Sweet Tammy Anniversary Cake! left
Sweet Tammy wedding cake! right
You do not have to be Einstein to understand the simple math problem we face.
One and a half million 'legal' Americans enter the work force each year. We have 10 million 'legal Americans' listed as unemployed and another 6 million unemployed but not listed as such.
We also have an equal number of illegals , if not more, working and sending most of the money elsewhere and what they spend here is more than offset by the social demands and costs they make and receive.
Thus, we must create around 300,000 jobs each month to get the new 'legal' workers employed and 1/5th of the 'legal' unemployed back to work if we can do so over a five year period.
People out of work for a long time probably need re-training and/or may not find the same job and generally will receive lower wages and or/benefits when they finally get work.
This means revenue to the government is likely to drop relative to what it was when we were at 4% plus unemployment.
Obama is spending money like it was gushing Gulf oil and therefore the deficit widens while the wherewithal to pay for it is shrinking.
As government debt increases the cost of carry does as well so a greater share of GDP goes to government and is taken from the private sector which, you should know, is where jobs are created. (Even Obama has ceased hiring high paid CZARS but at least Michele is traveling and spending money on fancy vacations but in foreign lands.)
Taxes are going up so business is uncertain about consumer attitudes and thus have few incentives to spend. Particularly is this so when plant utilization is around
74%.
By now you should be getting the point I have been making for well over a year. We are in trouble and this president does not have a clue what to do about it except make teleprompter speeches to buck us up and tell us how much he has done. Since it is all a mirage and puffery it is only natural that we feel worse afterwards. Less and less are even willing to listen.
Meanwhile, The Fed is trying to put money back into the economy against the hope that it will create some business momentum and make it lest costly to spend when in fact there being frightened, as they should be, is causing them to SAVE.
Interest rates around zero force those living on fixed incomes to seek greater risk for higher returns and that is not healthy. No wonder the market is so volatile among other reasons.
To sum it up, I see the growing prospect of a re-recession on the horizon.
The market could get a temporary jolt upward if Republicans make a good showing in the November election but they are not likely to have the guts to do what needs to be done like Christie in New Jersey. Furthermore, even if they do, as I just explained, the math is simply overwhelming and Obama would be there to veto strong initiatives calling for gutting government spending.
So what we have is a big bill coming due for all those lunches we ate thinking they were free because it was government not ourselves that was buying them. If our schools taught us to reason, to understand history and economics we would know we are the government and we did the spending.
You see it works this way: Politicians buy your vote with your money, then give it to others so they can get more votes and then they tell us it will not cost us a dime because we never have to pay it back - alas, we believed it.
Not a pretty picture but I believe a realistic one.
Then we have the other side of the argument. You decide. (See 1, 1a and 1b below.)
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Governorships are where the next presidential candidate should come from and Republicans have several that have done credible jobs: Minnesota, Indiana, Mississippi, and New Jersey.
Of course you will also get those with less hands on and more legislative experience such as Newt but he carries some baggage though he was very successful as the former Speaker and Palin, who was an effective governor but has been damaged by the press and media and some of her own doings. Romney has proven capable of any job he undertook but he too is somewhat yesterday.
It is far too early to conclude who is best suited to run on the Republican ticket because that will be shaped by the opposing candidate(s), the upcoming November results and the economic circumstances at the time. Whomever is selected the Republicans must move away from divisive social issues and stick to government and fiscal reform. They must also be willing and able to implement hard decisions about getting America's train not only back on track but also on one that has a solid foundation which will stand the test of time.
We face a number of powerful emerging nations that seek their earned place in the world's driver's seat but are not necessarily egalitarian in spirit.(See 2 below.)
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Democrats running for office are faced with a difficult moral decision - do they allow Obama to campaign for them and should they appear with him?
I can think of no greater indictment regarding their view of Obama both as a person and as a leader but then, most politicians live a constant life of double speak and compromise so their dilemma is not surprising.
Elaine Marshall, who is running for The Senate representing N.C. was interviewed this morning and waivered when asked did she want Obama to come to her state and campaign for her. Obama is toxic!
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Dick
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1)Dow Drops After Jobs Data
By Kristina Peterson
Stocks skidded as further signs of weakness in the jobs market cast fresh doubt over the path of the economic recovery and sent discouraged investors flocking to safer assets.
The Dow Jones Industrial Average fell 148 points to 10526 points and a surge in demand for Treasurys pushed the yield on the 10-year note to its lowest level in more than a year. The Nasdaq Composite slid 1.3% to 2263. The Standard & Poor's 500-stock index fell below its 200-day moving average, tumbling 1.4% to 1110.
