Money & Business
Money Watch: Is Ford Following the Leader--Off a Cliff?; Ho-ho-ho for Stocks; Help Wanted: Get Ready for Some Hiring, '90s Style
Is Ford Following the Leader--Off a Cliff?
For a company founded on innovation--think Model T and assembly lines--Ford's biggest problem seems to be a lack of creativity. Like rival GM, Ford produced too many vehicles in 2004, especially SUV s. And like GM, Ford "has had to resort to fire-sale tactics to clear excess inventory in 2005," says Merrill Lynch analyst John Casesa. Now, faced with shrinking market share and rising costs, Ford is following the leader once again. Only this time, the perennial No. 2 is competing to see who can shrink the fastest--not who can grow the biggest. Ford executives are said to be weighing whether to slash around 30,000 jobs in the coming years, just like GM. But while analysts say layoffs are necessary, job cuts don't address Ford's and GM's long-term problems, especially the daunting competition from Japanese and now Korean automakers. And the big problems won't go away, especially if Ford and GM keep thinking inside the box.
Ho-ho-ho for Stocks
There's one gift Santa often bestows on all investors--regardless of whether they've been naughty or nice. And that's the gift of bull market rallies in December. Over the past two decades, stocks have rocked in the final month of the year, with the Dow Jones industrial average posting average gains of 2.3 percent. This so-called Santa effect has made December the best month for equities over that period. "Christmas certainly is the season to be jolly where the stock market is concerned," says Clem Chambers, chief executive of the online financial website www.advfn.com. Maybe it's because companies post some of their best business in the holiday months, he says. "This, perhaps coupled with the general bonhomie, seems to account for the great returns of the month."
Help Wanted: Get Ready for Some Hiring, '90s Style
OK, so you might not be able to find jobs in the auto industry next year. But out-of-work Americans in most other industries have something to be hopeful for. That's because the labor market, which has recovered in fits and starts this year, could be poised to return in 2006 to the halcyon days of the late '90s. That's according to a forecast by the outplacement firm Challenger, Gray & Christmas. "A return to a late-1990s-style hiring frenzy may be only a matter of time," says CEO John Challenger. This is particularly true in the financial services, technology, healthcare, energy, and international business sectors, Challenger says. Those sectors alone are expected to produce 1.3 million new jobs in 2006. Look for a number of help-wanted ads for accountants, computer support specialists, financial planners, marketing managers, petroleum engineers, physical therapists, and international sales specialists.
The Week Ahead: The Last Hurrah?; Dicing Inflation
The Last Hurrah?
Federal Reserve Board Chairman Alan Greenspan presides Tuesday over his second-to-last monetary policy meeting. Benign inflation signals of late lead many economists to believe the Fed will raise short-term interest rates by only a quarter percentage point--not the half point some had anticipated. But will this be the last rate hike of the Greenspan era (which officially ends January 31 with his retirement after the next Fed meeting)? It all depends on the wording of the Fed's statement Tuesday, says Merrill Lynch economist David Rosenberg. For months, Fed officials have argued that "policy accommodation can be removed at a pace that is likely to be measured." In Fed speak, that means the central bank thinks it can keep lifting rates gradually. "If the word measured shows up again," Rosenberg says, get ready for another hike on January 31.
Dicing Inflation
Inflation is in the eye of the beholder. While the consumer price index has been climbing all year, "core inflation" --which strips out volatile food and energy prices--has been stable. Expect core inflation to remain under control when the Labor Department reports November's CPI results this week.
GETTING TO THE CORE
Consumer Price Index*
Core CPI**
[labels]
0.0
1.0
2.0
3.0
4.0
5.0 pct.
Jan. '05
May '05
Oct. '05
*Annualized inflation rate
** Consumer price index minus food and energy
Source: Department of Labor
This story appears in the December 19, 2005 print edition of U.S. News & World Report.