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Information Release Edmonds, WA " The Friendliest Town on Puget Sound " April 18, 2005 For additional information contact: Tim Raetzloff 425 670 8167 Shares of Western Wireless were down a little more than 1% in the week ending Friday April 15, 2005. Usually that would be cause for disappointment, but this was an unusual week. The S&P 500 was down more than 3%, and many companies were down more than 3%. Of the 1500 largest companies on the New York Stock Exchange more than 100, over 7%, were down 10% or more. Of the top 1000 NASCAQ companies more than 100, over 10%, were down 10% or more. Western Wireless held most of its ground while dozens of companies fell past it. As of the close of trading on April 15, 2005, Western Wireless is one of the top 500 companies in the U.S. as measured by market capitalization. Market capitalization is calculated by multiplying the value of one share by the total shares outstanding. The Seattle-area now has 15 companies in the top 500 measured by market capitalization. This is the largest number since early 2000. The Seattle-area companies ranked in the top 500, and the market capitalization as of the close of trading April 15, 2005 are: # 3 Microsoft $266.1 billion * Note: Boeing counted as a Seattle-area company because SEC filings continue to show Boeing principal business address as Seattle, 4 years after Boeing supposedly left. ** Usual Note: I own shares of Washington Mutual and have no financial or business interest in any other company in this release. This result is reversed from the experience of the last 2½ years, and probably represents a move to the safety of the largest companies. Over 2½ years since the bottom of the last bear market the platinum circle has gained more than 28% in market capitalization, the gold circle has gained 46%, and the silver circle has gained 62%. The smaller companies have gained value more quickly than the largest companies. The largest companies have been very active in buying back shares to support stock values. Since the relaxed rules for buybacks following 9/11 many of the largest companies have spent billions of dollars supporting the value their shares. Cisco has been the most active, buying back over 820 million shares, or $14 billion at current value. Oracle as bought back 400 million shares. ExxonMobil has bought back the largest dollar amount, 370 million shares, or $20 billion. Repurchases of 100 - 200 million shares have been common in the platinum circle. The net effect has been an appearance of a stronger market among the largest companies. During a bull market companies usually issue more shares as options are redeemed and investors reinvest dividends. This bull market has been unusual as shares have been bought back rather than issued. The Dow roughly measures the movement of the platinum circle and is up about 34% since the bottom of the market, while the market capitalization is up only 28%. The difference is the large number of shares repurchased by the largest companies.
March 10, 2005 5 years ago we talked about the top of the stock market. Ever skeptical, you asked me to let you know the next time I thought the market was near a top. I think we are there. We are near 4 year highs today, and the market is still 10% - 20% below the last top, depending on which index you follow; but I think that we will see a break down into a new bear market soon, and at the absolute outside before Thanksgiving. I also think that we will see a break in the hot real estate market (big shock !!!) at the same time. This will be the first time since 1969 that the stock market and real estate market turn down together. I expect this to be a normal bear market of shorter duration and less depth than the one we suffered through from 2000 through 2002. My guess is a decline of 30%-35% in the S&P over 18 months. I don't know what the trigger will be but there are certainly plenty of possibilities. The collapse of the dollar has benefited the earnings of companies that have overseas operations, but the growth rate in overseas earnings will slow even if the dollar continues to drop and that will lower earnings expectations and acceptable multiples for earnings. In plain language stock prices of multi-nationals won't hold. Interest rates are certainly headed higher. Another President from Texas gave us "guns and butter" 4 decades ago. It couldn't be done then and it can't be done now. Interest rates have remained remarkably stable in the face of massive deficits. Expect that to change. I expect mortgage rates to climb to 8% for a 30-year fixed by the end of 2007, up from 5½% just a few weeks ago. When interest rates go up it will destroy the entire dynamic of the current housing boom. People who need to buy houses will still buy houses, but the mania will come to an end. Expect the builders to have overbuilt just as they did during every upturn in the 60s and 70s. Expect inflation to creep back into our daily lives. That will actually mitigate the housing market so that it doesn't