The markets are still jittery due to uncertainty on many fronts. And today’s jobs claims won’t do a lot to help.
We’ve been going through an economic hurricane since last summer. Although the stock market was up 50% since March and many indicators from unemployment to GDP showed signs of improvement in recent months, reported sightings of a recovery coming this year were absurdly premature.
The truth is that the indicators cited were not good…they were simply less bad than previous numbers. And less bad doesn’t equal good.
· The number of people receiving unemployment compensation tops 9 million, and 1.5 million of those are at risk of running out of their benefits.
· 1/3 of those unemployed have been out of work for 6 months or more.
· By the end of this year, nearly 40% of the workforce will have been unemployed at some point in the last 18 months.
· The number of people involuntarily working part time is at an all-time high…and those people will be hired back first before new jobs are created.
Jobs will materialize when materials start disappearing off store shelves. And that won’t happen until consumers are convinced this storm has passed.
Like in the eye of a hurricane, there are glimmers of sunshine. But that’s all they are. People who get hurt in hurricanes are typically those who get hit by the backside of the eye wall…because they go outside not realizing the rest of the storm is still coming.
Right now, the data is very clear…we are in the eye of the storm.
Sunday, August 23, 2009
“It’s Crunch Time for Healthcare” - August 19,2009
Resolving the healthcare debates would help one area of uncertainty in the markets. Most agree that the uninsured should have coverage; it’s fixing the skyrocketing costs of healthcare where the debates are most at odds.
There are two main problems: We’re getting old…and we don’t take care of ourselves. And both cost money!
· The population of Americans over 65 will double over the next twenty years, growing 4 times faster than all other age brackets. Nothing can be done about that.
· 2/3 of Americans are obese or overweight, including 30% of adolescents. Something can be done about that.
So what do we do?
Do we remodel the house or knock it down? Do we scrap the current system for a government run one? Or do we salvage it? Remodeling is typically cheaper. The Congressional Budget Office estimates that universal coverage spending will outstrip revenues by nearly $200 billion a year within 20 years. Pricey!
What most people seem to want is the current system reformed so that everyone can afford it…that means things like… insurance reform…hospital reform…prescription reform. Not easy, but cheaper.
It’s time to make some choices before the economy makes them for us…which could be even more costly.
There are two main problems: We’re getting old…and we don’t take care of ourselves. And both cost money!
· The population of Americans over 65 will double over the next twenty years, growing 4 times faster than all other age brackets. Nothing can be done about that.
· 2/3 of Americans are obese or overweight, including 30% of adolescents. Something can be done about that.
So what do we do?
Do we remodel the house or knock it down? Do we scrap the current system for a government run one? Or do we salvage it? Remodeling is typically cheaper. The Congressional Budget Office estimates that universal coverage spending will outstrip revenues by nearly $200 billion a year within 20 years. Pricey!
What most people seem to want is the current system reformed so that everyone can afford it…that means things like… insurance reform…hospital reform…prescription reform. Not easy, but cheaper.
It’s time to make some choices before the economy makes them for us…which could be even more costly.
Tuesday, August 18, 2009
“Home is where your Heart is…not your Portfolio” - August 18, 2009
Housing starts were essentially flat in July. They were down only 1%, after being up 4 months in a row.
But there are good reasons for optimism…here’s the logic:
· New housing construction is down 50% from year-ago levels, and down 75% from peak 2006 levels. This means inventories of unsold homes are a lot lower, bringing supply back into better balance with demand.
· Median home prices are down an average 15% nationwide from last year – and as much as 40–50% in some areas.
· And new homes are getting smaller – also helping prices…and ultimately, sales.
But don’t expect housing to bounce back with a vengeance…the underlying arithmetic of housing has changed:
· The Baby Boom pressures that for years caused housing to be an investment are long gone.
- The number of kids the average family had during the peak of the Baby Boom was 4.
- The number of kids the average family has had since?...2
…or half the level of new demand.
You can take this arithmetic to the bank…along with the new psychology that a home once again is a place to live…not an investment.
But there are good reasons for optimism…here’s the logic:
· New housing construction is down 50% from year-ago levels, and down 75% from peak 2006 levels. This means inventories of unsold homes are a lot lower, bringing supply back into better balance with demand.
· Median home prices are down an average 15% nationwide from last year – and as much as 40–50% in some areas.
· And new homes are getting smaller – also helping prices…and ultimately, sales.
But don’t expect housing to bounce back with a vengeance…the underlying arithmetic of housing has changed:
· The Baby Boom pressures that for years caused housing to be an investment are long gone.
- The number of kids the average family had during the peak of the Baby Boom was 4.
