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Politics and your money
For years I've been railing about the lack of attention to fixing the housing market as the key foundation block to the economic recovery. Now after TARP, Stimulous, Cash for Clunkers, First time Homebuyers incentives and heaven only knows what other monies have been spent as attachments to this or that bill the administration is trying to address the home owner issues and stabilize home values as a result. A little slow to the party but at least they are beginning to get an understanding of the real problem. Sorry Barney Frank but Fannie and Freddie weren't "doing a great job". The Occupy Wall Street Crowd should be staging sit ins at the offices of Fanny, Freddie and Mr. Frank. They caused the problems. The banks weren't without guilt, but in a free country you play the hand your dealt. They just got dealt a hand that let them win really big. You don't suppose that it was intentional, like dealing off the bottom of the deck or something?
Investors are starting to really split. Some have capitulated and are turning to cash and fixed annuities while others can’t/won’t believe that America is done for and continue to seek the upside that capitalism provides. Which camp are you in?
The facts are:
1. Transportation Indexes are well off their highs a few months ago suggesting that investors don’t see freight bookings growing for trucks, trains, planes and ships. That means they believe the economic activity is flat or maybe even slipping a little. Increased risk of a second dip into recession.
2. Leading economic indicators are trending downward over the past 9 months. Not the type of trend that foretells a recovery.
3. 2011 average capacity utilization is 3% above last year’s average and is above the 2011 average in September. That bodes well for employment.
4. Yet employment remains stubbornly weak. Tomorrow’s report is expected to show 405,000 new claims for unemployment insurance. This would be on trend with the year to date. Same old same old.
5. Consumer Confidence, probably a lagging indicator, has reached a low for the year. This could suggest that we are already in a modest recovery, especially when taken in concert with the slight uptrend in capacity utilization.
6. I’ve been tracking the Philadelphia Fed and the Empire State Index which are both surveys of local business expectations. For the first time since June the two are reporting essentially the same level of expectation. They are positive but scoring only an 8 when 0 is neutral. The last time they matched they predicted a minus 7.7. That is nearly a 100% turn around in three months. The accuracy is anybody’s guess but the trend in intriguing.
7. The employment picture as demonstrated by Monster.com jobs ad activity has been strong and slightly up-trending. This suggests that companies are looking to upgrade and even maybe expand their work force. The persistent unemployment problem points to the systemic problem of the workers available not having the correct skill sets to match the jobs available. That will take years to resolve and won’t be affected by any sort of stimulus other than educational/retraining support.
8. To say that unemployment remains a problem is an understatement. The 2011 average monthly announced corporate layoffs were, to date, 53,000 per month. This is a heck of a lot better than the 116,000 in 2008 or 107,000 in 2009 but it is upsettingly 20.5% higher than 2010. Whether this is due to the chatter we hear about China being more business friendly and the over regulation making it harder to do business here I don’t know. But it seems like businesses may be clearing the decks in the face of “Occupy Wall Street” and “Obama Care” and other regulations that they consider onerous. Since this is a free country, they are free to leave and sell us their products from abroad (open market agreements).
So do I know what is likely to happen? My answer is a resounding NO. Do I know what I hope happens, sure. But like many, I don’t have absolute confidence that my hopes will come true. And like many I’m afraid that the opposite may happen.
I guess I’m playing the odds here. I bet 70% that my hopes will materialize, 30% chance they won’t. I suspect that the economy will continue to struggle until a true leader comes forward and demands that we the people and our elected Congress face up to our responsibility and fix what is broken. I hope Congress can actually do that. We all need for them to do that because continuing on the path we are on now leads us to catastrophe. Without courage and strength we could end up like the United Soviet Socialist Republic, once a world power equal to or at least a close second to the USA in world influence and in military might. It tried to fix Afghanistan too, and failed. Today the USSR no longer exists. No tears in my eyes but could we be next? The European Monetary Union seems to be in dire straights. If it fails, business trade in Europe will take a giant step backward. Banks in the USA could be again in trouble if Europe can’t fix their problems. That will make more problems for us the US taxpayers and cause more negative pressure on our economy. It could be the trigger to a second dip into recession. So are we next to circle the drain? That is the question we must all be asking as the next election cycle approaches. Whatever your leanings, whatever your political bent, exercise your duty to learn about the candidates and vote. Vote as though your life depends upon it. Your way of life really does.
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