Thursday, November 20, 2008

NY Times cuts the dividend, IBM cuts 30,000

In a sign of the current economic times, the New York Times cut their annual dividend to .24 cents from .93. It will save the company $100 million annually.

IBM, which pre-announced earnings on October 10th, now sees a different outlook. I reacted skeptically to that announcement as just a way to goose the price of the stock. After borrowing $12 billion to do an accelerated stock buyback last year at far higher prices, it shows that IBM continues to manage their earnings and their stock price. Both are red flags.

Now IBM is canning 30,000 workers, but they are keeping it under wraps until they work out their severance packages. Apparently they didn't see this last month when they pre-announced earnings. But the week before they pre-announced IBM said they had hedged their foreign currency risk.

Maybe they should just become a hedge fund! But this market is undressing everyone. Add in the 52,000 workers that Citigroup is axing along with the 30,000 that IBM is cutting, and you'll understand why continuing unemployment claims are at a 26 year high.

Maybe the ECB will cut rates tomorrow, and our Fed will follow suit. You'd expect that with the last minute action in stocks at the bell, and Bernanke's penchant to affect options expiration. Aggresive world wide cut in rates is needed, but when have these Central Bankers gotten a clue?

So look for IBM's job cuts to be announced next week. They are following Citigroup, which supposedly has no need for capital, and GE, which supposedly had no need for money from overseas investors. Corporations lie, and stocks don't.

Will the sleeping Central Bankers wake up before everything becomes unhinged or will they only cut when they have their meetings?

Because these are the cuts the markets need, not the cuts from IBM or the New York Times.

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