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August 21, 2001 Kit Menkins Leasing News www.leasingnews.org Tuesday, August 21,2001 __________________________________________________________________ Leasing News is delivered free to your computer daily. Contact: www.leasingnews.org or e-mail direct: kitmenkin@leasingnews.org Also Day in American History is the signature of the newsletter, written exclusively for Leasing News. --------------------------------------------------------------------------------------------- Headlines--- The Fed Drops ¼ Point Official Announcment Associated Press Story Bloomberg Analysis Asian Marketplace Agilent Cuts 4,500 Jobs World Commerce Online Files Chapter 11 Third of venture firms expected to failSan Diego Tribune-Union Ginny Young Drives Four Cars
Leasing News List is Up-dated : 116 Changes Paul Harvey is Back!!!! ///Drudge Report Extra/// ____________________________________________________________________f Official Announcement: The Federal Open Market Committee at its meeting today decided to lower its target for the federal funds rate by 25 basis points to 3.5 percent. In a related action, the Board of Governors approved a 25 basis point reduction in the discount rate to 3 percent. Today's action by the FOMC brings the decline in the target federal funds rate since the beginning of the year to 300 basis points. Household demand has been sustained, but business profits and capital spending continue to weaken and growth abroad is slowing, weighing on the U.S. economy. The associated easing of pressures on labor and product markets is expected to keep inflation contained. Although long-term prospects for productivity growth and the economy remain favorable, the committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Chicago, Kansas City and Dallas. Fed cuts rates quarter-point, ready to do more ---------------------------- ASSOCIATED PRESS WASHINGTON The Federal Reserve, still trying to keep the U.S. economy out of a recession, cut a key interest rate Tuesday for the seventh time this year, lowering the federal funds rate by a quarter-point to 3.50 percent. The reduction pushed the funds rate, the interest that banks charge on overnight loans, to its lowest level in more than seven years. In response, commercial banks were expected to announce that they were reducing their prime lending rates, the benchmark for millions of consumer and business loans, by a similar quarter-point, to 6.50 percent, also the lowest level in seven years. With the latest reduction, the Fed has cut rates by 3 percentage points since the beginning of this year, including five straight half-point rate reductions, which represented the Fed's fastest credit easing in nearly two decades. The effort is aimed at jump-starting the U.S. economy, which has been lackluster for a year and slipped close to recession territory in the spring. In explaining its latest rate move, the Fed said in a statement: "Household demand has been sustained, but business profits and capital spending continue to weaken and growth abroad is slowing, weighing on the U.S. economy." The quarter-point move had been expected. Some analysts had said the central bank might opt for a larger half-point move in an effort to deliver a surprise to Wall Street investors, who had already factored in a quarter-point cut. Signaling possible future moves, the Fed said the balance of risks going forward remains "weighted mainly toward conditions that may generate economic weakness in the foreseeable future." Many analysts believe the Fed will cut rates again at its next meeting on Oct. 2. --------------------------------------------------------------------------------------------- ( Bloomberg Take on Rate Cut ) Fed Cuts Overnight Rate to 3.5%, Cites Weakness Risk By John Cranford Washington, ) -- Federal Reserve policy makers lowered the benchmark U.S. interest rate a quarter percentage point, the seventh cut this year, and signaled another reduction is possible in coming months. Fed Chairman Alan Greenspan and his nine voting colleagues on the Open Market Committee reduced the target rate for overnight loans between banks to 3.5 percent, the lowest since April 1994. ``Household demand has been sustained, but business profits and capital spending continue to weaken and growth abroad is slowing, weighing on the U.S. economy,'' the Fed said in a four- paragraph statement accompanying its decision. Central bankers warned the economy faces a risk of continued weakness. Signs the economy is struggling include stagnant consumer confidence, slumping profits and a persistent slide in manufacturing. Dell Computer Corp. and Handspring Inc. are two among many computer-related companies that have reported a drop in sales. Those signs of weakness are countered by a rise in retail sales, surging homebuilding and an unchanged unemployment rate that may mean companies