- The number of kids the average family has had since?...2
…or half the level of new demand.
You can take this arithmetic to the bank…along with the new psychology that a home once again is a place to live…not an investment.
Monday, August 17, 2009
“Town Meeting Time…Democracy at Work” - August 17, 2009
It’s hot; it’s sticky; it’s August…and the stock market isn’t doing much this month. Historically, the stock market does not do much in August…as most people are on vacation.
But that’s not the reason this year. Retail sales are soft, consumer confidence is surprisingly down, and contributing to anxieties are the heated town meetings from Portsmouth to Peoria to answer the big question of the summer: do we support government-run healthcare or not? And we are far from a consensus…and, as we know, markets don’t like uncertainty.
The good news is that we got our heads out of the summer haze and got involved…so much so we turned dog days into dog fights.
But that’s OK. That’s democracy at work. Look what happened over the weekend: in statements made by Health and Human Services Secretary Kathleen Sebelius, the Administration has backed off its insistence on a government-run health-insurance option.
Passing major healthcare reform that will effectively remake 1/6 of the US economy…is a tall order that shouldn’t be rushed. The town meetings have made that very clear. If any plan is not understood and embraced by most Americans, the stock markets and the economy will react negatively…and what has been hot and sticky in August could become a scorcher come fall and winter.
But that’s not the reason this year. Retail sales are soft, consumer confidence is surprisingly down, and contributing to anxieties are the heated town meetings from Portsmouth to Peoria to answer the big question of the summer: do we support government-run healthcare or not? And we are far from a consensus…and, as we know, markets don’t like uncertainty.
The good news is that we got our heads out of the summer haze and got involved…so much so we turned dog days into dog fights.
But that’s OK. That’s democracy at work. Look what happened over the weekend: in statements made by Health and Human Services Secretary Kathleen Sebelius, the Administration has backed off its insistence on a government-run health-insurance option.
Passing major healthcare reform that will effectively remake 1/6 of the US economy…is a tall order that shouldn’t be rushed. The town meetings have made that very clear. If any plan is not understood and embraced by most Americans, the stock markets and the economy will react negatively…and what has been hot and sticky in August could become a scorcher come fall and winter.
Tuesday, August 4, 2009
“Defending Bernanke…Defending Bernanke” - July 22, 2009
The Federal Reserve is back in the spotlight again this week. Chairman Bernanke testified yesterday on Capital Hill, and will do so again today.
While he has good news to share, this time, though, it’s as much about defending the Fed itself for its policies of the past year as it is about the economy…and the growing concerns over commercial real estate loans.
· Some feel the Fed went too far in bailing out companies and exposing taxpayers…and want to rein in its power and authority.
· Most, however, believe we should leave well enough alone…and not impede the Fed’s independence in conducting monetary policy…because fighting inflation, for example, involves unpopular decisions such as raising interest rates to slow economic growth – which hurts unemployment – not the stuff of which you want to mix with political agendas.
The Fed has done an outstanding job in the past year. What it did… in providing liquidity to the financial system at levels never seen before in history…averted an outright collapse in the global financial system. The Fed did what it had to do. The options were not pretty.
· Do we need more regulations to ensure umpires do their jobs better on the baseball field? NO!
· Do we need to regulate the Fed more with new rules to handcuff quick decisions in tough times? NO again!
If you think we really need to regulate the Fed for some simple overzealousness, think what we need to do to regulate Wall Street for its lack of character and integrity which led to much of this economic mess in the first place.
While he has good news to share, this time, though, it’s as much about defending the Fed itself for its policies of the past year as it is about the economy…and the growing concerns over commercial real estate loans.
· Some feel the Fed went too far in bailing out companies and exposing taxpayers…and want to rein in its power and authority.
· Most, however, believe we should leave well enough alone…and not impede the Fed’s independence in conducting monetary policy…because fighting inflation, for example, involves unpopular decisions such as raising interest rates to slow economic growth – which hurts unemployment – not the stuff of which you want to mix with political agendas.
The Fed has done an outstanding job in the past year. What it did… in providing liquidity to the financial system at levels never seen before in history…averted an outright collapse in the global financial system. The Fed did what it had to do. The options were not pretty.
· Do we need more regulations to ensure umpires do their jobs better on the baseball field? NO!
· Do we need to regulate the Fed more with new rules to handcuff quick decisions in tough times? NO again!
If you think we really need to regulate the Fed for some simple overzealousness, think what we need to do to regulate Wall Street for its lack of character and integrity which led to much of this economic mess in the first place.
