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Top 2. Oct 24, 2001 7:15 PM

» Rande - Re: Re: Re: Margin Debt

In response to message posted by Steven_Russell:

The average life expectancy is around 80 years, give or take. For the majority of that time the glass will appear at the point of 50% capacity. No matter what, some will spend their lives viewing it as half full while others will view it as half empty. Such is life, and all too short it is.

-- posted by Rande

Top 3. Oct 24, 2001 7:54 PM

» Steven_Russell - Re: Margin Debt

In response to message posted by Rande:

Yeah, well, it's when the water in the glass starts to drop below the halfway point that some start to look around to see if the waiter is nearby to maybe come refill it.

Such is restaurant service?

-- posted by Steven_Russell

Companies Are Seeing Efficiencies Erode As Security Worries Drag on Productivity

Top 4. Oct 24, 2001 8:50 PM

» JenL_2 - Re: Greenspan brings reason back to wallstreet

In response to message posted by smile_1:

Greenspan brings reason back to wallstreet

on the negative:

repricing of risk

additional costs to productivity

on the positive:

we will adapt, and get stronger in time

future is promising

This from 10/24 WSJ:

By GREG IP

Shortly after the Sept. 11 terrorist attacks, Toyota Motor Corp. came within 15 hours of halting production of its Sequoia sport-utility vehicle in Princeton, Ind. One of its suppliers was waiting for steering sensors normally imported by plane from Germany, but the planes weren't flying.

Toyota, so committed to holding down inventory costs that it has no parts warehouses at its Indiana plant, has since asked suppliers to make doubly sure that they receive their own components on time. In response, Toyota supplier Continental Teves Inc. now plans to get the German-made sensor shipped by ocean instead of air and to store enough in the U.S. to last two weeks, rather than one.

That will raise inventory costs for the Continental AG unit, and it isn't clear yet whether the supplier will be able to pass along some of the burden to Toyota. But James Gill, a spokesman for Continental Teves, says: "Cost is not the question. It's keeping the customer happy and making them feel comfortable."

While the short-term economic damage of Sept. 11 is clear -- layoffs, grounded airplanes, half-empty hotels -- some more-subtle effects could last longer. In recent years, businesses have used information technology to trim costly redundancies and buffers ranging from extra inventory to backup staff. Computers made many businesses more predictable, productive and profitable.

The terrorist attacks threaten to undo some of that progress. "What the events of Sept. 11 did was to introduce a whole new set of uncertainties, which information technology is not going to improve our insight into," Federal Reserve Chairman Alan Greenspan told Congress last week. "And so it is a reversal of some of the forces which engendered the productivity acceleration of the last five years."

"Just-in-time" production -- which involves delivery of parts to the assembly line at the moment they are needed -- was one of those forces. It allowed efficiency pioneer Toyota, of Japan, and manufacturers that imitated it, to carry fewer spare parts and to correct part defects before piles of bad components ended up on warehouse shelves. Between 1990 and 2000, U.S. manufacturers' inventories dropped from those needed for 50 days of production to 40 days. Now, in light of post-Sept. 11 experiences with interrupted supplies, "I hear people wondering whether they have gone too far," says John Taylor, who teaches business logistics at Wayne State University in Detroit.

Keeping bigger inventories requires companies to lay out money sooner to pay for the ingredients of their products. In addition, the longer inventories are kept on hand, the more likely they are to suffer damage, become obsolete or spoil. Maintaining warehouses costs money, as does moving parts around within them.

'Need to Get Smarter'

That is why Toyota has no plans to build its own warehouses in the U.S. Just-in-time is "at the heart of our whole production philosophy," says company spokeswoman Barbara McDaniel. But she adds that "we as a company probably need to get smarter" about making sure suppliers don't run into problems like the one that almost halted SUV production in Indiana.

In ways that are only beginning to surface, Sept. 11 could add friction to an economy that had been discovering new ways to eliminate it. Many businesses are now spending more heavily on security and insurance. Others are investing more in expensive backup sites and contingency plans.

