Monday, January 14, 2008

Can $1000 Save The Bush Presidency?

Another 10 inches of snow up here in Massachusetts! I really don't know how I am going to stay sane this winter. I will try to keep thoughts of Quabbin Reservoir in the Springtime in my mind and all the bass I will catch.

What can I say about this weekends football? The Patriots beat the Jaguars in the best game the Jags will ever play in their current iteration. Tom Brady coolly carved up the Jags defense all night and the Pats never let things get out of hand. Contrast that with the total meltdown both the Colts and the Cowboys had while playing inspired road opponents. I can kind of understand the Cowboy loss, they have looked bad for the last 3 weeks, but the Colts game was a stunner. Peyton Manning had two chances to lead a game winning score drive and the Colts could not get it done. Manning is a great quarterback, but at some point you have to look at his playoff record and wonder if he is truly one of the greats. Last year's superbowl had very little to do with him, and in most games in spite of him.

Consumer Pulling Back - If Sears is Really a Bell Weather That Is
I can remember when I was a young boy and whatever you needed to buy we bought at Sears. Appliances, electronics, clothes, you name it. It was always exciting to go to the huge Sears store and look at the toys and the TV's. I have not bought one item at a Sears store in over 5 years. I bring up this stroll through memory lane in light of some consumer news, from Yahoo Finance:
AP
Consumer Spending Slowdown Deepens
Monday January 14, 5:18 pm ET By Anne D'Innocenzio, AP Business Writer
Consumer Spending Shows Dramatic Slowing, Possibly Tipping Economy Into Recession
NEW YORK (AP) -- More evidence of a dramatic slowdown in consumer spending surfaced Monday, as Sears Holdings Corp. warned that a drop in sales would result in a profit shortfall and the world's largest retail trade group issued a downbeat sales forecast for 2008.
On Monday, Sears Holdings, which owns Sears and Kmart stores, blamed growing competition, the housing market slump and consumers' credit fears for sales figures that were expected to slash fourth-quarter profit by as much as 57 percent from the year-ago period. Meanwhile, the National Retail Federation predicted retail sales in 2008 will grow at the weakest pace in six years.
The reports come on the heels of sales reports Thursday by major retailers that showed the weakest holiday period since 2002.
"When all is said and done, we have probably entered into a recession. The weakness in the holiday season was the tipping point," said Carl Steidtmann, chief economist at Deloitte Research, who forecasts a decline in consumer spending that takes inflation into account in coming months. It would be the first since 1991, when the savings and loans crisis precipitated a recession.

It has been a central theme here that a consumer led recession is almost impossible as long as access to credit is still possible. The US consumer is too stupid and/or stubborn to change their spending habits. Only a physical intervention by banks stopping lending can stop the train that is spending. I bring this up because it will take some real hard data concerning spending to sway my thinking on this point. Sears is no longer a front line store, and competition is probably taking more away from Sears than anything else. Still, it is a data point and one I will keep in mind.

Can $1000 Save The Bush Presidency?
While exact details of the coming "Stimulus Plan" are far from being known, rough estimates are beginning to filter in. In an effort to relieve the pain of the public during this slowing economic time, rebate checks are likely to be issued. The dollar figure ranges form $300 to $1000 per taxpayer. Never mind wondering how a government running substantial deficits can do such a thing. The issue I have is that almost all stories written say something along the lines of "to restart the economy and save the Bush presidency" or along the same lines "to prop up support for the Bush presidency" as a major reason for doing this.

Could $1000 dollars per taxpayer either restart the economy or make the Bush years easier on the memory? I would think the answer is no on both counts. I do not want a big political debate here, but that thinking like this is even being done makes me want to puke. I imagine that in the little peas sized brains most people have they think the president had something to do with the economy over the past 7 years. In truth a president has very limited ability to do anything. Only through allowing crazy taxes or some other major undercutting of the business world could a president wreck anything. A deadlocked and adversarial congress keeps much from happening. Keep this in mind when you hear the economy was so strong under Bill Clinton. Ask anyone to name ONE thing he did to cause a economic change and people will just stare blankly at you with no response.

So I submit as the new poll question, will $1000 save the Bush presidency? Leave a vote. I would submit that Bush did some things that are long term good (Afghanistan War, isolation and rejection of Yassir Arafat, removal of Saddam) but those things are outweighed by the damage he has done (Iraq war in overall poorly executed, Katrina mess, loss of public faith). They should just give out $10,000 and then Gold would really take off!