Thursday, July 16, 2009
“Golden Sachs…and Raised Eyebrows” - July 16,2009
The Federal Reserve raised eyebrows of a positive sort yesterday when it announced that although unemployment will top 10% this year, the end of the recession may be in sight in 2010. Its latest forecasts are an improvement over previous ones. Stock markets loved the news and futures markets this morning are following suit as the new jobless claims were the lowest in 6 months.
However, “Golden Sachs…I mean Government Sachs…sorry, Goldman Sachs” raised eyebrows of a different sort when it announced mind-boggling second quarter earnings of almost $3 ½ billion, more than it earned in all of 2008…and one of the most extraordinary rebounds in history after a near meltdown of the U.S. banking industry. And all this was after they paid pack the government $10 billion it received from the TARP program.
Goldman also blew the lid off compensation, putting aside enough so that the average pay for all employees this year will likely top $700,000.
CEO Lloyd Blankfein explained the success as reflecting “improved financial market conditions” and “a deep and diverse client franchise”…some of the best mental yoga I’ve heard.
The truth of the matter is that companies like Goldman Sachs receive preferential treatment – like bailouts and concessions – that allow them to prosper at the expense of a flawed regulatory system. In a society governed passively by free markets and free elections – a good thing – organized greed always trumps disorganized democracy.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at what’s at the base of the market’s foundation – trust!
Raised eyebrows don’t help the economy…raised confidence does.
However, “Golden Sachs…I mean Government Sachs…sorry, Goldman Sachs” raised eyebrows of a different sort when it announced mind-boggling second quarter earnings of almost $3 ½ billion, more than it earned in all of 2008…and one of the most extraordinary rebounds in history after a near meltdown of the U.S. banking industry. And all this was after they paid pack the government $10 billion it received from the TARP program.
Goldman also blew the lid off compensation, putting aside enough so that the average pay for all employees this year will likely top $700,000.
CEO Lloyd Blankfein explained the success as reflecting “improved financial market conditions” and “a deep and diverse client franchise”…some of the best mental yoga I’ve heard.
The truth of the matter is that companies like Goldman Sachs receive preferential treatment – like bailouts and concessions – that allow them to prosper at the expense of a flawed regulatory system. In a society governed passively by free markets and free elections – a good thing – organized greed always trumps disorganized democracy.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at what’s at the base of the market’s foundation – trust!
Raised eyebrows don’t help the economy…raised confidence does.
Monday, July 6, 2009
An Oath for Financial Markets… - July 6, 2009
With fireworks behind us, and an absence of any real heady economic data this week, statistically, we should have a quiet start to the first full week of the second half. Hopefully!
Probably the only thing we need to keep an eye on is the University of Michigan’s highly regarded report on consumer confidence – which will be out late in the week – and expected to show some improvement.
So while we ponder the facts that:
· we spent nearly $1 billion on fireworks this year,
· bought 2 billion beers on July 4th alone, and
· nearly half of us attended a barbeque…
…maybe this is a good time to reflect on what we really just celebrated – the 233rd birthday of our Declaration of Independence – and what that means for our current economic outlook. The connection is not difficult.
That first American creed talked about, among other things, truths that are self-evident…such as rights to life, liberty, and the pursuit of happiness…as well as other duties and responsibilities.
Some of these truths have come to be reflected in long-standing oaths of professional conduct – like the Hippocratic Oath for doctors who promise to keep the sick from harm and injustice, lawyers’ oaths, and other oaths that vary by state but all point to ethical standards of behavior.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at the market’s foundation – trust! – which has been badly bruised. Maybe it’s time for a new oath, one also not to engage in harm, injustice, or mischief – but this time for those who manage our money.
Probably the only thing we need to keep an eye on is the University of Michigan’s highly regarded report on consumer confidence – which will be out late in the week – and expected to show some improvement.
So while we ponder the facts that:
· we spent nearly $1 billion on fireworks this year,
· bought 2 billion beers on July 4th alone, and
· nearly half of us attended a barbeque…
…maybe this is a good time to reflect on what we really just celebrated – the 233rd birthday of our Declaration of Independence – and what that means for our current economic outlook. The connection is not difficult.
That first American creed talked about, among other things, truths that are self-evident…such as rights to life, liberty, and the pursuit of happiness…as well as other duties and responsibilities.
Some of these truths have come to be reflected in long-standing oaths of professional conduct – like the Hippocratic Oath for doctors who promise to keep the sick from harm and injustice, lawyers’ oaths, and other oaths that vary by state but all point to ethical standards of behavior.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at the market’s foundation – trust! – which has been badly bruised. Maybe it’s time for a new oath, one also not to engage in harm, injustice, or mischief – but this time for those who manage our money.
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