collapse. The term stagflation will be resurrected into daily jargon on the news. The age of boomers seems to be considered in health care, but not in relation to investing. The leading edge of boomers turn 59½ in less than 4 months. They don't have to begin taking distributions from their tax-deferred accounts, but they can, and certainly they will think more about what is in those accounts. For those who have enough to be secure and don't want to risk it further, look for a move out of stocks into interest-bearing investments. If younger workers are permitted to put some social security investments into private accounts it will not be enough money, quickly enough, to stave off this bear market, but it will fuel the next bull market. Then there is oil. I don't understand how folks who are so worried about reducing taxes don't recognize that the tax of higher oil prices is far more devastating to regular folks than an income tax will ever be. Maybe the blindness is caused by the reality that the tax goes to friends in Texas, Oklahoma, and Saudi Arabia, who will finance the next campaign. Every time oil has reached record high prices in the past it has tanked the stock market and the economy. I keep hearing Wall Street types say that this time is different. Maybe it is different, but that is the same thing they were saying about technology stocks 5 years ago. I can't see any reason why it should be different this time. There just aren't very many like you driving hybrids, and the more money that goes for gasoline and heating oil is less money for food, clothes, and entertainment. Maybe the trigger will be China when they stop buying our bonds and financing the fiscal foolishness in DC. This also amazes me - where are the real conservatives? Are there any left who care about fiscal responsibility? When foreign counties decide to stop financing our debt maybe it will be a wake-up call, but it would also trigger a bear market. And there are terrorists. I regard this as the least likely scenario. It took Bin Laden and friends 8 years to organize their 2nd attack on the World Trade Center. I expect it may take them many more years to arrange a major attack. Nevertheless we continue to spend billions destroying our own airline and travel industries with excessive measures. There were adequate safeguards to stop terror before 9/11, but no one paying enough attention to detail. I expect that the multiple layers of bureaucracy that has been put in place since 9/11 actually makes us less likely to halt a terror attack but it certainly uses more resources. The terrorists may never need to make another attack. The weight of the anti-terror force may be enough to wreak economic devastation of its own. Maybe there won't be one trigger that causes the new bear market to start, but a combination of things. The biggest thing that I notice is that the charts of many stocks are getting top-heavy. It is only a matter of time before that corrects itself. It always does. The sky isn't falling but it may lower expectations when we have another bear market so close on the heels of the last one. Information Release Edmonds, WA " The Friendliest Town on Puget Sound " March 7, 2005 For additional information contact: Tim Raetzloff 425 670 8167 Abarim Business Computers Thoughts About Harry On December 1, 2003 I wrote the following: [ "I have been a vocal critic of Boeing management, offending some who receive these releases. The news that Phil Condit has "resigned", following the firing of Mike Sears, should be good news. It isn't. The appointment of Harry Stonecipher is a step backwards. Mr. Stonecipher said that Boeing has thousands of talented employees. At least he got that right. Mr. Condit talked about the great accomplishments of Boeing. He got that right also. Virtually nothing else that I heard in the press conference made any sense at all. The Senate investigation will now be even more thorough, and nearly certain to take a year or more. That puts the Everett 767 production line in jeopardy. Unless Boeing gets new 767 orders between now and the end of 2004, it may be impossible to keep production going long enough for the tanker contract to begin. If the Air Force really needs tankers, the planes ordered may not be 767s. This sudden action removing Mr. Sears and Mr. Condit makes it appear that the hands of the CEO were not clean in the tanker contract scandal. Mr. Sears appears ready to defend his actions as approved by his superior, and, probably, by the board. I don't think I need to remind anyone that this is an election year, and political advantage will determine what finally happens with the tanker contract. Boeing may finally get the contract because there are few alternatives, so the company may not ultimately suffer at all; but, for the workers on the 767 production line, that determination may not come soon enough to save their jobs. My very strong opinion is that the Boeing board has been asleep. Phil Condit's conduct of Boeing has been in question for more than 5 years, ever since the production