Nonfarm payrolls fell by 131,000 last month, more than the drop of 60,000 economists had expected, the Labor Department said. Only 71,000 private-sector jobs were added last month. The government also revised lower June's data to reflect a payrolls drop of 221,000, more than the 125,000 decline previously reported.
The report added to a stream of economic data over recent weeks that indicate the American recovery continues to weaken, and stoked fears the country could still fall back into a recession.
"Everywhere you look, the economic news is borderline horrible," said Dave Rovelli, managing director of equity trading at Canaccord Adams. "We're two years into this recession, and we're not getting any better—we can't even add jobs. Companies are doing well because they've slimmed down, but they're not hiring."
Investors worry that consumer spending, which makes up 70% of economic activity, could further erode in the face of persistently high unemployment rates. And they remain wary about how the economic readings will influence the outcome of the Federal Reserve's meeting next week.
"Clearly now the thought is it's going to put pressure on the Fed to see what they do next week," said David Bellantonio, head of US trading at Instinet.
Treasurys rallied as demand for the safe-haven assets surged. The 10-year Treasury note rose, pushing its yield down to 2.83%, hitting its lowest level since April 2009.
The dollar weakened against both the euro and the yen. The euro was trading recently around $1.3276, up from $1.3186 late Thursday in New York. The U.S. Dollar Index, which tracks the U.S. currency against a basket of six others, shed 0.6%.
Gold prices rose above $1,200, helped by the weakening dollar, as investors moved to the perceived safety of the metal.
1a)Great News: The Economy Is Not Bad
Stocks have made it half-way back to the April highs. I think we'll make it all the way back this year.
That doesn't strike me as an especially heroic or bullish position. At this point, all that it would require is a roughly 8% rally. Stocks would finish 2010 with about an 11% gain, including dividends. That's a bit above the long-term historical average, but nothing spectacular.
Last week, I said I thought the correction in stocks was over. I got quite a few emails from readers asking me how I could say such a thing, considering that the economy is falling back into recession or that it never truly got out. The answer is simple. The recession is over. It's been over for at least a year. And we're not about to fall into a new one.
I'm not saying we're in a rip-roaring growth phase. One look at Friday's jobs report will tell you we're not. We're growing very slowly, but we're growing.
The economy lost of 131,000 jobs in July, but if you strip out the loss of 143,000 temporary Census workers (and other government job losses), you'll find the private sector added 71,000 jobs last month. More people have real jobs this month than they did last month.
That's good -- but not great. And this economy is good -- but not great, but also not bad. That's good enough for more gains in stocks.
For corporate earnings to grow a lot, the economy needs to grow only a little. Just look at earnings for the S&P 500, which have bounced back 56% from their recession-era lows. In October 2009, the trailing four-quarter operating earnings for S&P 500 members were $442 billion. Now, they're $690 billion. However, the overall economy, as measured by gross domestic product, has grown only 1.9% from the lows. (By the way, I'm not adjusting earnings or GDP for inflation.)
How can the S&P 500 squeeze a 55% earnings gain out of only 1.9% growth in the economy? You could ask the same question about the downside, in reverse. During the recession, GDP fell 2.1%, but S&P 500 earnings fell 46%. There are two main reasons for this seemingly strange phenomenon.
First, companies can experience outright losses, while the worst that can happen to GDP is that production is reduced. Much of the S&P 500's drop in earnings was attributable to losses in the financial sector, mostly from write-offs of bad loans and bad investments in so-called "toxic assets." While overall earnings were reduced by $248 billion from their August 2007 peak to their October 2009 trough, the S&P 500 financial sector took a $277 billion swing, from profits of $222 billion to an outright loss of $54 billion.
When the losses are over, earnings march forward. From October 2009, the financial sector has swung back $141 billion, from that $54 billion loss to a profit of $86 billion. That leaves another $109 billion in profit growth attributable to the rest of the S&P 500.
And that brings me to the second reason why corporate earnings swing so much more violently than underlying economic growth: Companies are leveraged to the economy. I mean this in two ways. First, I speak of "financial leverage," in which companies finance themselves with debt, allowing them to conduct larger operations on the same equity base, thus reporting larger gains or losses than they would otherwise. Second, I refer to what analysts call "operating leverage."
To see how operating leverage works, consider an airline. During the good times, it had to buy more planes to compete and meet the demands of a growing number of travelers. When the recession struck, people stopped traveling, but the airline still had its fleet. Now, it has to pay to finance and maintain the planes, but there are no travelers to bring in sales. Profits turn to losses, even with a seemingly small decline in travel. However, once the economy recovers and people start traveling again, the airline hits the jackpot. It has all the planes just sitting there. Now, it can earn money on them, without having to pay to get them. That's operating leverage.
