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by DJ Durant | May 30, 2011
First of all, a wonderful Memorial Day to you all. I pray that your travels, picnics, barbeques and parties would be safe and fun. And let’s remember our fallen heroes, who without them and their ultimate sacrifice, we wouldn’t have the freedom to enjoy what we do.
The economic calendar of last week revealed what appears to be a slowing economy. First, the analysis.
- Durable goods orders, a highly volatile statistic, were down significantly, reflecting slower orders for cars, airplanes, refrigerators and washing machines.
- The second estimate of Q1 GDP growth was anemic at 1.8%. 3% would be healthy and would suggest an economy growing fast enough to grow our employment base.
- Having said that, initial jobless claims rose to 424,000, which again suggest a slowing economy. Employment is not likely to grow unless jobless claims fall below 400,000.
- Consumers are more upbeat, for now.
There are two things which conservatives who have any hope of reaching the White House in 2012 must address in order to have a chance–employment, and oil prices. The two go hand in hand. High commodity prices are a drag on the economy and act like a tax. $4.00 gasoline keeps people from spending on other things, like durable goods, which create jobs. The current administration has been an abject failure in handling the economy (never mind foreign policy). Republicans would do well to address these issues, and not each other.
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by DJ Durant | May 24, 2011
U.S. markets closed off today, while foreign markets ended generally positive. A bright spot in the US economy was the release of new home sales, which were estimated to be up 7.3% in April, to 323,000 new homes sold. This represents the fourth month in a row of increasing new home sales, but we’re coming off a dismal low. In 2005, 1.4 million new homes were sold.
The housing market reflects a classic supply/demand equation. The supply of housing far outstrips demand, and with a glut of foreclosed homes still in the market, the housing market is unlikely to return to 2005 levels for several years.
The markets seemed to be more concerned with the nation of Greece’s ability to service it’s debt. Keep in mind that about the only difference between Greece and the United States is 270 million people. Investors have yet to figure that out.
Chrysler today repaid $7.6 billion in government loans to the United States and Canada. Perhaps this will tide Treasury Secretary Tim Geithner for another 20 minutes or so.
Having said that, Secretary Geither hinted today that it would be “irresponsible ” for Congress to allow the nation to default on its debts by not raising the debt ceiling. Is he kidding? It would seem to me that allowing the nation to run $1.2 trillion deficits, and the general handling of the economy by this Administration would be the very definition of irresponsible. Perhaps he should be examining how we got to this point. A little circumspection could go a long way and would be a pleasant change of pace.
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by DJ Durant | Jan 5, 2011
Out with the old, in with the new, goes the standard cliche every year about this time. No, this is not a reference to Nancy Pelosi’s age, although incoming House Speaker John Boehner is 9 years younger. Speaker Boehner does represent a new attitude and the resulting optimism is being reflected in the markets and the broader economy.
Consider:
- Retail sales, Christmas sales, were up significantly over 2009
- Consumer and business confidence for November and December have inched higher
- Jobless numbers are moving downward, evidenced by today’s ADP employment report that suggested 297,000 new private sector jobs were created in December (this is a big number!)
This is not a coincidence. This is, however a direct result of increased optimism in the country due to the November election and subsequent Republican control of the House. It is a direct result of Congress extending the Bush tax cuts in November. It is a direct result of the repudiation of the Obama/Reid/Pelosi economic agenda. Republicans have a huge opportunity to make the economy and employment the primary issue in 2011. In the words of that great philosopher James Carville, “It’s the economy, stupid”.
In addition to repealing the two collosal and horrid pieces of legislation, (ObamaCare and Financial Institutions Reform), Congress needs to deal with several other hangovers from the Pelosi/Reid years. First, Julian Assange should be tried and convicted of being the cyber-terrorist that he is, and he needs to be treated like any other terrorist. Second, the federal government needs to be starved into submission. Follow the model Chris Christie has set in New Jersey. Get the unions under control (and with it, the unfunded pension liabilities). Finally, any free trade agreements with valued allies and trading partners, such as Colombia and South Korea, should be ratified and signed as soon as possible.
Movement in these directions will reinforce the current optimism prevailing in the country, promote private sector job growth, encourage banks to lend again, and as a result, generate revenues for not only the federal treasury, but state and local governments as well. The last two years nearly ruined us as a nation. We have an opportunity to correct the damage. 2011 is a new year. Let’s hope the new Congress can build on it.
by DJ Durant | Nov 13, 2010
Our grandchildren were over last weekend–two boys ages 5 and 3. At one point the 3-year-old was telling me about being disobedient and how Daddy had to give him a big spanking. Now I know my son and I’m sure that he was providing gentle discipline, but the point wasn’t lost and can be applied to last week’s election.
Much has been made of the Republican’s gains in the House and Senate, and their effective control of Congress. This was clearly a repudiation of the Obama, Reid, and Pelosi policies of economic stagnation. Make no mistake about it, this was about the economy. The Democrats insistence on spending taxpayer’s money ineffectively, squandering it, actually, passing huge and unpopular bills, and their complete lack of caring about the taxpayer and the cumulative effect on the economy led to their downfall.
