve their varied markets. The majors are learning from LUV and are finally doing what they can to streamline their fleets after years of gross mismanagement on this issue, but they'll never be able to match LUV on this because they need to accommodate their various markets by flying various aircraft.
Another implication, of course, is that the majors have to maintain staff and facilities at all the airports they serve, even low-volume sites where they may only have four flights per day. Critics of the majors scream about how wildly inefficient they are: LUV can get this much more productivity out of a baggage handler or a ticketing agent, blah, blah, blah. But, c'mon, how "efficient" can you appear to be if you're only working four flights per day? LUV serves markets where it can build up the volume to make sure it's getting a higher and more consistent return on its employees and infrastructure.
Related to this: much is made of the idea that LUV has dramatically lower wage and salary scales than the majors. It's true that LUV pays most of its employees less than the majors, but the differences aren't nearly as great as the media or the analysts would have us believe. The one sensational area of difference -- the one that always gets covered -- is the maximum pay for captains. LUV caps its base pay at about $150,000 and provides minimal perks. Maximum base pay at DAL approaches $250,000 and at UAL approaches $220,000, with perks taking them up to the $300,000 range. But a captain with 10 years of experience makes about $145,000 at LUV, $150,000 at UAL, and $160,000 at DAL. (BTW: about $195,000 at UPS.) Starting pay for co-pilots is about $37,000 at LUV, $34,000 at DAL, and $33,000 at UAL. Mechanics with 10 years make about $58,000 at LUV (this was recently renegotiated higher, though I haven't yet seen the new figures), $70,000 at DAL, and $72,000 at UAL.
The data go on forever, but the bottom line is that pay scales at the majors run about 15-25 percent higher than at LUV, except for co-pilots and captains with 10 years, where LUV is generally in line with the majors. Here's the reason the majors get killed on labor costs: they have on average about 130-140 employees per aircraft, whereas LUV has about 90. That is, the majors are operating with about 45 to 55 percent more employees per aircraft than LUV. This is in part a result of "organic" inefficiency at the majors, but also in part because the majors serve so many low-volume markets.
Anyway, I'll spare you more details and analysis of all this. The one puzzling question that remains is: so why don't the majors just get out of all of these small markets and replicate LUV's route system? There are lots of factors, but the important ones are: (1) the majors continue to get favored treatment in route assignments and airport facilities in part because they serve small markets; (2) intense political pressure -- including, for example, a provision in the post-9/11 Air Transportation Safety and System Stabilization Act that forced airlines seeking federal aid to continue serving smaller markets, which looks a lot like reregulation through the back door.
mlsoft--
Is this a preview of what we're going to get tomorrow on INTC? The biggies seem to have more inventory to move--.
BTW, did Sir Alan ever get back to you regarding your offer to sit on some corporate boards on behalf of the PPT?
OT
basserdan--
LOL -- what a great story! Now that's the way to spend the holidays.
(And thanks for the kind words.)
14:40 ET Microsoft rises on conference comments (MSFT) 56.72 +0.01: Stock gets a lift -- and helps give the Dow a lift -- on comments that the company still sees modest FY03 PC shipment growth.
Sheesh -- this hits Briefing.com on a 20-minute delay -- thanks to Joe Stocks for posting here in real time.