Capital Commerce


March 2009


The Unemployment Bubble

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The market has rallied. There's also been a string of better-than-expected economic reports. But the variable to keep an eye on, especially politically, is the unemployment rate. And that doesn't look so hot. Listen to Janet Yellen, president of the San Francisco Fed:

It’s true that the ...

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Fantasy Obama Vs. Reality Obama

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So where are we in the Age of Obama? Here is where we are: Cap-and trade is on hold, the middle-class tax cut has an expiration date,  a government healthcare insurance option is 50-50,  and trillions are being spent on Wall Street. Where would liberals like to be?  Probably somewhere in the ...

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Geithner: 'Quite Open' to Idea of Global Currency

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Treasury Secretary Tim Geithner says he is "quite open" to a massive reduction in the  economic power and influence of  the United States.

O.K, what Geithner actually said earlier today is that he is "quite open" to China's idea of a global currency system linked to the International Monetary Fund's ...

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Do We Even Need the Geithner Bank Rescue Plan?

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Hey, I know the stock market loved hearing the details of the The Public-Private Investment Program.  Huge rally. But consider this:  1) Obama-Geithner want to get these so-called toxic securities off bank balance sheets so banks supposedly will lend more; 2)  the PPIP plan is predictated on banks ...

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Barack Obama, Stock Market Strategist

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Ed Yardeni does the math so I don't have to:

The S&P 500 Financials probably bottomed on March 6. If so, then so did the S&P 500 at the devilish level of 666 on an intraday basis. Since their latest bottoms, the S&P 500 Financials and Banks stock price indexes are up 58.1% and 76.9%, respectively.

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Dude, Where's My Depression?

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Economist Michael Darda of MKM Partners points to some rays of sunshine:

1) The yield curve spread, a classical leading indicator, has turned up.

2) And unlike the Great Depression or the Japan experience in the 1990s, broad money growth has picked up dramatically.

3) The credit markets, while not ...

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Why Liberals Hate the Geithner Bank Plan

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The Geithner bank rescue plan, says liberal economics columnist Paul Krugman of the New York Times, "fills me with a sense of despair." And the liberal blogosphere isn't much happier with it. One denizen of the Daily Kos site describes the gist of it this way:

1. bribe (through subsidies)

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Geithner and Toxic Assets: What It All Means

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When the stock market surges 7 percent in a single session, I'm going to pay attention. I'm going to think. A few observations on the Geithner Plan to deal with the "toxic assets" problem:

1) Let's keep in mind that there is every chance that the "legacy loan" program isn't going to be up and ...

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Recession Killing Obama Climate Plan

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Congress is trying to fast track healthcare reform. But Obama's cap-and-trade plan? Not so much. And these Gallup poll numbers give you some perspective as to why: "For the first time in Gallup's 25-year history of asking Americans about the trade-off between environmental protection and economic ...

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Obama, Bernanke and the 1970s Redux

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Have we just traded the 1930s for the 1970s? The decision by Ben Bernanke and the Federal Reserve to pump an additional $1 trillion-plus in the economy, while not as sexy a story as AIG bonus-gate, has far greater long-run importance. Already we are seeing the dollar fall and gold rise as the ...

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Did Mark-to-Market Create a Phony Banking Crisis?

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Jeffrey Snider at Atlantic Capital Management emails me this great analysis of the problems with mark-to-market accounting:

1) For the majority of the public banks are full of "toxic" assets. The reason they believe that is because of mark-to-market (or more accurately mark-to-model). The ...

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Fed Annoucement Means Bernanke to the Rescue

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If you were a White House economic adviser ( like Larry Summers) and perhaps knew that in a few days the Federal Reserve was going to announce an expansion in its balance sheet by over $1.16 trillion with $300 billion in Treasury purchases alongside increases in other purchases of $750 billion in ...

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The AIG Bonus Fiasco and Taxpayers

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The great Andy Busch of BMO Capital Markets sums things up nicely as usual:

This is what happens when friends don't let friends go into bankruptcy. The US government bailed out AIG and prevented it from going into bankruptcy. As the world's largest insurer, it was deemed too important to ...