Morgan Stanley, realizing the vulnerabilities of what once seemed like a sound disaster plan, now intends to disperse its workers more widely, says Steve Van Wyk, chief information officer for the financial company's individual-investor group. "No one realized a disaster of such magnitude would happen, so everyone felt a few blocks might have been enough for people to spread out and have backups," he adds. "I don't think a few blocks are going to cut it any more."

During the Gulf War in 1991, Mr. Van Wyk's group, then Dean Witter Reynolds Inc. -- which merged with Morgan Stanley in 1997 -- began building a backup location for 300 employees several blocks north of its World Trade Center headquarters, which was home to roughly 2,600 of its workers. After the Trade Center bombing in 1993, the backup facility was expanded to accommodate 900.

On Sept. 11, employees began regrouping there after the attacks, exactly as planned. But then the workers were forced out, as authorities evacuated much of downtown Manhattan. Morgan Stanley, which has its headquarters in midtown, now plans to spread its employees permanently among more locations in the New York City area.

Maintaining multiple locations isn't just potentially costly. It can interfere with the day-to-day interaction among employees that promotes productivity. "In the past, we didn't have to worry about specifically where somebody sat," says Mr. Van Wyk. An employee who needed to talk to someone in another department could just walk over. That is harder to do if the employees are in different neighborhoods.

Morgan Stanley plans to conduct more video conferences, and, in some instances, formal meetings will replace the conversations that used to occur in hallways and cafeterias. As workers are shuffled to new locations, the company hopes that mixing elements of departments previously kept separate -- such as information technology and operations -- could actually improve cooperation and the quality of service, Mr. Van Wyk adds.

Already, heightened security and related delays are raising the cost of transporting goods. It used to take Smith Carriers Inc. of Fairfield, N.J., two hours to deliver a photocopier to an office building in Manhattan. With added security at bridges, tunnels and customers' buildings, that has stretched to four or five hours, says Gregory Smith, the company's president. Drivers spend extra time inspecting truck interiors and undersides for suspicious objects or tampering. The company is installing new high-intensity lights at its terminal. It is contemplating buying costly alarm systems for each truck and a surveillance camera for the terminal.

Consumer Will Pay More

"Unfortunately, the end user, the consumer, is going to get hit with some of the expense," from these changes, Mr. Smith says. He recently tacked an extra $50 to $100 onto the $250 to $375 he used to charge to deliver a photocopier.

Delays at the border with Canada -- the nation's largest trade partner -- have slowed many industries' supply chains. In the days immediately following Sept. 11, those delays extended to 18 hours, compared with an average wait of only 15 minutes before the attacks.

Although the border slowdown now has subsided to only a few hours, it has prompted Lear Corp., a big auto supplier based in Southfield, Mich., "to rethink how we do things," says Bob Denning, the company's director of global transportation. One Lear factory that makes seats for General Motors Corp. pickup trucks has arranged to get seat parts from some of its own Canadian suppliers several hours earlier to compensate for the border delays. Mr. Denning says the amount of additional inventory has been "minor." But he doesn't expect factories that depend on parts from Canada to be able to operate with as little inventory as they could before Sept. 11 anytime soon, if ever.

Some businesses for now are resisting adding any inventory, in spite of disruptions suffered after Sept. 11. Crompton Corp., a chemical company in Greenwich, Conn., saw shipments it receives of an explosive chemical temporarily suspended by railroads after the U.S. began bombing Afghanistan earlier this month. But Thomas Mignanelli, director of asset management, says the company isn't planning to store more of that chemical.

"The cost is not just inventory, but in storage, which can be expensive," Mr. Mignanelli says. "You have to build new tanks or rent rail cars and tankers and let them sit on your property. Plus some of these [chemicals] may have shelf lives." He adds, however, that "at some point in time, we might change if circumstances become far worse."

Other companies have done the rethinking and are adding redundancy that previously seemed too costly to them. Before Sept., 11, the contingency plan at Aronson+Partners, a Philadelphia money manager with 23 employees, consisted of sending backup tapes home every night with key staffers. In the event of a disaster, managing partner Theodore Aronson would run the firm, which manages $5 billion, from his library at home.