We're in that part of the economic cycle now. The economy still hasn't completely recovered -- by "completely" I mean that GDP hasn't risen back to its pre-recession peak yet. Businesses have a lot of idle airplanes, stores, factories and so on, just waiting to be brought back online when demand materializes.
Right now, GDP has to rise another 0.2% to get back to the old highs. Earnings have to increase a hundred times that, about 20%, to get back to their former peak. That's the ratio of operating leverage built into corporate America right now -- about a hundred to one.
From that perspective, it shouldn't be especially controversial to imagine the S&P 500 at least returning to its April highs by the end of the year.
That is -- unless you think the economy is about to fall into a double-dip recession, which would restart the dark side of the operating leverage cycle. That's a judgment call, but I don't see it happening. Interest rates are low, and I'm confident the Federal Reserve will do more to keep them low for a long time. Housing prices and stock prices have begun to recover, restoring household wealth. At the same time, households have already shed over $400 billion in debt over the last four years. Higher wealth, lower debt -- that's the formula for continuing economic stability and growth.
There's no reason to get wild-eyed bullish here. All the wild-eyed stuff I see out there is from the bears. It seems like America's biggest export industry now is pessimism. Personally, I've had all the pessimism I need for a lifetime already. Right now, "good -- but not great" is good enough for me.
1b)2 Top Economists Differ Sharply on Risk of Deflation
By NELSON D. SCHWARTZ
When the latest unemployment figures are announced on Friday, all of Wall Street will be watching. But for Richard Berner of Morgan Stanley and Jan Hatzius of Goldman Sachs, the results will be more than just another marker in an avalanche of data.
Instead, the numbers will be a clue as to which of the two economists is right about where the American economy is headed. Their sharp disagreement over that question adds yet another twist to the fierce rivalry between the firms, Wall Street’s version of the New York Yankees and the Boston Red Sox.
Mr. Hatzius is arguably Wall Street’s most prominent pessimist. He warns that the American economy is poised for a sharp slowdown in the second half of the year. That would send unemployment higher again and raise the risk of deflation. A rare occurrence, deflation can have a devastating effect on a struggling economy as prices and wages fall. He says he may be compelled to downgrade his already anemic growth predictions for the economy.
For months, Mr. Berner has been sticking to a more optimistic forecast, despite growing evidence in favor of Mr. Hatzius’s view. Last week, Mr. Berner was caught by surprise when the federal government reported that the economy grew at a 2..4 percent pace in the second quarter, well below the 3.8 percent he had forecast a month before. Mr. Hatzius came closer to hitting the mark, having projected a 2 percent growth rate.
Mr. Berner and his deputy, David Greenlaw, still expect a pickup in the second half of the year, which would help gradually bring down unemployment. They play down the danger posed by deflation, the malady that deepened the Great Depression and contributed to Japan’s lost decade of the 1990s.
“I’d say at this point the data and the sentiment in the marketplace have certainly gone more Jan’s way than mine,” Mr. Berner said. Some people, he added, “think I’m out of my mind. But I have a conviction in my beliefs that’s based on my analysis.”
Mr. Hatzius, a 41-year-old native of Germany who was 3 when Mr. Berner started out as an economist, is more restrained. He can afford to be, having snagged the top spot in a recent ranking of Wall Street economists as well as an award from Arizona State University honoring his “uncanny economic forecasting that anticipated the global financial crisis.”
On Wall Street, both men were among a very small group that accurately predicted the recent recession. Mr. Berner’s long résumé includes stints at the Federal Reserve in Washington and Mellon Bank in Pittsburgh. “I’ve seen plenty of ups and downs,” said Mr. Berner, 64, sitting in a corner office overlooking the Manhattan skyline at Morgan Stanley’s Midtown headquarters.
Showing not even a hint of doubt, Mr. Hatzius said, “The prospect of substantial inflation seems very remote, but the prospect for deflation is far from remote. A double dip is certainly possible but not likely.”
Mr. Berner does not expect substantial inflation, but he is predicting inflation will run 1 to 2 percent annually rather than the near-zero level Mr. Hatzius sees by the end of next year.
“There is still a one in 10 chance of deflation,” Mr. Berner calculates. “But we already have been much more aggressive and proactive in dealing with the problem than Japan was,” he said, referring to the Federal Reserve’s decision to quickly cut rates and aggressively buy government securities.
