-
Do Wall Street's Woes Help McCain or Obama?
Tweet Share on Facebook September 15, 2008 Comment (10)I have no doubt that if President Bush were on the ballot in November, he would probably suffer a crushing defeat. Like Jimmy Carter bad. A weak economy, or the perception that the economy is weak, is what leads to incumbent presidents getting thrashed. Yet poll after poll shows John McCain in the lead, despite the best efforts of Barack Obama to paint a McCain first term as Bush's de facto third term. Will the big shakeup on Wall Street do anything to change that? I don't think so, a belief I had even before checking the Intrade betting odds that have McCain leading Obama, 53 to47, though he's down a smidgen today. Anyway, here is my reasoning:
1) McCain has done about as good a job as possible, both through his convention speech and his veep choice of Sarah Palin, of making himself the nominee of the McCain Party rather than the Republican Party.
-
Who's Better for Stocks, McCain or Obama?
Tweet Share on Facebook September 12, 2008 Comment (14)Who would be better for the stock market, President Barack Obama or President John McCain? One way to look at this issue is to see how stocks have done under past Democratic and Republican presidents. My pal Donald Luskin, chief investment strategist at Trend Macrolytics, slices and dices the data in today's Wall Street Journal. Among his financial and economic findings:
1) Investors seemingly like donkeys. Since 1948, the total return of the S&P 500 has averaged 15.6 percent with a Democrat in the White House and 11.1 percent with a Republican occupying the Oval Office.
-
Economic Game Changers
Tweet Share on Facebook September 12, 2008 Comment (3)Wise words on the economy from my friend Larry Kudlow of CNBC:
The commodity drop signals the death of inflation expectations. And of course, the oil plunge itself is a big tax cut for consumers. Not only will real wages start rising again, but folks will be able to service their mortgages. That's good for banks. There's a lot of volatility and cross currents in the stock market right now. But this consumer/banking theme should hold the test. The trick here is to look through the front view of the windshield, rather than the rearview mirror of yesterday's credit crunch like Lehman Brothers, Washington Mutual, and other cases. The game changer is oil's drop and the dollar's rise. The collapse of gold adds more icing to the cake.
-
Assigning Blame for the Fannie and Freddie Fiasco
Tweet Share on Facebook September 12, 2008 Comment (1)Russell Roberts over at Café Hayek provides as a good an explanation as any about what went wrong and who is to blame in the Fannie Mae-Freddie Mac mess. Here is a bit, but you should read the whole, whimsical thing:
I actually think this is an emergent mess that evolved out of no one's design. An alliance of bootleggers and baptists that created something that was no one's intention but that served many people well until it fell apart. It's a study in flawed incentives and institutional design. The lesson is that government agencies work best when we know what they're doing and there is some measure of accountability, even if it's only political.
-
Al Qaeda's Failed War on the U.S. Economy
Tweet Share on Facebook September 11, 2008 Comment (23)In the seven years since the terrorist attacks of Sept. 11, 2001, Osama bin Laden and al Qaeda have shown themselves quite capable of releasing amateurish videotapes, slaughtering innocent Iraqi civilians, and getting al Qaeda members killed in mass numbers by America's valiant and lethal warriors.
But what about the goal of bringing down the U.S. economy? Remember what bin Laden himself said about his goals back in December 2001: "If their economy is destroyed, they will be busy with their own affairs rather than enslaving the weak peoples. It is very important to concentrate on hitting the U.S. economy through all possible means." This was echoed by al Qaeda second-in-command Ayman al-Zawahiri in September 2002: "We will also aim to continue, by the permission of Allah, the destruction of the American economy."
-
Let Fannie and Freddie Fail?
Tweet Share on Facebook September 10, 2008 Comment (4)Not everybody thinks the government needed to step in and essentially take over Fannie Mae and Freddie Mac. Banking guru Martin Weiss thinks the financial situation at the two mortgage giants is far worse than many realize. That, combined with a worsening economy, will doom Uncle Sam's efforts, he says. "Just to keep Fannie and Freddie solvent will take so much capital, there will be no funds available to pursue the primary mission of this bailout—to pump money into the mortgage market and save it from collapse," Weiss says. "That mission will ultimately end in failure."