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The Mark-to-Market Bull Market

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Why are the Dow industrials up some 13 percent over the past six trading days? Here is my theory: Depression 2.0 seems off the table.  Great Recession? Sure. Lost Decade? Maybe. But not even a minor repeat of the 1930s. And why is that? For starters, a bit of common sense about the mark-to-market ...

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Cap-and-Trade Protectionism

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First, Buy American. Now this: Energy Secretary Stephen Chu told a House subcommittee yesterday that if countries such as India and China do not limit carbon emissions as the U.S. is planning  to do, then tariff should be considered “in order to protect American industries." The Chinese say such ...

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The Phony AIG Bonus Scandal Outrage

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A few thoughts:

1) So Geither is supposed to go after the AIG bonuses. It's is not like he doesn't have a pretty full plate as it is. I mean, he's usually pictured these days as being like the Maytag Repairman, all alone over at Treasury, his voice echoing in the hallways as he searches for help.

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Barack Obama's Irrational Exuberance

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Label it the "Irrational Pessimism" speech. In a peppery presentation to the Brookings Institution, White House economic adviser Lawrence Summers did his best to prove that Mr. Market has it all wrong, that the 25 percent drop in stocks since Election Day represents a) an irrational mispricing of ...

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Who Really Won, Obama or McCain?

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President Obama seems to be undergoing a strange metamorphosis. He's slowly turning into John McCain. 

1) Last Thursday, Obama told a group of CEOs he would consider cutting corporate taxes. Candidate McCain was for a corporate tax cut.

2) On Friday, Obama seemed to channel McCain's famous campaign ...

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Hey Obama, Buy Stocks -- Not Toxic Assets

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It appears the White House finally noticed that the stock market has been in a calamitous freefall, not just bobbing up and down. So like a stock analyst  issuing  a "buy"  rating on a company his investment bank just took public, Team Obama has been firing up the hype machine. First, we had the ...

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Financial Markets Show Limits of Obama's Power

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Simple but often overlooked truth: When a nation's equities, debt and currency are bought and sold globally in very large amounts, it places limits on that nation's fiscal and monetary policies. But global financial markets are more than just a veto, they can also nudge policy in certain ...

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American's Net Worth Down $15.5 Trillion

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The numbers from the Fed's Flow of Funds report for the fourth quarter are ugly: (Via JPMorgan):

1) The showstopper in today's report was the larger-than-expected $5.1 trillion decline in household net worth.  The 9% decline in wealth was easily the largest on record and pushes the ...

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Geithner: Higher Taxes Hurt Economic Growth

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Here is an illuminating exchange today between Sen. Mike Crapo and Treasury Secretary Tim Geithner:

SEN. MIKE CRAPO, R-Idaho: “You say that the tax increases will only happen when the economy has recovered. I understand that a lot of economists are saying we are going to be recovered by ...

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Madoff: His $65 Billion Ponzi Fraud

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Bernard Madoff is going to jail for what now appears to be a $65 billion Ponzi scheme. How much is $65 billion? Here is a list of some European nations with economies smaller than $65 billion: Croatia, Luxembourg, Slovenia, Serbia, Bulgaria, the Baltic states (Lithuania, Latvia, Estonia). Heck,

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Putting Obama on the Couch

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"So, like, do you think Obama is just mean or something?" That is how a twentysomething television booker recently responded to my critique to her of the president's stimulus package and banking bailout plans. Actually, I think Team Obama is filled with dedicated, hard-working folks trying to do ...

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Will Obama's Housing Plan Increase Unemployment?

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There is an economic downside to trying to keep people in their homes, even if underwater. Mike Feroli over at JPMorgan points out the Osward Hypothesis: "Higher homeownership rates increase the natural unemployment rate because it reduces geographical mobility and the ability to move someplace ...

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Pelosi: Second Stimulus Possible

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 A couple of hours ago I wrote about the possibility of a second stimulus package. Then this from Politico:

House Speaker Nancy Pelosi said Tuesday she is open to introducing a second stimulus bill, but it's too early to determine the size of such a package and the timing on another major ...

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The Great Recession

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And this sort of thing, gang, is why I have been predicting a second stimulus package. From the econ team at IHS Global:

We expect the fourth and first quarters to show back-to-back declines in real GDP of more than 6% at an annual rate. And we now peg the peak-to-trough drop in GDP at ...