Expensive Options

This summer, Mr. Aronson says, he investigated the cost of building a full-scale backup site, with computers and work stations where his staff could move if a disaster shut down their offices. He received estimates from consultants of $500,000 in upfront costs, plus $300,000 a year in operating costs. Mr. Aronson didn't think the potential benefit was worth the price. "We never believed all these systems would work as well as advertised," he says.

But the Sept. 11 attacks proved "that the impossible, never-could-occur event, can occur," he says. "It just reminded you that you have to swallow the cynicism and have a backup plan." Another source of pressure: His customers now are asking more frequently about the firm's disaster planning, he says.

So, in coming months, Mr. Aronson says, he will choose a contingency site in a nearby suburb, although he hopes to spend less than what the consultants proposed.

There aren't reliable historic benchmarks for how much added security will cost private enterprises and subtract from economic growth. Some expenditures will fuel economic activity. The security-guard business should boom. But this type of spending won't add to overall productivity, economists say.

Expenditures to improve Americans' safety are "socially productive but economically unproductive," says Gail Fosler, chief economist of the Conference Board, a business-research group in New York. She compares outlays for security to spending on government-mandated pollution controls in the 1970s. "In the end, we were all the better for [the antipollution spending]," she says. "But it is not productivity-enhancing."

Before Sept. 11, no more than 20% of the multitenant commercial buildings across the country managed by Cushman & Wakefield Inc. had access restrictions, says Laurence Conlon, who is in charge of beefing up security for the company. He expects that proportion to climb to 50% as property owners take steps to protect against terrorism threats.

It won't be cheap. The owner of a one-million-square-foot building in midtown Manhattan that Cushman manages recently has closed some entrances and restricted deliveries to tenant offices. The owner also added a security desk with guards who check visitors' bags in what was once an open lobby. The price tag: $200,000 a year, says Mr. Conlon, who declines to identify the building.

Safer Buildings

To boost security further, the same property owner plans to install a computerized access-control system, which matches employees' identities to digitally stored photos; intrusion alarms at strategic places in the building; a cutting-edge video-surveillance system and bomb-detection and X-ray equipment for its messenger center, Mr. Conlon says. The cost of the additional upgrades, including consulting fees, is expected to run as high as $370,000, with another $50,000 a year in maintenance.

This type of spending will add substantially to what the private sector already spends on crime prevention. Figures compiled by David Anderson, an economist at Centre College in Danville, Ky., put the pre-Sept. 11 nationwide amount at about $54 billion a year or 0.5% of the gross domestic product. That includes $20 billion for security guards, $5 billion for access-pass systems and $500 million for airport security.

It is harder to demonstrate the benefits of spending to prevent terrorism, than, say, shoplifting. The latter can be measured from month to month. "But when you have these very small probabilities of very bad things happening, like the one-in-a-million chance you open an envelope and it has anthrax in it, your attitude toward risk makes a big difference," Mr. Anderson says. "Because we are particularly averse to activities [such as terrorism] that are well publicized, people will spend a lot more than would otherwise be rational. With this new type of hysteria, we might easily start doubling our expenditures."

Some businesses will sit on their checkbooks for now and take their chances. Jeffrey Vertucci, a manager for DPR Construction, Inc., a global commercial contractor, says constructing a building so that its front wouldn't shear off in a bomb blast, as happened to the Murrah Federal Building in Oklahoma City in 1995, would boost the cost 6% to 7%. While government tenants might be willing to pay that cost, Mr. Vertucci says he hasn't heard from private developers who are. "With the market slowing and space increasing, the last thing they want to do is add 6% or 7% to the cost of a job," he says. If developers tried to pass along such additional costs to tenants, they would "never get it leased," he says.

In some cases, information technology will help defray the costs of preventing terrorism. E-mail and the Internet have reduced the economy's dependence on conventional mail and packages and made it far easier to stay in touch with backup office sites.

And significant security advances could even spur private-sector productivity. The Internet, after all, is an outgrowth of the Cold War defense effort.

Drew Roberston, president of ASI-Transmatch Inc., a transportation consulting firm, says most railroads rely on electronic tags on their cars to track cargo, including hazardous materials. Such systems can keep track of cars as they pass through rail yards, but for the hours in between, railroads typically don't know in real time precisely where their cars are, he says.

