• Harley Drops Its Forecast
    Posted by on September 7th, 2007 at 10:31 am

    This is not good news:

    The Milwaukee-based manufacturer said it now expects 2007 earnings of $3.69 a share to $3.77 a share, well below the average forecast of $4.12 a share in a survey of analysts by Thomson Financial.
    Moreover, Harley-Davidson reduced its estimate for third-quarter shipments to a range of 86,000 to 88,000 units, from 91,000 to 95,000 previously.
    “Initial reports about our 2008 model-year motorcycles from our dealers and the media have been excellent, but this is a difficult time for the U.S. consumer,” said CEO Jim Ziemer in a statement. “However, our U.S. dealers’ retail sales have fallen sharply during August.”
    Against the current economic background, Harley-Davidson said it no longer expects worldwide dealer retail sales to increase during the second half of this year, with a “modest” revenue decline for 2007 and earnings per share falling 4% to 6%.
    For 2008, management now expects the U.S. retail environment to continue to be challenging for motorcycle sales, with moderate revenue growth, narrower operating margins and earnings-per-share growth between 4% and 7%.
    Analysts have been expecting 2008 earnings of $4.51 a share, on average.
    Harley-Davidson also withdrew its financial forecast for 2009.

  • Today’s Jobs Report
    Posted by on September 7th, 2007 at 9:13 am

    This morning’s jobs report was a bit of a surprise. The economy lost 4,000 jobs last month. This is the first job loss in four years. Of course, the initial jobs report gets revised again and again, but this is the first serious evidence that the economy is going into, or perhaps is already in a recession. The economy needs to produce about 150,000 new jobs each month just to absorb population growth.
    Here’s a look a monthly nonfarm payroll gains. And losses.
    image521.png
    The economy has created far fewer jobs in this expansion than in the previous one. Some observers have thought this signals underlying weakness in the economy. I wasn’t so sure. Not all economies look the same, and this current one has been marked by strong growth in corporate profits but timid job growth. Instead of making grandiose political claims, I simply think that’s the style of this recovery.
    The unemployment rate stayed the same at 4.6%. I looked at the raw numbers and the unemployment actually had a teeny decline from 4.6472% in July to 4.6419 in August.
    Let’s remember that we had nearly 24 straight years where the unemployment was never this low. A lot of that time was quite good for equity prices.

  • Does This Look Like a Bubble to You?
    Posted by on September 6th, 2007 at 7:48 pm

    Not to me but a lot of folks would say yes.
    image520.png

  • Radio Silence
    Posted by on September 6th, 2007 at 4:07 pm

    Sorry for the lack of postings today. I was at the DC Money Show which is just a few blocks from Crossing Wall Street Global HQ.
    I saw many of the famous names (Forbes, Battipaglia, Kudlow). I’m not sure what to make of this but I also saw a well-dressed woman in her golden years…well-dressed except for her lime green Crocs. I think that may be the sign of a top.

  • Leading Negative Indicator: Robert Reich
    Posted by on September 5th, 2007 at 3:20 pm

    Poor Robert Reich. Ronald Bailey at Reason has the goods:

    Former Clinton labor secretary and perennial industrial policy hustler, Robert Reich, is a leading negative indicator. Whatever he predicts, the exact opposite occurs. In the 1980s, Reich declared that the U.S. economic growth rates were in a permanent slump and that we needed to adopt the economic model represented by the once famed Japanese Ministry of International Trade and Industry. In 1982, Reich co-authored Minding America’s Business with Ira Magaziner which recommended that the federal government start directing the economy. A few excerpts below:
    “U.S. companies and the government [should] develop a coherent and coordinated industrial policy whose aim is to raise the real income of our citizens by improving the pattern of our investments.” According to the two the governments of Japan, France and West Germany “understand that the only real alternative to developing a rational industrial policy that seeks to improve the competitive performance of their economy in world markets is for the government to cede the formation of policy to the politically strongest or most active elements of industry. Industrial policies are necessary to ease society’s adjustment to structural changes in a growing economy.”

    The United States was failing because it had “an irrational and uncoordinated industrial policy,” resulting in a “process of economic policy formation [that] remains decentralized and chaotic.” They added: “Perhaps the most striking feature of the U.S. industrial policy apparatus is the absence of a single agency or office with overall responsibility for monitoring changes in world markets or in the competitiveness of American industry, or for easing the adjustment of the domestic economy to these changes.”
    They concluded: “The failure of U.S. industrial policy is not simply a failure of organization, of course. It is a failure of substantive strategy. The industrial policies of Japan, West Germany and France have been more successful than U.S. policies because they have explicitly and consciously aimed at improving the international competitiveness of their businesses.”