The split between the chief economists, whose work helps inform trading strategies recommended to investors by their firms, echoes a broader and sometimes fiercer debate among academic economists and commentators about the threat posed by deflation and what the government’s response should be.
According to the deflationistas, as they are nicknamed, a new round of stimulus spending by Washington is urgently required to stave off a Depression-like cycle of falling prices and wages that is difficult to reverse once it is set in motion.
Inflationistas, by contrast, worry more about the effect that additional government borrowing could have on the recovery. With the budget deficit expected to hover around $1 trillion a year for the next decade, they say, interest rates could eventually surge, making borrowing — and goods — more expensive. A double dip, they say, is highly unlikely.
Mr. Hatzius’s gloomy outlook is owed centrally to Americans’ slowdown in spending. Recent data suggest that consumers are using any extra cash they have to pay down debt or put into savings. That places a strain on an American economy that has become hugely dependent on consumer spending.
On Tuesday, the Commerce Department reported that Americans saved 6.4 percent of their after-tax income in June, in contrast to the years before the recession, when savings rates stood at 1 to 2 percent.
Last month, the Federal Reserve reported that consumer debt dropped by 4.5 percent in May, a $9 billion decline. It was the 20th consecutive month that figure has dropped. In 2007, consumer debt jumped by 5.7 percent, or nearly $40 billion.
We had a housing and credit boom that was unsustainable, and now this boom has turned into a bust,” Mr. Hatzius said. “There was too much debt, and the deleveraging process has still got a ways to go. It’s going to keep private demand weak.”
Another big factor is the amount of slack in the economy. According to a recent report by Nomura, “The U.S. economy continues to operate with a staggering amount of spare capacity — unemployed workers, idle trucks and factories, etc.”
Mr. Hatzius agrees, adding that all this extra capacity will restrict the ability of companies to raise prices, thus raising the risk of deflation. “It’s plain to see there’s a ton of slack in the economy,” he said. “We’re not managing to generate enough demand to absorb all these productive resources in the economy.”
Mr. Berner is also studying the role that slack and deleveraging are playing, but he draws very different conclusions from Mr. Hatzius. Excess capacity is being reduced more quickly than Mr. Hatzius believes, Mr. Berner said. That will help businesses raise prices and improve profits, thus heading off the threat of deflation.
What is more, Mr. Berner argues that the deleveraging process is much further along than Mr. Hatzius contends, which will encourage consumers to start spending again. He expects economic growth in the second half of 2010 to run at more than 3 percent, roughly twice the 1.5 percent rate Mr. Hatzius projects.
If Mr. Hatzius is right, unemployment will still stand at 9.7 percent at the end of next year, slightly higher than it is now. Mr. Berner says he believes unemployment should sink to 8.7 percent by then. As for Friday’s numbers, Mr. Berner is calling for a private sector gain of 145,000 jobs versus Mr. Hatzius’s prediction of 75,000 new jobs.
Either way, both predict unemployment will remain at uncomfortably high levels for several years.
One answer, Mr. Hatzius says, is another round of stimulus spending by Washington to fend off the deflation risk he worries about.
Mr. Berner was skeptical of the stimulus bill passed in 2009, and he still “doubts that traditional fiscal stimulus is the right tool for the job.”
Instead, he and his colleague Mr. Greenlaw argue for new mortgage rules that would reduce foreclosures and steady the housing market, payroll tax credits to encourage hiring and a new job training corps for unemployed workers.
“Friday’s number is just one tile in a mosaic,” Mr. Berner said. “From time to time, it’ll be like I’m winning, from time to time Jan will be winning.”
“The truth is that it’s just a crummy moderate recovery,” Mr. Berner added, hedging his bets. “We’ll both testify to that.”
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2)Mulling 2012, Pawlenty Takes Restrained Plunge
By Scott Conroy
As he explores a potential presidential run, Minnesota Governor Tim Pawlenty has been branded with the "too conventional" label so many times that it's already become a cliché. But Pawlenty insists he's not as boring as many pundits have made him out to be.
"I think if people get to know me better, it's just not true," the second-term Republican said in a phone interview with RealClearPolitics between meetings in St. Paul. "But the other response I have is: compared to who? There may be some more people who are dramatically more entertaining, but probably aren't getting elected. And there are some people who are, you know, serious candidates. I would say, which one of those is a barrel of laughs or somehow in a different league as far as excitement?"
Of course, there is that other hockey-loving Republican who tends to draw more than a passing interest in the media. But when pressed directly about the woman who edged him out to be John McCain's running mate in 2008, Pawlenty was deferential.