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Obama's Chicago-Style Economics

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According to the always insightful Joel Kotkin, the president is giving a new definition to Chicago economics:

The question is what strategy? Right now it seems like Chicago style interest politics with a Moveon.org spin. Money will be there for key what passes for"left" groups - urban ...

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Obama's Rosy Scenario

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Here Is Barack Obama's budget guru Peter Orszag on CNN today:

I don't think we should be chasing our tail, constantly revising assumptions," Orszag said. "Let's see what happens, let it work. We'll have a mid-session review later in the year. We'll have an opportunity to revise the ...

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Is Obama to Blame for the Plunging Stock Market?

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Let me sum up the attitudes of the many investors I talk to: "I thought with Obama we were getting the third Clinton term. Instead, we got Pelosi's first." Of course, that is an unofficial sample. But here are some of the big gripes by these folks: 1) the stimulus package wasn't stimulative ...

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How High Will the Unemployment Rate Go?

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The econ team at Action Economics still sees plenty of room for the unemployment rate to rise:

For reference, the rate rose in the 2001 recession from 3.8% in April of 2000 to a 6.3% peak in June of 2003, while in the 1990 recession it rose from 5.2% in April of 1989 to 7.7% in July of ...

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Stock Market Declines are Dangerous

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This is getting ridiculous. As I write this, the Dow is off another 4 percent. Attention must be paid, gang. Just as the Clinton White House monitored every blip of the bond market, the Obama White House needs to track the stock market.  The evisceration of net worth will have a hugely negative ...

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The Odds of a Depression? 40 Percent

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The Intrade betting market assigns a 38 pecent chance the U.S. economy will shrink 10 pecent or more from peak to trough. Let's call that a depression. Moreover, the market assigns a 20 percent chance the economy will shrink 15 percent or more. Let's call that Great Depression 2.0. For context, GDP ...

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The Big Flaw in Obama's Housing Plan

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So the White House released the details of its housing bailout plan. The meta-message of the plan (besides that there is often no justice for people who "work hard and play by the rules") is this: Markets don't work. Supply and demand doesn't work. At least not the way the White House would ...

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Will China Stop Buying Our Bonds?

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Here is what our economy needs, according to Hillary Clinton:

Our economies are so intertwined, the Chinese know that to start exporting again to their biggest market the United States has to take some very drastic measures with this stimulus package, which means we have to incur more debt.

Save us,

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Barack Obama, Stock Market Strategist

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The American president on the American stock market: "The stock market is sort of like a tracking poll in politics. It bobs up and down day-to-day. And if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong."

Me: This is so wrong. We are not ...

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Stock Market Vigilantes Vs. Obama

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Dynamite Dan Clifton, superanalyst with Strategas Research, sums up Wall Street's vote of no confidence on Obamanomics:

With the S&P 500 off close to -8.5 pct. since the budget was introduced, it is clear that equity investors remain skeptical of the government’s plan to lead us out of this ...

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Market to Obama: I'm Just Not That Into You

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"I think he overestimates his ability to take people .. and, sort of, charm them into being nice," Barney Frank, has famously said of Barack Obama. And while America's Charmer-in-Chief has worked his magic with the Women from Maine and some of the Blue Dog Democrats, not so much with the Rump ...

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Goldman Sachs: Economy Worsens

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The econ team at Goldman Sachs paints a gloomier picture:

We have marked down our forecast for US economic activity in the first half of 2009; we now expect real GDP to fall at annual rates of 7% this quarter and 3% next quarter (versus declines of 4½% and 1% previously). ... As a result of ...

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Romney Speaks! My Chat With Mitt

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I spoke with former GOP presidential candidate Mitt Romney at his hotel room the morning of his speech to the Conservative Political Action Conference here in Washington. (He ended up winning the CPAC presidential straw poll.) Instead of the usual political horse race questions, I wanted to probe ...

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No Need for Obama's Housing Bailout?

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What this chart (via Jim Glassman at  JP Morgan Chase) says to me is that housing is now undervalued. And, as Glassman expains, "even if house prices continue to fall, don’t be so sure that defaults will worsen, because the weak hands—speculators—by now have been washed out. Folks who actually live ...

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