The King Report
M. Ramsey King Securities, Inc.
Monday Oct. 18, 2004 –
Issue 3018 "Independent View of the News"
August PPI rose only 0.1% because BLS has energy prices down 0.9% for the month due to a sharp drop in the last week of August. This violates the BLS pattern of sampling for energy prices between the 10th and 14th of the month. Prior to August, there have been several months were energy prices slumped early in the month and soared later. But the price increases never showed up due to the 10th – 14th sampling pattern. Now all of a sudden the BLS samples during the last week of August when there has been a sharp decline. We’d love to hear the ‘official’ explanation.
Over the past 3.5 months (since Q2 ended on 6/30), oil is +50%; heating oil is +54%; gasoline is +24% and natural gas is +6.5%. But the increases have not shown up in PPI or CPI.
Ford’s debt of $108B is almost at junk status, and its sales are shrinking. Both GM and Ford will suffer further because higher steel prices have worked their way through the system. Suppliers will no longer eat the increases…Both GM and Ford have been making money via their finance operations. GM’s recent earnings of $440m were derived entirely from GMAC’s $656m in earnings. On Tuesday, Ford will report. Bloomberg’s David Pauly notes, "In the first half of 2004, Ford Motor Credit Co.'s business was subsidized by Ford auto to the tune of $1.67 billion in what Ford Credit calls ``interest supplements and other support costs.'' The finance unit's profit for the period was $1.59 billion." With the finance bubble threatening to burst, where will GM and Ford turn for profits? Who will first seek the bailout?
Al (What, me worry?) Greenspan says soaring oil prices don’t concern him because the global economy will adjust to higher prices by boosting exploration and increasing fuel efficiency. "Road hog!"
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