Current Construction of Operating Costs

Kraft starts to find that an additional Production Cost, i.e., ethanol subsidies, has begun to eat into their 4th Quarter Profits. I would comment Kraft has benefitted from its Share reduction program, without which Today’s announcement would have been a funeral dirge. High Commodities costs had dragged down operating earnings in their Food Division by 53% by their Accounting, even while the Food Division is trying to spread the Profit loss away from their primary Products to their sideline Products; an attempt to mollify the 40% increase in dairy prices. Kraft lost 15% of full year Profits because of higher Operating Costs, though revenues increased by 8.4%. I am not an Intimate of Kraft business details, but you can bet at least 80% of the increase in Operating Costs came from ethanol subsidies, given that Kraft’s Food Division has maintained steady Operating structure for years.

China endures a major natural disaster–Snow. How to explain to an Average American what the danger of that Snow holds for the Chinese economy, when We traditionally undergo much deeper Snow drifts. It is all a question of Population density, combined with absolute lack of Transportation expansion for Product. American Snow Days means that the kids legally get to play hokey; Chinese Snow Days mean that Product doesn’t move, and lack of excess Transport units entails that Production fall behind, from which there is no basic recovery. The Chinese Production year is shortened by a much larger number of Days, than is the American trend response. There is also no realistic Recovery mechanism.

Mike Shedlock will tell you everything which you didn’t want to know about the American economy. Price Wars between Discount houses will not bring out the Shoppers this time, except to grab the announced Bargain offers. Shopping carts will remain empty of the associated items common in ordinary Shopping, due to constrained Consumer income. The later has been reduced by an induced higher overall Cost structure without Wage Increase relief. A Tax Rebate will not change the context of current Shopping structure. It reminds of the Federal Court Review issued today which reversed a lower Court Ruling that stated Packing companies must pay for knowingly underpaying Beef Producers, because the Beef Producers could not prove that the Packers had read current federal regulation on such Pricing; whatever happened to the long-established dictate that it is the duty of the Criminal to know and understand the nature of the Edict? lgl