snafu in the commercial airplane division. A prominent Seattle business columnist wrote in 1998 that Mr. Condit would not survive long in the job. Unfortunately that prediction was wrong. The problems at Boeing are not limited to commercial airplanes. Every Boeing division has had at least one crisis in the last year. This indicates serious problems at the very top, of which the tanker scandal is little more than the proverbial tip of the iceberg. As layers are disclosed in the investigation no good for Boeing can come from it. The frustrating part of the entire process is that the responsible parties seem certain to retire in wealth, while the employees pay the full bill of management failures. The State of Washington should be reviewing the $3 billion giveaway to keep Boeing 7E7 production in Washington. If the tanker process has been tainted, is there any reason to believe that Boeing has operated any differently in the 7E7 decision? The $3 billion in "incentives" to Boeing will be made up by every other business in the state. Is the damage done to those other businesses worth the "gain" of 7E7 jobs, and does that make Washington a more "business-friendly" environment? Wouldn't Washington be more "business-friendly" if the $3 billion was spread around to every other business in the state by small across-the-board reductions in the B&O tax? If the state is willing to give up $3 billion to be more "business-friendly", why not spend the money where it will really generate more jobs? This crisis in Boeing management gives Washington the opportunity to review the "incentives" and use the money in a more rational, and more productive way." ] Today I have to add that the board has finally awakened and done its job. That is very good news for the ultimate health of Boeing. However, the excuse for firing Harry Stonecipher sounds bogus, just like almost everything associated with Harry Stonecipher has been bogus right along. Harry's great skill has been the ability to bs Wall Street and administration officials. How ironic that the government should return Boeing to its good graces on Friday, in recognition that Boeings ethics woes are behind it, and on Sunday the board of directors should find it necessary to dismiss CEO Stonecipher for a lapse in judgment and ethics. I believe there is more to the firing than an affair. Almost certainly the board had more reason to request the resignation. There is, at least, a suspicion that investigators are getting closer to Harry in the Darlene Druyun investigation, and other ethics investigations of government contracts improperly awarded to Boeing. Sadly, this new cloud makes it almost certain that the 767 line in Everett will be shut down. It also will strengthen Boeing opponents in Congress. How much better if the board had done its job 15 months ago and cleaned house at the top. Boeing must fully cooperate with government investigators to remove the last of the suspicion. It is time to reconcile Boeing and Seattle. The individuals who were the cause of the friction are now gone. There is much to be gained for Boeing and the region if we find that we can again work together and salvage as much as possible from the situation. Information Release Edmonds, WA " The Friendliest Town on Puget Sound " July 18, 2004 For additional information contact: Tim Raetzloff 425 670 8167 No this isn't a pipe dream. I realize that Boeing made a huge production out of the move of the headquarters to Chicago, probably the biggest such move of the last decade; but check out Boeing's file at the SEC. Boeing's files at the SEC indicate that Chicago is the company mailing address, and that Seattle is the actual business address. It is not uncommon for a company to use 2 addresses for a year or more while moving the company headquarters. Burlington Resources kept Seattle as a mailing address for more than a year when BR moved to Texas 10 years ago. Potlatch kept San Francisco as a mailing address for more than a year when moving to Spokane 5 years ago. What is unusual (in fact the only case I found while checking companies that have moved headquarters in the last few years, there may be another but I didn't find it) is that Boeing did not keep Seattle as the mailing address, but installed a mailing address in Chicago and maintained the business address in Seattle. What is also unusual is the length of time - Boeing is using Seattle as its business address nearly 3 years after the "move". I can't find another example of dual addresses used that long. If you want to check for yourself go to: http://www.sec.gov/edgar/searchedgar/companysearch.html Less than half the expected 500 jobs landed in Chicago. It looks like Chicago got the CEO and some support staff, but a lot of what is considered to be executive functions remain in Seattle. I can only guess at why. An absentee CEO is not all that uncommon. You need only go as far as Redmond to AT&T Wireless where John Zeglis has been missing in action since AWE was spun from AT&T. Then there was notorious case of Bill Agee (Mr. Mary Cunningham) who