Weiss, in the analysis I link to above, outlines what he thinks Treasury Secretary Henry Paulson should be saying to Bush right about now:
Let's say I'm a foreign investor and I own U.S. Treasury bonds. This implies that I trust the U.S. government; that I loaned you my money for the purpose of running your government. Now you take my money and pass it on to a third party, a private company. So I say to you, "What did you go and do that for? If I wanted to loan the money to that company, I would have done so myself—directly—in the first place. But I didn't. I didn't do it because I don't trust the company. I trusted you. But now I can't trust you anymore either. Now you're just one of them." So the investor stops buying our bonds or, worse, dumps the government bonds he's holding, and then we are in trouble. Then we can't sell our government bonds anymore to pay off the old ones coming due. Then we, the United States government, default.
-
Some Good Economic News
Tweet Share on Facebook September 10, 2008 Comment (3)Here are a couple of rays of sunshine, via Reuters. First, the suits seem to be getting a bit more chipper:
NEW YORK—Chief financial officers are more optimistic about the direction of the U.S. economy, but remain concerned about consumer demand and weak credit markets, according to a quarterly survey. Those saying they are less optimistic fell to 41.5 percent, from more than half in the previous survey and more than 72 percent in March.
And the folks at Disney aren't seeing a global recession:
LONDON—Walt Disney Co.'s business is proving resilient in the face of tough economic conditions although the crisis is not over yet, Chief Executive Robert Iger said on Wednesday."Our business has been quite resilient," Iger told journalists at a meeting ahead of the London premiere of "Camp Rock." "Global theme parks have held up extremely well."
-
Pop! Why the Obama Bubble Has Collapsed
Tweet Share on Facebook September 10, 2008 Comment (200)The Obama campaign seems to have experienced a "Minsky Moment." That, as any financial bubblologist worth his weight in tulips knows, is the particular point in time when no more "greater fools" can be found to support a bubble and a Great Deflation finally begins. Sssssss. (The financial phenomenon is named after economist Hyman Minksy.)
Now Obama's Minsky Moment is morphing into the McCain Moment. The evidence? Here goes: 1) The final 10 national polls in June had Barack Obama up by an average of 7 percentage points. The past eight polls this month have John McCain up by a bit more than 2 points, according to RealClearPolitics. 2) Right around the same time that Obama's polling lead was entering landslide territory in June, his odds of victory over at the Intrade betting markets were hovering at a sky-high 70 percent. Today, Obama's chances are right around 50-50 vs. McCain. 3) And now, according to a New York Times story yesterday, the deluge of donations has started drying up: "Pushing a fundraiser later this month, a finance staff member sent a sharply worded note last week to Illinois members of its national finance committee, calling their recent efforts 'extremely anemic.'"
-
Money Men to McCain: Focus on the Economy
Tweet Share on Facebook September 9, 2008 Comment (1)John McCain raised $5 million yesterday at a campaign fundraiser in Chicago. Clearly, his postconvention bounce in the polls has raised the spirits of contributors. This from the local CBS station:
"Everybody in the room said 'wow.' This was even beyond what many expected. He is wonderfully self-confident but not cocky," said McCain contributor Craig Duchossois. "The senator is clearly ecstatic about the polls," said Ronald Gidwitz. "He's very comfortable right now in his own skin. He sees the momentum going in his favor. He is the man who looks like a winner."
Yet away from the cameras, some McCain contributors think that unless he more effectively puts forward an economic message, he will come up short on Election Day. Said one to me, "He's doing great right now, but he's got to talk more about the economy and what he wants to do. He should have done more of that at the convention. If he doesn't, forget about it."
-
The Deficit and the Growth Imperative
Tweet Share on Facebook September 9, 2008 Comment (5)The budget deficit will be $407 billion this year and $407 billion next year, according to a new forecast from the Congressional Budget Office. (Keep in mind that these numbers included about $180 billion in Social Security surplus funds.) Now my budget guys tell me that the actual number could be anywhere from $500 billion to $700 billion depending on the economy, Fannie and Freddie, and any additional government stimulus spending.
But what really strikes me is the CBO's anemic growth forecast: Just 1.8 percent next year, 3.3 percent from 2010-2013 and 2.3 percent from 2014-2018. This economy should be growing more like 3.5-4.0 percent year after year. And it could with the right economic policies.
One other interesting factoid: Freezing discretionary spending to the nominal growth rate of the economy (not counting inflation) would save $1.3 trillion over the next decade. Our budget problem is nothing that better economic growth and spending restraint can't solve.
advertisement
Follow U.S. News Money
Like Us On Facebook
advertisement
Subscribe
U.S. News Weekly
An insider's guide to politics and policy, available on the iPad or as a PDF download.