Mr. Robertson advocates the creation of a government-sponsored global-positioning system which tracks all rail cars and trucks carrying hazardous materials and shares real-time information among transportation companies, roughly akin to the way the Federal Aviation Administration operates. The cost would be less than $1 billion for rail cars about and $5 billion for trucks, he estimates. But once in place, such a system could be an economic plus.

"It would greatly increase the reliability of the transportation system," he says. "That can mean lower cost, lower production expenses, and less capital expenditure on tank cars and trucks."

Jeffrey Ball in Detroit contributed to this article.

Subscribe to WSJ Online @ http://www.wsj.com

Yeah - things might look bleak now....but we need to look towards the positive economic advances that will come from our concerted effort to increase national security and combat terrorism...in the end we'll be the stronger for having come through this crisis......Jen

-- posted by JenL_2

Top 5. Oct 24, 2001 9:09 PM

» smile_1 - CNN - Joe Blue collar worker qouted

In response to message posted by smile_1:

Just caught a worker who was quoted on CNN:

"President Bush says, go out and buy a car, go out and by a washing machine, how can I go out and buy these things when I have to pay a mortgage..."

----------------

this ain't rocket science folks... get long rates down so refi can happen on a massive scale... you will improve the balance sheets of most Americans by thousands of dollars annually.

demand will not have to be artificially stimulated through corporate tax break give aways... you will get real demand through real spending from those who have more disposable income after refi...

duh.............

-- posted by smile_1

Top 6. Oct 25, 2001 5:29 AM

» Rande - Re: Re: Margin Debt

In response to message posted by Steven_Russell:

Maybe having been through three or four recessions before gives a little more perspective. Maybe it's just a matter of how one views the world, even in the best of times. For me, it's the long term that matters and I refuse to get carried away in either direction based on how good or bad current events might seem. The bearish case always sounds "smarter," and there seems to be no end of folks out there desperate to sound smart. Ironically, the truly smart money maintains an even keel and continues to focus on the longer term.

-- posted by Rande

Top 7. Oct 25, 2001 7:38 AM

» lcha - Re: stimulus package

In response to message posted by smile_1:

I read last week that for every 1% Americans add to their savings rate(% of income saved), that takes $100 BILLION out of the consumer side of the economy. So if we decided it was prudent to save just 1% more than before, it would wipe out the entire benefits package additions proposed by Congress.

-- posted by lcha

Top 8. Oct 25, 2001 8:07 AM

» lcha - Re: Re: Re: Margin Debt

In response to message posted by Steven_Russell:

More potentially useless margin debt stats:

From www.yardeni.com, stocklabs section, margin debt now stands at about 2.1% of personal disposable income.

Going back to stats from 1965, margin debt never reached even 1.3% of personal disposable income until 1995-1996.

From 1965-1996, margin looks to have averaged 0.8% of personal disposable income.

So, at least using this comparison, we still have a lot of margin debt outstanding.

The glass is 1/4 full with no waiter in sight opinion.

-- posted by lcha

Top 9. Oct 25, 2001 11:17 AM

» Rande - Re: Re: Re: Re: Margin Debt

In response to message posted by lcha:

The glass is 1/4 full with no waiter in sight opinion

For better or worse, the market is a forward-looking, discounting mechanism with a history of punishing those who get hung up on last month's data. Some of us have the advantage of being positioned for the long term and so don't live or die on every short-term report or event. The average Joe, however, tends to see what's hapenning now and then assumes it will go on indefinitely, whether overly good or overly bad. Of course, if one believes our country and economy will never again see growth and prosperity, he/she will act accordingly. For those who think we will rebound eventually, but only at some specific point in time yet to be determined and then acted upon, there's not much to say but, "good luck."

BTW, for a really bearish view check out the latest from Calandra:

Slimy market bubble persists
'You provide pictures, we'll provide bull market'

By Thom Calandra, CBS MarketWatch
Last Update: 12:52 PM ET Oct. 25, 2001

SAN FRANCISCO (CBS.MW) - What we're learning this month looks like that battery-operated bunny: the bubble keeps bursting and bursting and bursting.

If you thought the second half of 2000 and most of this year were ugly, wait until October's inflated stock prices receive their well deserved pinprick.