would never go to Idaho to the headquarters of Morrison Knudsen, of which he happened to be CEO. There are literally hundreds of cases of absentee CEOs. Before I digress too much it appears that what Chicago really got was an absentee CEO and his entourage. The real headquarters remains in Seattle and is so indicated in the SEC filings. I can't blame Mr. Reed for believing that Chicago was cheated. I found only 1 other top 100 company in the country which uses a mailing address in one state and a business address in another state. That company is First Data, which moved from Atlanta to Greenwood Village, CO about 2 years ago. During the process of leaving Atlanta, a mailing address in Omaha was set up and is still on the SEC filings, but the business address is in Colorado where the company is really relocated. Fortune magazine lists First Data as a Colorado company, which is certainly correct. Using the same criteria, Boeing is still a Seattle company. I have decided that I will include Boeing in reports about Seattle companies until Boeing begins to use Chicago as its business address. Information Release Edmonds, WA " The Friendliest Town on Puget Sound " March 17, 2003 For additional information contact: Tim Raetzloff 425 670 8167 Abarim Business Computers 2 Years Since Boeing decided to Leave When Boeing announced that it was leaving Seattle 2 years ago, the city had barely stopped shaking from the February earthquake, and was still psychologically shaking from the Fat Tuesday riots a few weeks before and the WTO riots a year before. That timing probably made the Boeing announcement even more startling, and caused even more doubt and discussion than it would have at any other time. Boeing had been the economic engine of Seattle for 60 years, and Boeing was going away. Would the lights really go out this time? The lights didn't go out. After 2 years the Seattle area share of the market capitalization of the United States not only hasn't gone down, but it has gone up slightly, despite the loss of Boeing and 2 other large companies, as the region has clearly out-performed many other areas of the country. On March 16, 2001, the last Friday close before the Boeing announcement, there were 12 Seattle companies in the top 500 in the US when measured by market capitalization. The value of Seattle companies was $489.560 billion, 4.557% of the US total of $10.7425 trillion. Boeing was a little less than 10% of the Seattle total. In the 2 years since, Seattle lost the headquarters of Boeing, and also VoiceStream Wireless (now T-Mobile a part of Telekom), and Immunex (now a part of Amgen). The value of those 3 companies was $79.76 billion (17%) of the 2001 Seattle total, which should have reduced the Seattle portion of the top 500 to 3.8%. Yet on Friday March 14, 2003, there were again 12 Seattle companies in the top 500. The total market capitalization of Seattle companies had declined to $378.446 billion, a loss of 22.697%. Over the same period of time, the total market capitalization of the 500 most valuable companies in the US had declined to $8.0306 trillion, a loss of 25.245%. The Seattle portion of the total is now 4.713%, a higher percentage than it was 2 years before. 3 new companies that had never been in the top 500 in 2001 are now on the Seattle list: Expedia, Plum Creek, and Expeditors International. Of the old companies, the value of Amazon, Starbucks, PACCAR, and SAFECO have gone up. Washington Mutual and Weyerhaeuser are virtually unchanged. Microsoft and Costco Wholesale have both declined less than the national average. Of the largest Seattle area companies, only AT&T Wireless has declined more than the national average. The Seattle area doesn’t seem to have been damaged at all by the Boeing move. The biggest losers in the process seem to have been Boeing itself and the New York Stock Exchange. The value of Boeing shares has declined by 52.465%, and the total market capitalization of Boeing has declined by 57.197%. Boeing was the 52nd most valuable company in the US in 2001, and is now #80. Much of that loss can be attributed to September 11, and the devastation to commercial airlines. But there is anecdotal evidence that small Seattle area investors have quietly abandoned Boeing shares, and Chicago area investors have not filled the gap. Boeing shares were the foundation of many Seattle area portfolios for decades, through good times and bad. That attachment is now broken, and Boeing is probably a little the worse for it. Boeing was the largest New York Stock Exchange company in the Seattle area for 50 years. NYSE companies were 26.7% of the Seattle total in 2001, but the NYSE share has declined to 16.3% in 2003. The momentum that NYSE had built up in the late 90s by listing Washington Mutual and Nordstrom is now gone. Seattle is once again firmly NASDAQ territory. Boeing left Seattle, but the Seattle area is still among the dynamic areas of the country. Boeing’s arrival in Chicago didn’t do a thing for Chicago, but put the spotlight on the declining fortunes of the Windy City.
