Fisher Capital Management Report Part 2 - The UK Emergency Budget

Fisher Capital Management Report  Part 2- The UK has had an emergency budget and it could have been much

worse. The heavy lifting is being done by a rise in VAT bringing in

£13 billion. On the spending side the cuts are achieved by freezing

public sector pay, indexing state benefits to the CPI rather than the

faster-rising RPI and freezing child benefits. State pensions will be

indexed to the higher of wages or the CPI but the pension age will

be raised to 66 fairly soon.

Interest rates are projected to remain low, with inflation absent;

and it is possible that Quantitative Easing will need to be resumed

but on present prospects this seems unlikely to be necessary.

Another concern is with the regulative proposals. There is an antibank

mentality developing in this coalition government, which is

most unfortunate; much of it seems to emanate from Vince Cable

and the Lib Dems.

Yet a moment’s thought should be enough to convince one that we

need bank credit expansion and a return to competition on the

bank high street in order to foster recovery and enterprise. Ever

tougher bank regulation is what was needed before, at the peak of

expansion, not now in the slough of recession giving way to recovery.

Talk of breaking up banks fails to recognise the natural economics

of banks, which favours scale and risk-spreading. Talk of capping

mortgage lending at modest percentages of income is also unfortunate

when the UK want to see a revival of it’s housing market, now once

again back in the doldrums.

A last area of concern is the state of the labour market. The UK do

have near ‘full employment’ if one discounts the modest temporary

effect of recession. But this only applies to those normally looking

for work.

Fisher Capital Management Report Part 2 - The UK Emergency Budget: There is now a large group of people who are claiming benefits of

various sorts in order to stay out of the labour market. Disability

benefit is one route; another is the having of children in order to

get child benefits and related parenting allowances, with tragic

consequences for some children.

Tightening up of this has been signalled in the budget but this has

happened before, with no proper follow-through.

Another UK labour market problem is the resurgence of union

power as Labour loosened the union laws passed before 1997. One

key loosening was the 12-week rule, which allows workers to breach

their contracts with impunity when on strike until 12 weeks of

strike have occurred. When strikes are designed for short periods

for maximum disruption, this 12 week period can take a long time

to trigger. During it the employing firm is unable to defend itself

by recruiting a different labour force.

Under the pre-1997 legislation firms were able to dismiss workers

in breach of contract, provided they did so in a non-discriminatory

way. This led to a huge reduction in strikes and a large rise in UK

productivity, to the great general benefit.

As we have seen in recent years, certain unions are exploiting this

12-week rule to damage the economy — the classic case has been

the BA dispute where UNITE has persisted in attempting to defend

well-above market wages for cabin crew.

In sum the budget was a decent start in restoring fiscal sanity. But

only a start.

The UK now needs urgent attention to the creation of a proper tax

system with low marginal rates but generating a reliable revenue

source — the two are perfectly compatible. It needs sense and

restraint in regulation. Finally they need to reform their labour

market yet again.

Fisher Capital Management - Japan Elects a New Premier Part 1

Fisher Capital Management Eight and a half months after riding the Democratic Party of Japan’s

(DPJ) historic lower house victory into office, Prime Minister Yukio

Hatoyama announced his resignation, having haphazardly frittered

away a chest brimming with political capital.

Major newspapers said that Hatoyama was resigning mainly for

two reasons: his failure to keep his promise to relocate the functions

of US Marine Corps Air Station Futenma, Okinawa, out of Okinawa

Prefecture, and a political funding scandal that included his mother’s

provision of some ¥1.26 billion to him over years.

Following Hatoyama’s resignation, Minister of Finance Naoto Kan

was elected as the new Prime Minister, the fifth in four years.

At his inaugural press conference Kan proposed a comprehensive

reconstruction of the economy, public finance, and social security

as his priority, in addition to reforming public administration, and

conducting responsible diplomatic and defence policy.

Fisher Capital Management Report- Japan Elects a New Premier Part 1: The biggest question surrounding the once-popular new government

is whether Kan can really turn over a new leaf for the DPJ. In his

first policy speech to the Diet as prime minister, Kan sought to set

his administration apart from the previous one by vowing to build

“a strong economy, strong finances and strong social welfare”.

Kan stressed the need to jolt Japan out of its currently weak state,

which he attributed to “anaemic economic growth, ballooning

public debt and dwindling public trust in the viability of Japan's

social security system”.

Observers and practitioners believe that the government is unlikely

to announce any significant new policy initiatives, as Kan was

already one of the main architects behind the previous

administration’s economic policy, although some changes have just

been announced in the DPJ election manifesto for the Upper House

election. For instance it drops the promise of doubling monthly

child allowances to ¥26000 next year.