Data Heavy Tuesday
Tomorrow will be a day to watch some data. Citigroup will be out with earnings before the bell, and any discussion about a possible dividend cut will be the hot item. Throw in a possible hiccup in the flood of Chinese money and it could be very interesting indeed. Retail sales numbers will also be out, and that should help to clear up the spending picture a little bit. Lennar homes reports as well. Also some inflation data, though we know those numbers are cooked anyway!

On CNBC (I know, I know) there was an analyst that said the "perfect scenario" for Tuesday is a weaker than expected retail sales number, followed by a tame inflation report. That would clear the way for the FED to cut rates 50bps Wednesday morning was his thinking (cannot remember his name). I mention this because if that scenario plays out, the markets may rally huge on that line of thinking. Obviously if the data does not agree, there could be some serious downside action. either way, it will be interesting.

Have a good night.

5 comments:

Rob Dawg said...

Another 10 inches of snow up here in Massachusetts! I really don't know how I am going to stay sane this winter.

You could do what I did. April 1st, 1983 in Worcester. Woke up to my my motorcycle buried in a snowbank after spending the day previous cleaning it and getting it ready for spring.

I live in SoCal now.

Despite that the Bolts have no chance. They lost before and Foxboro ain't gonna give up a game to them. Jags played above themselves last time and the Pats just need to suck it up a little. Brady is gonna have to take some really nasty hits from the Bolt defense and not get rattled but the Pats are not Brady despite the chatter.

SD is gonna have to do one thing, and one thing only, not give up. Even if they lose not giving up will establish their program for years to come. Pundits thought Colt/Pats was the championship but I'm thinking Bolts/Pats is the game to watch.

Oh wait. I was really talking SoCal economy. Wierd.

Sparhawk said...

One thing that does affect the economy is government deficit spending, which drives down the value of the dollar. I'd find it difficult to argue that Bush's massive and unnecessary tax cuts, combined with his massive and unnecessary war in Iraq, haven't substantially "affected the economy".

Bill Clinton made a moderate tax hike on the rich and balanced the budget. Granted, one might argue that Congress does those things, not the president, but our system is screwed up enough presently that the president has a lot of sway with Congress and they will often do what the president wants (would the 2001 massive tax cuts have happened with Gore as president and the same Congress? i suspect we all know the answer to that).

So on balance, I'd say that presidents do have big effects on the economy, just (I agree) maybe not in ways that most people consider.
Of course, Clinton also made the horrible error of reappointing Greenspan (which is another way presidents can affect the economy, appointing Fed chairpeople and other Big Economic Players).

Anonymous said...

Sparhawk is right. The budget was balanced under Clinton. Balance budget = strong dollar. Deficits do matter. The interest on the debt alone will eat us alive in time, let alone how are we going to pay the principal.

The war in Afghanistan accomplished nothing. That money could have been better spent on world crime enforcement, because 911 was exactly that, a crime.

Isolation of Arafat, a green light for Israel to do what ever it wanted, and seven years later cannot be undone with a MidEast photo op tour.

We have now killed more Iraqis than Saddam, who was never a threat to us. $500 billion and counting.

I do not watch regular season football, but I do watch the playoffs in all sports. From what I have seen, I can't imagine any other outcome but a Pats' Superbowl. Caveat: if there is a rule change to a 45 minutes game, then some other team might have a chance. That is what makes this team so good. They stay in the game for the whole game, and will beat you in the end.

Tim H. said...

$1000 isn't anything in an economic mess like this. It just shows how clueless Bush is. Someone under water with an enormous mortgage isn't going to be helped long term by $1k landing in the mailbox. And if the average wage-earner isn't helped long term, then neither is the economy. Either wages have to go up, or costs have to come down. Simple equation.

What would help? Instead of freezing teaser rates, refinance houses at their new, lower value; fixed rate mortgage, 5.5%. If a mortgage is sitting at $500K on a house that's now worth $300K, refinance it at $300K. The banks are going down anyway -- at least this way they wouldn't bring the housing market down with them.

What we need now is realistic pragmatic solutions, not spin, not finger-pointing, not politics.

More money was created via credit than can be repaid by wages. Simple as that. These billions of 'dollars' aren't dissapearing; they never really existed in the first place. The banks and Wall Street used housing as a Ponzi scheme to enrich themselves and now it's run it's course. Chalk up another one for unregulated human greed. The parasite has again killed it's host.

watchtower said...

Any uninformed lurkers out there?
If you get a $1000 from Daddy "W"arbucks, I`d seriously consider investing in a non-perishable food program for your household.