Hurricane Irene's devastation has resulted in over thirty deaths and will add another estimated $6 billion in debt to our already fragile economy. Insurance companies have been burdened with the housing crisis that resulted in thousands of vacant homes being vandalized, several forest fires and major flooding.
When do the locusts arrive?
You may recall that on January 21, 2010 the Supreme Court decided that corporations and labor unions could directly and expressly advocate for, or agains, political candidates for federal office. That, in addition to the 34,000+ lobbyists in D.C. !
Could corporation and labor union money corrupt our democracy?
Does the ruling minimize our individual freedom to vote?
How might that help "kick the can down the road" re our S&P rating for the new "Super Committee"?
Go figure...
As you will recall, it was British economist John Maynard Keynes who, in his "General Theory" writing of 1935, advocated strong government intervention in the economy. And, where has that led us?
Adam Smith, reputed to be the world's "first economist" back in the 1700's, advocated free markets...and less governement intervention. Perhaps Adam was correct! Where might that lead us?
The Fed chair stated that the FOMC will hold interest rates at zero through 2013. The free market however, will likely see greater price inflation due to the Fed's massive increases in money supply. Studies looking back to 1913 reveal that interest rates tend to track inflation.
That said, even if the Fed holds rates low, it is hard to understand how interest rates throughout our economy can remain low going forward. The FOMC Jackson Hole, Wyoming meeting later this month may shed more light on the strategy. Stay tuned.
My earlier suggestion today re the 'trickle-down" impact of the U.S. credit rating decline might impact Freddie Mac and Ginnie Mae has now become fact. Mortgage rates will rise...just what our troubled housing market and distressed homeowners don't need!
As mentioned in my previous comments, instead of the Fed dropping money from the air, why not employ working people to give them back the dignity that "unemployment compensation" steals? Some form of WPA should be examined. The global unrest stems from the lack of jobs. Please ask your Congressional rep if they have examined the Work Progress Administration approach as a possibility.
Reflecting on the stock market sell-off today,- while I am happy that our clients were re-positioned into bonds in a timely July fashion, I am saddened by the great number of those who experienced the 630+ point landslide decline. Future retirement plans and family growth will be damaged. And, i'm afraid that the carnage is not over. This, in an an economy with the S&P 500 index featuring corporations with average earnings over $100 per share! In a normal economy, the market would be rising.
In the final analysis, history will record that leadership was lacking. Watch what the Federal Reserve does tomorrow in their open market committee meeting... and hope that they don't create even more debt to burden our children by dumping more fiat cash into the global economy. (Princeton Economist Paul Krugman predicted a second dip recession tonight...unless Congress learns how to cooperate with their opposition.) I wish you the very best.
As though we don't have enough to worry about; consider the fact that S&P could now lower ratings on ancillary quasi-government entities, i.e. Fanny Mae and Freddie Mac. Also, municipalities and counties and states are also exposed to ratings cuts.
...It may take much longer than we anticipated to dig our way out of this economic hole. Say a prayer?
Well, the S&P rating loss we alluded to last evening has now occurred and will impact us all. President Obama tried to apply lipstick to the historic error when he subsequently stated that "private sector" jobs gained 154,000. (Unfortunatly, 37,000 government jobs were lost in the same period). We noted that government jobs in 2009 averaged $39.83 per hour versus private sector employment at $27.49 according to economist Mark J. Perry http://mjperry.blogspot.com/2010/02/two-americas-public-sector-vs-private.html.Why is that so?
Time for CHANGE:
The Work Progress Administration, you may recall, was part of the New Deal back in 1935. The program poured $4.8 billion directly into the hands of working men and women. Plan Administrator Harry Hopkins was surely correct when he averred, "Give a man a dole, and you save his body and destroy his spirit. Give a man a job and you save both body and spirit."
Perhaps a combination of unemployment benefits and public works could be a formula to improve our fixed asset base while stimulating the grass roots economy directly. Past WPA projects constructed 651,087 miles of roads, streets and highways, built 124,031 bridges, 125,110 public buildings and 8,192 public parks while stimulating existing private sector businesses and increasing employment. Carpe Diem?
All the best to you.
With the Dow down 12% from this year's high and the "true" level of unemployment in the area of 16-17%- there is some positive news. Overpriced gasoline is finally declining by maybe 40% in cost and corporate earnings, (due to the total confusion of CEO's and board members re DC's proposed entitlement plan revisions), are up! This, of course, at the expense of additional hiring! A mixed economic bag? you bet!
The core cause might just be apathetic voters-(only 40% of registered voters cast their ballot in our last Presidential election after 18 months of costly network prelude!) One must suppose that we are experiencing our just desserts) Can http://www.allcan.org change that over time?
Perhaps with your help.
For the above fundemental reasons, a deeper recession now seems likely... unless DC finally isolates and destroys the many inefficient and duplicative programs Congress fosters for their members' constituents and minimizes foreign aid.
I have long felt that whaterver Congress legislates into law should apply EQUALLY to THEM as well. Possible ya' think? Stay tuned,- but battan down the hatches for a rough sea.
I wish you the best!
The political posturing in Washington, combined with global financial uncertainty and a possible debt rating downgrade led us to begin investment style revisions for clients in late July. We feel that disintermediation will attract equity sale dollars to the fixed income side of our portfolios supporting bond prices. Our most aggressive clients are now only 20% in equities with assets preserved barring devaluation of the dollar.
As we point out in our latest book entitled "The Wall Street Casino", applying a tactical aspect to the very efficient "no-load" index funds allow investors to stay invested longer term while also being able to excape the wrath of rotten economies. It will be a while before we return to a more bullish mix.
I still feel that the best insurance against these economic crises lies in overcoming the voter apathy throughout the world. Tune in to http://www.allcan.org/ for a possible plan.
Recent political posturing and the resulting delay re the debt ceiling increase supports the need to investigate the credentials and campaign platforms of political candidates in more detail.
Upon reflection, it is amazing that even the Speaker of the House could have benefitted from more information on the goals of the freshman Congress members who would not relent on their campaign promises.
http://www.allcan.org is a step in the correct direction. It is all about candidates completing a voluntary "self-survey"...before the voters cast their ballots! (The site seeks an academic to write the outline for in-home neighborhood classes explaining the two-party system, constitutional law and methods to overcome voter apathy.)
The site welcomes your continued support. You can add your suggestions at askus@allcan.org.