“I hope to carry over the torch of rebuilding Japan passed on to

me by Hatoyama”, he observed at a press conference after his

election. Alan Feldman, chief economist at Morgan Stanley in Japan,

says that “although Kan’s initial speech did include some new

elements, the main message was continuity with Hatoyama’s

economic policies. Investors are likely to welcome the innovations,

but to remain sceptical of the overall philosophy”.

However, economists believe Kan will face a mountain of challenges

both at home and abroad in the near future. First, he needs to

rebuild that political capital ahead of the upper house elections.

Public support for the DPJ has recovered sharply after his

appointment suggesting that voters have, for now, forgiven the

ruling Democrats for the previous leaders’ policy mistakes.

But it remains to be seen whether the initial popularity of the Kan

administration will translate into a strong performance, and whether

Kan will ultimately be given a strong enough mandate to push

through difficult policy decisions.

Major newspaper polls give Prime Minister approval ratings of

between 60 and 70 percent; but such ratings can be very fickle.

The election will be an uphill battle for the DPJ. The DPJ is without

one of its coalition partners, the Social Democratic Party who left

the ruling camp over Hatoyama’s failure to remove the US base

from Okinawa, as demanded by its leader, Mizuho Fukushima.

The two parties that remain, the DPJ and the People’s New Party,

hold 122 of the upper house’s 242 seats, the slimmest majority

possible. Should the coalition lose that majority in the coming

election, it would mean a split Diet — its majority would only

remain in the lower house. And that would make passing bills

extremely difficult.

Fisher Capital Management Report- Japan Elects a New Premier Part 1: Kan will have plenty on the economic front too. In terms of fiscal

policy, as a former Finance minister he has turned into a fiscal

conservative, having been a champion of funnelling revenue from

higher taxes toward government spending in order to achieve

economic growth. “Economic growth, fiscal reconstruction and

social welfare reform will be achieved together”, he told reporters.

Fisher Capital management Warning : Imperial Tobacco issues Spanish profit warning

Imperial Tobacco (IMT.L) today warned profits from its Spanish division could drop by up to £110 million for the year ending 30 September 2011 compared to previous guidance.
The cigarette manufacturer said it was responding to price cuts from competitors in recent weeks, which have impacted all market participants in the Spanish market, and the company has moved to protect its market position.
Included in the £110 million cut in forecast, the company said £40 million of this represented a one-off non-recurring impact on the logistics division.
The company’s share price dipped last month when members of the Spanish media reported that its Altadis subsidiary was planning to cut the price of its blonde tobacco brands following an aggressive pricing move by rival Phillip Morris.
In a statement delivered to the London StockExchange, the company said it is continuing to monitor the position closely.
Despite today’s announcement, Imperial maintained that the overall group performance is unlikely to be materially impacted when the financial results are released on 30 September, saying they remain in line with the board’s expectations.
Throughout Western Europe, Imperial has a presence in most markets through its Davidoff, West, JPS and Golden Virginia brands.
As at 0845hrs, Imperial Tobacco was already trading down at 2,059, 1.25 per cent down on Friday’s close.
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Fisher Capital Management Warning: Kellogg Gets Second FDA Warning on Listeria in 2 Years

A Kellogg Co. (K) cookie plant in Augusta, Georgia, was found to have a “persistent strain” of listeria during a February inspection, including on food-contact surfaces, according to a warning letter from U.S. regulators.

The Food and Drug Administration letter, dated June 7, was sent less than two years after a Kellogg Eggo waffle plant in the same state was shut for similar reasons.

The inspection found flies and pools of water, the FDA said. The letter from District Director John Gridley didn’t say that any products were tainted with listeria, yet said they were “adulterated” and “may have become contaminated with filth.” The Augusta plant makes Keebler and Famous Amos cookies, and is one of five cookie bakeries Kellogg operates in North America.

“While the FDA did not identify specific concerns with the food, we take this situation very seriously,” Kris Charles, a spokeswoman for Battle Creek, Michigan-based Kellogg, said in an e-mail. “We have undertaken a number of aggressive actions to address their concerns including comprehensive cleaning and extensive testing.”

Kellogg’s response didn’t include dates for taking action at the plant, the FDA said. The regulator gave Kellogg 15 days to outline specific remedies to avoid injunction or product seizure.

Eggo Production

Kellogg’s cookies are baked at a temperature high enough to kill any listeria present, according to Robert Gravani, a food science professor at Cornell University in Ithaca, New York. The lack of an FDA product recall suggests that listeria was not found in the cookies, he said. FDA spokeswoman Tamara Ward declined to comment on a potential recall.