have gotten past the worst period of firings. Commercial banks probably will reduce borrowing costs for consumers and businesses right away, helping to underpin an expected rebound. Since the first of the year, the Fed has reduced its target rate 3 percentage points to keep the slowdown from worsening. Aggressive Rate Cutting That's the most aggressive pace of interest-rate reductions by the Fed since 1982. Even so, the economy has expanded at less than a 2 percent annual rate since mid-2000, the weakest 12-month period in 10 years. The Fed has room to lower rates further because the economy's weakness ``is expected to keep inflation contained,'' the statement said. Greenspan told Congress last month that rate reductions so far hadn't yet proved sufficient to pull the economy back onto its feet. ``We aren't free of the risk that economic weakness will be greater than currently anticipated, and require further policy response,'' he said. The biggest problem facing the economy has been a collapse in business investment that's forced manufacturers to reduce inventories by cutting production. The process has been difficult for telecommunications, computer and software companies. Business spending on equipment and software has declined for three straight quarters, the first time that's happened since 1982-1983. Dell, Handspring Dell, the biggest direct seller of personal computers, said fiscal third-quarter sales will miss forecasts as consumers and businesses put off purchases. Handspring, a money-losing maker of handheld computers, cut prices on most of its products to spur demand, reduce inventory and fight off rivals, after making reductions three months ago. PC-industry sales fell last quarter for the first time in 15 years as corporations and home users pared spending. Dell Chairman Michael Dell said the slowdown may last until the second quarter of next year, damping optimism that sales might get a boost sooner from back-to-school and holiday sales. The economy's growth was measured at a 0.7 percent annual rate in the second quarter, the weakest in more than eight years, according to preliminary Commerce Department figures. Revisions to that estimate may show the economy didn't grow at all or possibly contracted for the first time since the first quarter of 1993, analysts said. Discount Rate Cut The Fed's Board of Governors also voted today to cut the discount rate on loans to banks from the Fed system by a quarter percentage point to 3 percent. Although few banks borrow directly from the Fed to meet their cash reserve requirements, the central bank generally keeps the discount rate within a half point of the overnight bank rate. The Fed Banks of Boston, New York, Philadelphia, Richmond, Chicago, Kansas City and Dallas asked for the discount rate cut. Today's action was in line with the unanimous view of 82 economists surveyed by Bloomberg News. It puts the overnight rate at the lowest since it was 3.5 percent in April 1994. It may take six to nine months for the full effect of the Fed's rate reductions to work through the economy, analysts said. Fed policy makers, in their few public comments over the last month, have continued to say they expect a rebound late this year and next. ``We are cautiously optimistic that our current economic situation will improve as we approach 2002 and continue into next year,'' said Chicago Fed Bank President Michael Moskow, a voting member of the FOMC, in a speech in Iowa two weeks ago. Consumer Spending And Atlanta Fed Bank President Jack Guynn, a non-voting member, said last month he expected consumers and businesses to add to growth. ``The consumer has not completely stopped spending,'' he said in Mississippi. ``I'm optimistic that spending will stay at respectable levels, investment spending will begin to pick up.'' So far, the economy has shown few signs of reacting to lower rates. The Conference Board's consumer confidence index declined to 116.5 in July from a six-month high of 118.9 in June. The index has ranged between 109 and 119 this year, below the average reading of 127 for the previous five years. Corporate profits fell 16.8 percent in the second quarter, the worst performance since the third quarter of 1991, based on reports from 479 companies in the Standard & Poor's 500 Index, according to Thomson Financial/First Call. And manufacturing has contracted for 12 straight months, the longest stretch of weakness since the 1990-91 recession, according to the National Association of Purchasing Management. Retail Sales Other evidence supports the optimistic expectations of Fed policy makers. Retail sales have risen in three of the last four months when automobiles are excluded. Spending may accelerate as $38 billion in advance tax refund checks reach consumers. Target Corp.'s sales in the period ended Aug. 4 rose 8.5 percent, mostly reflecting a 12 percent gain at Target