Appended Statistics: Largest Seattle area companies on March 16, 2001, market rank, market capitalization, share price, and shares outstanding: # 2 Microsoft $290,932,360,000 $54.56 5,332,338,000 shares # 52 Boeing $ 47,754,130,000 $53.75 888,449,000 shares # 57 AT&T Wireless $ 42,504,000,000 $18.40 2,310,000,000 shares # 86 WashingtonMutual $ 29,945,810,000 $51.49 581,585,000 shares #112 VoiceStream Wireless $ 20,581,650,000 $90.31 227,900,000 shares #135 Costco Wholesale $ 16,638,030,000 $37.13 448,102,000 shares #192 Immunex $ 11,421,940,000 $21.25 537,503,000 shares #207 Weyerhaeuser $ 10,616,060,000 $49.88 212,832,000 shares #257 Starbucks $ 8,243,000,000 $43.81 188,158,000 shares #456 Amazon.com $ 3,914,500,000 $11.00 355,864,000 shares #480 Nextel Partners $ 3,579,380,000 $14.75 242,670,000 shares #493 PACCAR $ 3,429,130,000 $44.81 76,526,000 shares
Largest Seattle area companies on March 14, 2003, market rank, market capitalization, share price, and shares outstanding:
# 1 Microsoft $266,036,430,000 $24.86 10,701,385,000 shares # 53 Washington Mutual $ 31,052,130,000 $33.53 926,100,000 shares #109 AT&T Wireless $ 16,037,580,000 $ 5.92 2,709,050,000 shares #123 Costco Wholesale $ 13,487,210,000 $29.59 455,803,000 shares #150 Weyerhaeuser $ 10,622,280,000 $48.51 218,971,000 shares #171 Amazon.com $ 9,593,480,000 $24.71 388,243,000 shares #177 Starbucks $ 9,403,350,000 $24.26 387,607,000 shares #282 PACCAR $ 5,612,360,000 $48.43 115,886,000 shares #327 SAFECO $ 4,710,140,000 $34.42 136,843,000 shares #349 Expedia $ 4,301,930,000 $37.14 115,830,000 shares #366 Plum Creek Timber $ 3,974,510,000 $21.50 184,861,000 shares #387 Expeditors International $ 3,615,570,000 $34.74 104,075,000 shares
Dow Jones Industrial Average March 16, 2001 9823.41 March 14, 2003 7859.71 Percent change - 19.99
S&P 500 March 16, 2001 1150.53 March 14, 2003 833.27 Percent change - 27.58
NASDAQ Composite March 16, 2001 1890.91 March 14, 2003 1340.33 Percent change - 29.12
Top 500 Market cap March 16, 2001 $10,742,542,740,000 March 14, 2003 $ 8,030,618,340,000 Percent change - 25.24
Seattle top 500 companies March 16, 2001 $ 489,560,190,000 March 14, 2003 $ 378,446,970,000 Percent change - 22.70
Boeing share price March 16, 2001 $53.75 March 14, 2003 $25.55 Percent change - 52.47
Boeing market capitalization March 16, 2001 $47,754,130,000 March 14, 2003 $20,439,440,000 Percent change - 57.20
And I suppose I should again provide the disclaimer. I do own shares of Washington Mutual. Neither I nor Abarim Business Computers have any financial interest in any of the other companies, except to the extent that local companies doing well is good for the local economy.
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