Listeria is a bacterium found in prepared foods and soil that can cause a serious infection in humans called listeriosis. It is particularly harmful to pregnant women, the young, the elderly, and people with weak immune systems, according to the FDA’s website.

Kellogg, the largest U.S. maker of breakfast cereals, fell 45 cents to $54.96 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 7.6 percent this year.

The FDA in January 2010 ordered Kellogg to improve sanitation controls at the different Georgia plant after Eggo buttermilk waffles were found contaminated with listeria bacteria. That, along with flooding and equipment changes at another waffle factory in 2009, slowed production for months and caused Eggo’s market share to drop.

Kellogg in June 2010 voluntarily recalled about 28 million boxes of cereal including Froot Loops and Honey Smacks, citing unusual taste and odor coming from the liner of packages. The recalled boxes were made at an Omaha, Nebraska, facility. North American cereal sales dropped 5 percent in 2010, partly because of the recall.

To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net.

To contact the editor responsible for this story: Steve Walsh at swalsh@bloomberg.net

fisher capital management strategies: Morning after bin Laden dies, patriotism fuels economy

The killing of Osama bin Laden gave New Jersey’s economy an emotion-fueled boost Monday morning. But consumers and investors turned their attention to jobs, gasoline prices and inflation by Monday afternoon.

Myla Williamson gave a typical sober response when she said she was pleased to see the nation’s most wanted terrorist brought to justice. But for her, at least, the day was no different.

“I can’t spend what I don’t have,” said Williamson, 44, of Ocean Grove. “I’m trying to get out of debt.”

Bin Laden was killed Sunday in a U.S. operation that offered a chance for closure, particularly to Central Jersey residents who lost family, friends and co-workers in al-Qaida’s Sept. 11, 2001, plots.

It set off celebrations in New York and Washington, D.C. And it could in the long-term help to bring stability to the Middle East. But euphoria can only carry you so far, experts said.

“Does it make people feel better? Yes. And anything that makes people feel better and raises confidence is a boost,” said Joel Naroff, an economist based in Holland, Pa. “But ultimately it comes down to people’s pocketbooks.”

Some stores found themselves with a bigger advantage than others. Kempton Flags in Wall, for example, sold more American flags on Monday, including many to parents whose children are in the military, co-owner Shawn Kempton said.

But initial giddiness gave way to reality within just a few hours. For example:

The Dow Jones industrial average opened higher on Monday, but gave back its gains in the afternoon to close virtually unchanged. It closed at 12,807.36, down $3.18, or 0.02 percent, at 4 p.m. Monday.Investors were more concerned about the federal government’s debt ceiling, the aftermath of Japan’s earthquake and upheaval in the Middle East, said Doug Lyons of Trident Wealth Advisors in Bay Head.”There are more structural issues that would impact” the stock market, he said.

Fisher Capital Management- Financial Market August 2010

Fisher Capital Management- Financial Markets: Sentiment in the financial markets has improved

over the past month. The global economic recovery is continuing,

so far there have been no sovereign debt defaults, and there has

been a modest recovery in the euro. Investors and traders therefore

appear to have concluded that the gloom was overdone.

But there has been evidence of a worsening situation in Spain, and

the decision by the Chinese authorities to adopt a “more flexible”

towards renminbi has also raised some concerns about the growth

prospects for the Chinese economy.

Fisher Capital Management- Equity Markets: All the major equity markets, and the emerging

markets, have improved over the past month. Wall Street has outperformed

markets elsewhere because of some welcome economic

data; there have been strong gains in most of the mainland European

markets as the sovereign debt crisis has appeared to ease; the UK

market has welcomed the measures by the new coalition government

to address the problems of the huge UK fiscal deficit; and the

Japanese market has also moved slightly higher. Corporate results

have been satisfactory; and this has helped to improve sentiment

amongst investors.

Government Bond Markets have had another unusual month. The

sovereign debt crisis might have been expected to lead to a general

weakness in bond markets; but the main effect has been to produce

aggressive switching for the “weaker” markets to the “stronger”

ones, and a further widening of the yield curve.

As a result the major markets are unchanged or only slightly lower

at a time when the “weaker” markets, especially in Southern Europe,

have continued their sharp declines. Slow economic growth and

low short-term interest rates are continuing to provide support.

Currencies: The improvement in sentiment in the markets has led

to a movement of funds out of the “safe havens” of the dollar and

the yen into commodity-related currencies and “riskier” assets.

Both the dollar and the yen are therefore slightly weaker over the

month; and this movement has also eased some of the pressure on

the euro, and allowed it to recover.