Japan's Nikkei 225 Index took 12 years, starting in 1989, to decompress. It reached 39,000 or so and wound up falling below 10,000. In that span, there were plenty of 30 percent and 40 percent and 50 percent rallies. Call them retracements, dead-cat bounces, adjustments, corrections - who cares?

The Japan and Asia-oriented funds lived off those bounces for more than a decade. Investors made short-term scores, even as the Japanese economy deflated and the Japanese consumer went into hiding. No argument there.

This time around, in the good old USA, the mini-bubble is making an appearance, fed by government stimulus programs, the Federal Reserve's easy-money policies and a Wall Street penchant for hyping the beast. Oh, and deluded individuals who are boarding the October momentum train. Call it a 15 percent retracement in Nasdaq, a dead-cat bounce, a correction. I call it a bear trap, pure and simple.

The air-pocket has names like QLogic (QLGC: news, chart, profile), Applied Micro Circuits (AMCC: news, chart, profile), Surebeam Corp (SURE: news, chart, profile) and Cepheid (CPHD: news, chart, profile). Other names include Krispy Kreme Doughnuts (KKD: news, chart, profile) and P.F. Chang's China Bistro (PFCB: news, chart, profile) - these last two food and restaurant companies that are becoming a favorite of hard-nosed short-sellers who hope to get their just desserts in the coming crash.

The squibs of air being pumped into these securities isn't the fresh mountain air that swept through stock markets in 1998 and 1999. It doesn't have the tingle that comes with fistfuls of corporate profit and a booming economy.

This time around, at their depressed levels, securities of all shades are getting a whiff of the foul air that comes with stale hype and the beating of war drums. Hence the doubling and tripling of shares that once sold for $2 or $4 or $6.

If and when this last-gasp bubble pops, it will be mean and slimy - like an air pocket that belches its way into an oil slick on the Dead Sea. The folks who will hurt the most are the ones already in the stock-market poor house: individuals who don't have access to market-neutral and short-bias hedge funds.

There are 28 or so reasons why this stock market is an oil slick waiting to happen, as quantitative analyst and fund manager Cliff Asness at $1.3 billion AQR Capital in New York City points out. The price-earnings ratio of the Standard & Poor's 500 Index stands at 28, its richest valuation but for two brief spans of time. "Though of course there are 92 versions of earnings these days," says Asness, a frequent contributor to financial journals and a stock market historian.

One of those expensive-stocks spans was in the November 1999-March 2000 insanity, fed in part by the Federal Reserve's rush of Millennium Bug liquidity. The other came just before the October 1929 crash that marked the start of the Great Depression.

Asness, a fund manager with a sense of humor, is as mystified as anyone why investors are willing to pay such high prices for the stocks of companies that can't possibly recover their pre-2000 growth rates, at least not in the next year.

"I imagine the head of CNBC saying 'You provide the pictures, I'll provide the bull market,' '' he says.

The 72nd anniversary of the '29 crash is Oct. 28-29. That's this Sunday and Monday. Thank goodness for the fact that American markets don't trade on Sundays.

-- posted by Rande

Top 10. Oct 26, 2001 11:34 AM

» lcha - Some more debt

There was a question on total debt yesterday. The paragraph below is from yesterdays Comstockfunds commentary. Yes, I know these guys have been bears since time began and their funds have underperformed(I'm being nice) the last 10 years. But if their facts are correct and the topic is debt, well, facts-is-facts.

The amount of the debt overhang in the U.S. is likely to restrain growth for some time to come. Total private debt to GDP is now a whopping 152% compared to 87% in 1960, and 115% in the mid-80s. This includes household debt, which is 100% of disposable personal income and corporate debt, which is 48% of GDP. All of these are at all-time highs. Similarly, consumer installment debt is at a record 21% of disposable income, and has not yet pulled back as it normally does during recessions. At the same time the consumer savings rate is at the lowest level in 68 years at a time when job layoffs are rising sharply and consumer net worth is down 15% over a year ago, the sharpest drop in more than 41 years. It is also noteworthy that delinquency rates on mortgage payments are at 4.5%, the highest in nine years.

-- posted by lcha