    Total unmitigated flapdoodle.

    Ouch. This reminds me of the old saying that economists have predicted 13 of the last five recessions.
    My personal favorite goes to John Kenneth Galbraith writing in the New Yorker: “That the Soviet system has made great material progress in recent years is evident both from the statistics and from the general urban scene…One sees it in the appearance of solid well-being of the people on the streets…and the general aspect of restaurants, theaters, and shops…Partly, the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.”

  • Biomet Shareholders Approve Merger
    Posted by on September 5th, 2007 at 12:42 pm

    It’s official. Over 91% of Biomet (BMET) shareholders approved the merger agreement with LVB Acquisition, Inc., which is the consortium of Blackstone, Goldman, KKR and TPG. The deal is for $46 a share in cash.
    When the initial deal came out at $44 a share, the Internet went crazy. Actually, it was just me. But five months after my first post complaining that the offer was too low, Institutional Shareholder Services agreed. So the consortium raised the bid by $2 a share, and now, it’s a done deal.

  • Hedge-Fund Manager Invests Millions In Spouse’s Appearance
    Posted by on September 5th, 2007 at 12:01 pm

    The Onion Radio News is on the scene.

  • September Is the Worst Month for the Dow
    Posted by on September 5th, 2007 at 11:15 am

    CNBC looks at the average monthly performance of the Dow from 1896 to 2007:
    Month………% Positive……..% Negative……..Avg % Return
    Dec………………71.6………………28.4 ………………1.4
    Jan………………64.9………………34.2……………….1.1
    Aug………………63.6………………36.4………………1.2
    Nov………………61.5………………38.5………………1.1
    Jul………………..60.7………………39.3………………1.3
    Mar………………60.4………………39.6………………0.7
    Oct………………59.1………………40.9………………0.3
    Apr………………55.9………………44.1………………1.1
    May………………51.4………………48.7………………0.1
    Feb………………50.5………………49.5………………-0.2
    Jun………………50.0………………50.0………………0.4
    Sep………………40.9………………59.1………………-1.2

  • Scholars Link Success of Firms To Lives of CEOs
    Posted by on September 5th, 2007 at 11:06 am

    Give economists enough data and they’ll try to find links everywhere:

    Should shareholders in a company care if the chief executive’s child dies? What if the mother-in-law passes away?
    Such things don’t normally figure in investment decisions. But maybe they should, according to a recent study by three finance professors. Mining a trove of Danish government data on thousands of businesses, they were able to track links between CEO-family deaths and the companies’ profitability over a decade.
    It slid by about one-fifth, on average, in the two years after the death of a CEO’s child, and by about 15% after the death of a spouse. As for an executive’s mother-in-law, the old jokes seem to hold: The researchers found that profitability, on average, rose slightly after her demise.
    The study is part of an emerging — and controversial — area of financial research that delves into the lives and personalities of executives in search of links to stock prices and corporate performance. The trend is an outgrowth of the tendency to lionize CEOs as critical to the businesses they lead. If their performance is so vital, the researchers say, investors should want to know anything that could affect it.

  • Donaldson Reports 18th Straight Record Year
    Posted by on September 4th, 2007 at 4:44 pm

    Donaldson (DCI) just reported a great fiscal fourth quarter. Earnings came in at 53 cents a share, five cents more than estimates. This is the company’s 18th straight record year. Donaldson expects a 19th straight record year with EPS between $1.92 and $2.01.
    Here’s the streak:
    Year………….Sales……………..EPS
    1990…………$422.9……………$0.19
    1991…………$457.7……………$0.21
    1992…………$482.1……………$0.23
    1993…………$533.3……………$0.26
    1994…………$593.5……………$0.30
    1995…………$704.0……………$0.37
    1996…………$758.6……………$0.42
    1997…………$833.3……………$0.50
    1998…………$940.4……………$0.57
    1999…………$944.1……………$0.66
    2000…………$1,092.3…………$0.76
    2001…………$1,137.0…………$0.83
    2002…………$1,126.0…………$0.95
    2003…………$1,218.3…………$1.05
    2004…………$1,415.0…………$1.18
    2005…………$1,595.7…………$1.27
    2006…………$1,694.3…………$1.55
    2007…………$1,918.8…………$1.83
    2008…………$2,100.0…………$1.92 to $2.01 (est)