Sterling has also improved as the markets have welcomed the

measures introduced by the new UK government to reduce the

fiscal deficit.

Fisher Capital Management- Shrt-Term Interest Rates: There have been no changes in shortterm

interest rates over the past month in the major financial

markets.

Fisher Capital Management- Commodity markets: have produced a mixed performance over the

past month, with some weakness in base metal prices, but strong

gains in the prices of cocoa, coffee, oil and precious metals.

Fisher Capital Equipment Update - Machine Components Industry in China Problems

Fisher Capital Equipment Management Update- Machine Components Industry in China Problems and their causes - the machinery, basic parts - construction machinery industry Avoid online internet scams, get latest updates on Fisher Capital Equipment Management website.

As our country on the basis of pieces of machinery in Machinery Industry Awareness of the importance of late, long-term lack of investment, leading the entire industry based on poor, weak economic foundation and strength of the weak. In particular, as the host country raises the level of basic pieces of machinery behind the main bottleneck is becoming more apparent. In recent years, although the introduction of technology, technological innovation, scientific research and development, our country has given some support, but with the current level of market demand and overseas, there remains no small gap, in particular in: less product variety, low level quality of instability, early failure rate, poor reliability.

  China Machine Components product variety, small size, especially a big gap between high-end products can not meet the growing needs of the host. At present, various types of host based piece of performance indicators is roughly equivalent to the level of foreign 20th century 80s. Quality of instability, early failure rate, reliability is poor, the Achilles heel of basic items. Therefore, many OEMs to enhance the market competitiveness of its host, often choose to import the basis of supporting documents, resulting in domestic basic parts, especially the low-tech products, the domestic market share declined. Although China's exports of basic items has obvious advantages, but mainly labor-intensive products, the number of large, low-value, technology added value.

  Present, China Machine Components Industry of the following main issues: First, redundant construction
seriously, the low degree of specialization, not form scale, low economic efficiency
Machine Components, compared with the host enterprises to establish an initial financial and technical inputs required relatively few times in the national economic development period, have increased the number of basic parts manufacturer, also appeared along a large number of low-level duplicated construction, multi-point, volume is small, not form economies of scale. Basic pieces of business, while gradually independent of the OE, but most of the enterprise itself is large and, small but complete, low degree of specialization, the level of equipment is not high, the quality of instability, low economic efficiency. If China Bearing Annual output of three large enterprise sector bearing less than the sum of a well-known foreign companies 50%. The past two years, China built nearly one hundred Hydraulic Parts Plant, but the annual output of 300,000 or more only a few, the main product is Agricultural Machinery Matching. The company's annual output of Germany Rexroth hydraulic items 1.3 million, the Japanese oil research (strain) is also an annual output of 600,000 or more. Industrialized countries die of about 150 000 companies per capita output to 20 million, China's only 4 million to 50 thousand yuan. In recent years, with a variety of common development policies, the ownership, basic parts industry is experiencing increasingly focus from scattered to the intensive development process.

Fisher Capital Equipment Management Update- Machine Components Industry in China Problems and their causes - the machinery, basic parts - construction machinery industry Avoid online internet scams, get latest updates on Fisher Capital Equipment Management website.

  Second, weak research and development, insufficient capital investment, technological progress is slow
Basic pieces of 70 different industries in the late 20th century, early 80s to early introduction of a number of foreign advanced technology, but the lack of adequate absorption of the hardware and software investment. According to foreign experience, required for digestion and absorption of imported technology and capital ratio of approximately 1:7, and our understanding of this late, slow digestion and absorption steps. Technical strength of competition in the market is actually a contest. Have attached great importance to overseas, have increased investment, occupy high ground. Various well-known companies for research and development funds account for its Sell Amount of 4% to 5%, 10% in key areas. Although many institutions of higher learning in China at present engaged in research work, a lot of theoretical research, scientific research, patents, papers have a very high level, but actual production is not tightly integrated, especially into commodities slow.

  Third, and related raw materials, backward technology, low level of technology and technological equipment, the foundation of the development constraints

  Fasteners, chains, springs, bearings, molds and other steel products used by the poor quality specifications less direct impact on the quality of basic items, while the hydraulic pressure and hydraulic pressure castings and quality of products related to electronic control technology backward, but also directly affect the quality and reliability of hydraulic components. Mechanical parts are generally based on batch, mass production, but also more variety, high precision machining products, and therefore requires high technology and equipment production, large investment. Foreign multi-use high efficiency and precision of the plane, line or soft line for efficient automated production. However, some basic pieces of our business by financial constraints, input small businesses transform themselves poor, less advanced equipment not matching, affect product quality and quality.