OK Dave Hanna says I should break up long boring diatribes like this with something funny. So here it is. I remember going to see Towering Inferno in 1974. Looking back at the film, it was pretty dorky, but for its time it was cool. I went with my brother and sisters and my mom. My mom was mad at me and I could not figure out why. We all suffered through the Margie Cronin mad attitude and as we left the movie and asked what she thought. She replied, "You see one fire, you've seen them all." Well, I though that was hilarious and so did she although she was still mad about something. When we got home I asked what was bothering her. She said it was me and my cavalier attitude about having sex with my girl friend. That took me back a bit. I asked her what she was talking about and she reminded me about the weekend before when she caught me and my girlfriend were necking in my mom's car in front of our house. (Yes I know not the brightest place is the world to park and kiss.) Well she had banged on the window and scared us to death and said, "What are you doing?" I replied, "We are necking what is the big deal?", to which she stormed into the house and did not say a word to me all week long. So as we spoke after the movie, I said, "Why are you so mad, I am turning 18, don't you think I kiss girls?" She said, "I am not stupid I know what "necking" means." While I tried to explain that necking meant kissing she did not believe me. I had to ask my 11 year old brother into the living room and say, "Patrick what does the work necking mean?" He sheepishly explained it was sucking face. Mom and I made up and she did admit she liked the movie. Now back to the boring stuff.
The last and really last option is what is called Operation Twist where the fed shifts its purchase of Treasuries from the short term Treasury Notes to the longer term Treasury notes (10 years or longer.) This, in theory will close the yield gap between the 2 year notes and the 10 year notes. The good news is, Guietner and Bernanke will not have to print any new money to do Operation Twist because they are going to dump short term notes and reinvest in the long term notes and mortgage backed instruments (think Fannie and Freddy).
Again in theory if you drive down the 10 year and 30 yield, it will make other investment opportunities look more attractive. Companies that currently have 2.1 trillion in the cash accounts might start hiring and merging and issuing dividends and this might help the economy.
Unfortunately there are few things wrong with this logic. First off the announcement today came with a clear and present warning that the economy is slow and there are "significant downside risks to the economic outlook". Not a great way to set the stage for a disappointment. Next we have the fact that the economy needs jobs and an improvement to the housing market. On the jobs side of things, there seems to be no hope.
Due to all the regulations and health care confusion a CEO and their Board would have to drunk or stupid to go on a hiring spree right now until a lot of questions are answered. Yet every time this administration get in front of a television, there is more banter about new tax regulations for business and amendments to the health care bill and changes to the recently passed yet undefined financial sector. Like I said as business person knowing the 25-80% of your cost are labor or labor related, you are not going to hire 5,000 people unless your revenue growth curve is exceptional. In this economy, not many are.
While employment is one issue the housing market is another, though not unrelated. Today we had a bit of hope. Existing Home sales surprised big to the upside, but that news was drowned out by the Fed announcement.
Without sounding too alarmist, the next few months are looking a little spooky to me. We have Alcoa reporting in about three weeks and that will kick off the third quarter reporting for the year. With the slump in manufacturing, consumer sentiment falling, sovereign debt issues, and currency concerns, it could be a tough reporting season. Gold has been sliding the last few session probably due to the Feds actions. Anyway we are considering a shift towards bonds again.
This is really frustrating and it can be traced back to a corrupt political system, with on one side, lead by an administration that does not many individuals at the helm who has ever been responsible for creating a job, firing a person, or managing a budget. I challenge any reader to prove that statement as being inaccurate. Once Lawrence Summers left the cabinet and Rahm Emmanuel left to go play Mayor, the White House staff now consists of idealoigists, academics, and career politicians. Here is the link to the Obama Current Cabinet. Here are a couple you could argue for some practical experience.
Hilary (wish she had won) Clinton attorney and board of directors Walmart.
Tim Guitner (inherited from former adnimisitration) was and executive and turned down the job of CEO of Citicorp. Not really in Obama's camp.
Tom Vilsak former Governor of Iowa. Ok I'll give that one to though he has never managed a private sector budget or job.
Arne Duncan, Secretary of Education was CEO of Chicago Schools but no experience in the private sector.
Obama's recent Chief of Staff William Dailey has a strong resume and practical private sector experience.
On the other side of the aisle, you have a group of boneheaded republicans that will not lift a finger for the American people if it means giving Obama 1% improvement on his week poll ratings. We should all be ashamed. If this situation doesn't get you to write to your representatives and let them know how frustrated you are, then we deserve what we have. If you are a Dem, write to your congress person and or senator and tell them enough, and you would be willing to look at restructuring of national debt and dysfunctional entitlement programs. If you are a republican, tell them you are willing to pay a little more on your taxes if it means that we can get some of the wasteful spending reduced. Everyone has to let the parliament of whores in Washington know, if they don't, this economy will not fix itself. If you need your representatives addresses or e-mails, let me know I'd be happy to get them to you. Just send my your home zip code, I'll even help draft your message if you'd like.
Salve Lucrum