discount stores, compared with declines of 8.2 percent at the company's Marshall Field's department stores and 0.8 percent at its Mervyn's chain. Lowe's Cos., the second-largest home-improvement chain after Home Depot Inc., said its profit rose 18 percent in the quarter ended Aug. 3 as it was able to demand lower prices from suppliers. Construction of new homes rose 2.8 percent in July to the fastest pace in 17 months. And the number of fired workers filing for unemployment benefits has been below 400,000 for four straight weeks, the first time that's happened since mid-April, suggesting the pace of firings is slowing. While today's Fed statement suggested policy makers aren't ruling out further rate reductions, analysts are beginning to doubt there will be additional cuts unless business investment slumps further or consumers curb their spending. Of the 25 banks and securities firms that trade directly with the Fed, 13 say today's rate reduction will be the last this year and 12 expect at least one more -- possibly at the next policy meeting on Oct. 2. Before today's announcement, trading in fed funds futures contracts suggested about a four-fifths probability of another quarter-point reduction by the end of the year. __________________________________________________________________ Asian Marketplace Tokyo's main stock index fell yesterday for the fourth straight session to its lowest close in nearly 17 years, dragged down by weakness in technology shares. The benchmark 225-issue Nikkei Stock Average fell 187.60 points, or 1.64 percent, to 11,257.94 -- the lowest finish since Dec. 11, 1984, when it closed at 11,250.83. On Friday, the average closed down 0.60 percent to 11,445.54. This may affect Orix Corporation, billed in their press releases as Japan's top leasing company, Orix Corp. There is a re-shuffling of many companies for stock market report purposes. Fujitsu announced plans yesterday to slash 16,400 jobs, or 9 percent of its work force, in a bid to stem red ink amid a worldwide electronics slump. The Tokyo-based company said 11,400 of the job losses will be at its overseas operations. The company has 180,000 workers worldwide. Locally, the bad news for continues as: Agilent ( formerly the other half of Hewlett-Packard , here in San Jose ) posts loss, will cut 4,000 jobs: Agilent Technologies Inc., a maker of test and measurement equipment, reported a third-quarter loss that was narrower than Wall Street had expected, but said yesterday that it is slashing 4,000 jobs because business is expected to stay sluggish for quite some time. ________________________________________________________________________ WCO Files Chapter 11 World Commerce Online, Inc. filed for protection under Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court. The Company stated that it has not attained sufficient cash flow from operations to fund the on-going business and additional bridge loan financing that heretofore had been secured during the latter half of 2000 and the first seven months of 2001 was not available. Consequently, the Company was not able to fund the current operating costs of the business or meet the near term obligations of existing unsecured creditors. ________________________________________________________________________ Ginny Young Drives Four Cars I actually trade off driving 4 vehicles. I am basically an "old fashion" girl. I prefer old houses to new houses and I prefer antiques to new furniture. Three of my 4 cars are old. I drive a 67 Alpha Romeo Giulietta when I want to zip around town. A 69 Firebird convertible when I want the freedom of wind blowing through my hair (Note to self: Don't wear lipstick when your driving or riding in a convertible). A 61 Jaguar Mark II (<oh, what a beauty) when I want to be stared at. My newer car is a 97 BMW 750IL which is without a doubt the most comfortable car in the world. It is so big and roomy. It is also very practical, if the economy really takes a dive which causes the leasing business to halt and the stock market to crash, I can live in this car very comfortably.
Ginny ________________________________________________________________________ Third of venture firms expected to fail By Bruce V. Bigelow SAN DIEGO UNION-TRIBUNE STAFF WRITER Venture capitalists who saw their numbers mushroom in recent years now expect their ranks to thin by as much as a third in 2001, according to a poll intended to gauge industry sentiments. The survey, released yesterday by the Deloitte & Touche consulting firm, suggests many venture firms will fail due to an inability to raise new funds from their deep-pocket partners. The most vulnerable ones appear to be the newest venture firms and those that invested heavily in Internet startups, said J. David Clark, a managing director at Deloitte & Touche in New York. "A lot of the first-time, less-experienced and less-seasoned venture capital |