Part of this is due to their arrogance. Part is due to the Democrats’ lack of understanding of how our economy works. America is and always has been a capitalist society. Government control and planning is an anethema. Our economy works best when businesses and individuals are confident and can make plans to invest, spend, hire and borrow with a degree of certainty. America has not had any level of confidence in over two years, since the collapse of Lehman Brothers in September 2008. The Democrats, and President Obama, Harry Reid and Nancy Pelosi specifically, have done everything they could to ensure a lack of confidence by ramming through legislation designed to further their agenda and in the process, scaring the living crap out of people. Hence the rise of the Tea Party, and the big spanking.
Everything the Democrats have done has suggested higher taxes or significantly additional costs and fees. First, they’ve managed to pass a “stimulus” bill that has to be paid for somehow, and that has failed to stimulate much. Second, they passed Obamacare that will raise the cost of doing business for everyone, and I mean everyone, and must be paid for with additional taxes. Third, they passed a “financial reform” bill that will raise the costs of banking and lending, with the net result of limiting access to credit. Finally, their failure to extend the Bush tax cuts raises everyone’s taxes, regardless of income, by a minimum of $2,000 next year. All of this money has to come from somewhere. And so people are nervous and nervous people do not spend money. Nervous businesses do not hire and invest in infrastructure and equipment. And the cumulative effect of all of this is a lack of revenue flowing into the US Treasury. You cannot have 9.6% unemployment and expect treasury tax revenues to increase. And this is why the Democrats got spanked.
Republican leadership now has to lead or they’ll get spanked. They need to undo the uncertainty and instill confidence in the electorate and business. This means revising all of the poor legislation that was passed the last two years, if not repealing it altogether. This is what they were elected to do. If they pass legislation and President Obama vetoes it, then in two years, the voters will have another chance to spank. And despite all of his rhetoric, I don’t believe that the President truly gets it. There is still an incredible lack of humility emanating from the White House. Even this week in Seoul, the President got spanked by the Europeans and Chinese, and he refuses to acknowledge his policies aren’t working; rather, his policies are ”misunderstood”.
On a separate but related topic, The Federal Reserve and Chairman Ben Bernanke has decided to print another $600 billion and buy back US Treasury securities in a process known as Quantitative Easing (QE). Flooding another $600 billion into the economy over the next six months is like pushing on a string. Until the government gets its fiscal act together, it won’t do anything other than increase the money supply with no increase in aggregate demand for goods and services. This money has to go somewhere, and investors will search for a place where they can get a reasonable rate of return. So, after the election, there was a rally in the stock and bond markets, but this week, stocks and bonds sold off, but commodities rallied–specifically oil, cotton, soybeans and gold. On Friday, even commodities weakened. The stock markets have generally rallied since September 1 because corporate earnings have been solid. But earnings are a result of sales, and in order for sales to increase, people have to want to risk spending the money, which brings us back to fiscal policies.
So the next month will determine whether or not the resurgent Republicans and spanked Democrats can and will work together. The amazing thing about our economy is that it hasn’t collapsed despite collosal mismanagement in our nation’s capitol. Stay tuned. Things are about to get very interesting.
by DJ Durant | Aug 6, 2010
The Labor Department reported this morning that nonfarm payrolls fell by 131,000 in the month of July. Even more discouraging was that June’s revised payroll number was revised downward to a negative 221,000. This is huge. Initial jobless claims estimates released Thursday was 479,000, and was an increase from the previous week’s 460,000. The two statistics, nonfarm payrolls and initial jobless claims, are suggesting the same thing–employers are not hiring, and are, in fact, laying off workers, and we may very well be headed into a “double dip” recession.
That’s the report. Here’s the analysis. As suggested some months ago, the past predicts the future. As Solomon wrote in Ecclesiastes, there is nothing new under the sun. There will be no new net growth in employment until new jobless claims fall below 400,000. Hiring cannot and will not happen until employers are confident that they have sustainable business prospects, that their expenses will be stable (like health insurance premiums) and that their taxes will be stable. Again, we’ve seen this scenario before. It was called the Carter Administration.
Right now, President Obama and his staff are crafting a spin that would suggest this is all the Bush Administration’s fault. That somehow, the last 18 months didn’t happen and they are not responsible for any of the anemic economic growth evident currently. The reality is, they could blame the Bush Administration for anything that happened in the first six months of the current administration. All economic activity since August 2009 is due to Obama Administration policies.
It’s time for the President to put his big boy pants on. No one wants to hear his whining anymore. Nor do we want to see solutions that will expand the national debt and budget deficit. And while I feel for all of the 6.6 million people that have been out of work for six months or more, it’s laughable to watch the arrogance of liberal Democrats defend their failed policies. The Democrats are imploding, again, something I predicted in November 2008. They violated economic principles. They thought they were smarter than that, and that, somehow, because the sun rose and set on Barack Obama, it would be different for them. This is a hard lesson to learn. The longer this lasts, the more seats the Republicans will gain in the November elections. By all means, they should continue their rhetoric. It’s fun to watch.
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