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Ronald Reagan on Election Night, 1980
Tweet Share on Facebook November 20, 2008 CommentIt's been a long week and think we could all use some of this. It's the Gipper from Nov. 4, 1980:
"You know, Abe Lincoln, the day after his election to the presidency, gathered in his office the newsmen who had been covering his campaign and he said to them, 'Well boys, you're troubles are over now, mine have just begun.'
I think I know what he meant. Lincoln may have been concerned in the troubled times in which he became president but I don't think he was afraid. He was ready to confront the problems and the troubles of a still youthful country, determined to seize the historic opportunity to change things. And I am not frightened by what lies ahead and I don't believe the American people are frightened by what lies ahead. Together, we're going to do what has to be done.
We're going to put America back to work again. You know, I aim to try and tap that great American spirit that opened up this completely undeveloped continent from coast to coast and made it a great nation, survived several wars, survived a Great Depression, and weГll survive the problems we face right now."
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Financial Crisis Elbowing Out Climate Change
Tweet Share on Facebook November 20, 2008 Comment (2)Expect to see more stories like this:
LIMA (AFP) – Climate change is fading as a priority in the Pacific Rim as the gloomy state of the global economy takes precedence, a survey of opinion leaders showed Wednesday. The private Pacific Economic Cooperation Council released an annual survey of leaders in government, business and media ahead of a summit in Peru of 21 Asia-Pacific nations, which account for more than half the global economy. Twenty-four percent of some 400 opinion leaders surveyed said the top priority for Asia-Pacific leaders should be addressing the US-bred financial crisis, far outweighing other issues. Last year, the top priority was reviving stalled global trade negotiations, at 12 percent, but climate change came close at eight percent. Global warming did not even figure among the top priorities this year.
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Stock Returns Washed Away
Tweet Share on Facebook November 20, 2008 Comment (3)Brad DeLong does the terrible math:
"Average real capital gain over the twelve years since Greenspan's "irrational exuberance" speech in December 1996: -2.1% per year.
Average dividend paid on the S&P composite over the twelve years since Greenspan's "irrational exuberance" speech in December 1996: 1.6% per year.
Real return on the S&P composite over the twelve years since Greenspan's "irrational exuberance" speech in December 1996: -0.5% per year."
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Dow Down 22 Percent Since Election Day
Tweet Share on Facebook November 20, 2008 Comment (3)OK, we've had a bear market even if you count only the losses since Barack Obama was elected.What, don't investors know the MegaStimulus Package is on the way? Maybe instead of a guesstimated $500 billion, it should $1 trillion or maybe even $2 trillion (which I actually heard suggested on CNBC). Or maybe we should do what we did the last time we faced a severe economic downturn ...
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Washington Continues to Chill Stocks
Tweet Share on Facebook November 20, 2008 Comment (1)The great Andy Busch, FX guru at BMO Capital Markets, thinks the Beltway Boys should go on vacation ASAP:
"For the week, I underestimated the negative impact of two appearances by the auto executives in front of Congress. This has cast a pall over the markets analogous to the October appearances by Bernanke and Paulson as they lobbied for the TARP program. When we have this high profile media appearances, it forces the market to focus on the bad things that are happening in the economy. While I did warn that this was the last/next shoe to drop on the stock market, I underestimated (how could I!) how poorly the executives would be handled by Congress. I'm sure they are wondering whether they will get their cash as they head back to Detroit on their private jets."
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The Gingrich Middle-Class Tax Cut
Tweet Share on Facebook November 20, 2008 Comment (3)Now was that so hard? Want to boost the economy? Cut taxes. Newt Gingrich, in the WSJ, proposes cutting the 25 percent tax bracket to 15 percent, basically creating a 15 percent flat tax for 90 percent of all Americans. As Gingirch puts it:
"This would be much more effective than Mr. Obama's tax plan with it's $1.3 trillion in redistributive tax credits, as well as yet another so-called stimulus package based on another $300 billion or more in increased government spending.'"
Me: Gingrich's plan makes it even clearer to me that John McCain should have made tax reform the centerpiece of his campaign, particuarly the idea of creating a two-rate structure -- 25 percent and 10 percent. Instead, Obama won the "tax cutter" mantle and the presidency.
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The Terrible Scare Story Hank Paulson Told Congress
Tweet Share on Facebook November 20, 2008 Comment (3)What does a Treasury secretary from a lame-duck Republican administration have to tell the leaders of a Democrat-dominated Congress to persuade them to fork over $700 billion to rescue Wall Street by buying toxic mortgage securities. Well, according to Sen. James Inhofe, Hank Paulson said something like this: "He said, ‘This is going to be far worse than the Great Depression in the '30s.'" (Recall that unemployment hit 25 percent back then vs. 6.5 percent currently.)
But now Paulson has scrapped Plan A. And a new University of Chicago study of a similar plan conducted by Japan in the 1990s concludes Paulson should have never gone that route. Here is what the study found:
"The U.S. financial system is in very fragile shape. As in the recent Japanese financial crisis, the shortage of capital is the fundamental problem that must be fixed. The U.S. bailout plan is similar to the Japanese approach in that it does not clearly identify the capital problem as critical and instead proposes using AMCs to remove distressed assets from bank balance sheets. When Japan used AMCs, their effectiveness was limited in part because they did not purchase enough assets. AMCs did not help recapitalization, either, and Japan had to come up with different mechanisms to use public funds for recapitalization. Both these risks are also present for the U.S. plan."
Me: Indeed, in an interview with CNBC, Paulson seemed to imply that $700 billion was not going to be enough money to make the asset-buy work. And good luck going back for more dough. The first bill barely passed. What's more, FBR Capital Markets estimates that Wall Street needs another $1-2 trillion in new capital, in the form of direct injections, to stablize. And it continues ...
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Like Orange Juice and Toothpaste
Tweet Share on Facebook November 19, 2008 CommentHere is a scary thought: We could get the sharp contraction of the 1982 recession with the "jobless recovery" that came after the 1990-1991 downturn. The worst of both worlds. Is it 2010 yet? I want this decade over!
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Dow Down 16.9 Percent Since Obama Election
Tweet Share on Facebook November 19, 2008 Comment (10)Another day, another decline. In the 11 trading sessions since Barack Obama was elected president, the Dow has fallen 16.9 percent, or an average of 148 Dow points a session. The stock market is forward looking. The stock market discounts. The stock market cares about what happens in Washington. That is all ...
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Sheila Bair: First Woman Treasury Secretary?
Tweet Share on Facebook November 19, 2008 Comment (4)Going by Sheila Bair's chat with Larry Kudlow, it sounds like she wouldn't say no. And I don't think the Secretary of State, AG, Defense Secretary and Treasury Secretary are all going to be men.
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