"I think Sarah Palin is somebody who has got a lot of talent and I think is very important to the conservative movement," he said. "I think she's been a successful leader and I think she's got a very bright future in front of her. And I think she is electable."
Pawlenty is often assumed to be positioning himself as the alternative to likely 2012rival Mitt Romney, but the contrast with Palin is even more profound.
While Palin has mastered the art of amplifying and then defining the debate on the kinds of issues that dominate the 24-hour shout-a-sphere, Pawlenty relies on shoe leather and closed-door meetings far more than his Facebook page or his Twitter account.
Pawlenty's relatively low profile has meant that background meetings with national political reporters, a campaign-style biographical video, and increasingly frequent trips to Iowa haven't been able to wait until after the midterms.
"Minnesota and Iowa are a lot alike," he said in what is sure to become a familiar refrain. "If you start from southern Minnesota into northern Iowa, unless you saw a sign, you wouldn't know when you crossed over...it's a comfortable place for me."
Having just returned from a three-day swing through the first caucus state that was ostensibly on behalf of local candidates, Pawlenty is already scheduled to return to Iowa next week for two fundraisers, an event with Republican gubernatorial nominee Terry Branstad, and an appearance at the must attend event for anyone who's caught the early presidential bug.
"The Iowa State Fair is similar to the Minnesota State Fair, and I'm a longtime aficionado of all things deep fried, all things on a stick," Pawlenty said. "So if you're talking cheese curds, caramelized bacon, deep fried snickers bars... you name it, I'm on it."
Pawlenty's efforts to increase his visibility have not thus far translated into many headlines beyond a low-key New York Times profile and fireworks-free appearance on The Daily Show. And that seems to be just fine with the governor and his political staff.
When controversy over the planned construction of an Islamic community center and mosque near Ground Zero boiled over in New York City and became national news, Palin's voice was among the most emphatic as she took to her Twitter account to call on "peace-seeking Muslims" to reject what she called an "unnecessary provocation."
Pawlenty left the mosque matter alone until coming out against the now-approved plan when asked about it for this story.
"I'm strongly opposed to the idea of putting a mosque anywhere near Ground Zero-I think it's inappropriate," he said. "I believe that 3,000 of our fellow innocent citizens were killed in that area, and some ways from a patriotic standpoint, it's hallowed ground, it's sacred ground, and we should respect that. We shouldn't have images or activities that degrade or disrespect that in any way."
Just as Pawlenty was more restrained than Palin in jumping into the mosque controversy, he has also been more low-key about what has become one of Romney's pet issues: the nuclear arms control START II Treaty with Russia, which is currently being held in Senate limbo.
Whereas Romney angered some in the Republican foreign policy establishment by coming out strongly against the treaty in a Washington Post op-ed last month that ran under the headline "Obama's Worst Foreign Policy Mistake," Pawlenty has been less emphatic, though largely in agreement with Romney.
"I have serious concerns about it and particularly concerns about the language in the preamble that the Russians believe prohibits or limits America's ability to deploy further anti-missile defense systems," Pawlenty said. "I also don't like the general premise behind this treaty and others like it that somehow the United States and Russia are on equal footing."
Pawlenty has been boosting his foreign policy resume with three visits to Afghanistan and five to Iraq already under his belt. He recently returned from both countries and said that he sees progress in the new Afghanistan strategy.
He spoke glowingly of David Petreaus, calling him "an historic and epic figure" and an "outstanding choice" by President Obama to replace ousted General Stanley McChrystal.
Pawlenty is slated to visit China on an official trade mission during the first week of September and will spend the rest of that month largely focused on end-of-quarter fundraising before returning to the stump on behalf of 2010 candidates.
After his memoir is released in early January, Pawlenty will likely spend some time on the book signing circuit and then make a decision about whether he's running for president soon after that.
If Pawlenty does decide to run, he will likely go full-throttle in Iowa, where he will hope that his conservative bona fides, his status as a near-local son, and his blue-collar background can overcome his better-known competitors and post a first or second place finish that would help catapult him into the top tier of the Republican pack.
Treating Iowa as a near must-win state echoes Romney's failed strategy during the 2008 campaign, but Pawlenty would be banking on an ability to connect with voters there in the kind of deeply personal way that they have always demanded.
"When you're talking about affording college or worrying about how they can afford their health insurance, or whether they're going to have a job, or putting gas in a car, or even if they can afford a car, it speaks to a life perspective and life experiences," Pawlenty said of connecting with voters. "And you know, I have been there. I understand what you feel, and I understand what you're up against. And I also understand what it's going to take to fix it."
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