Could the U.S. economy tolerate, and, equally significant, will the American people push the nation's chief executive, the president, in the direction of more government intervention?
The view from here is: probably not. Everything in the American ethos and culture speaks against it.
Unlike in France, where the French Government is simply, "France," Americans, for the most part, view their government -- save defense spending -- usually as part of the problem, not the solution. 'Government is best which governs least' is a longstanding Americanism. And most investors/readers know about candidates who say they want to "get the Washington bureaucrats off the backs of the American people" and "clean up the mess in Washington!"
Americans are anti-central government, and they are anti-state (they generally dislike the limited federal government that exists). In the United States, it is always private first, public second.
Political science empirical research teaches us that when U.S. unemployment is rising and job losses occur over many months, the political party in charge of the White House will have a difficult presidential election. (See: The American Voter, by Campbell, Converse, Miller, and Stokes.)
Federal statisticians will release one more jobs report, the September jobs report in October, but to-date the trend is not one of U.S. economic health.
The U.S. Labor Department announced Friday that the U.S. economy lost another 84,000 jobs in August, with the unemployment rising to 6.1% - - a five-year high.
The U.S. economy has now lost 605,000 jobs in 2008 after creating just 1.1 million in 2007. Economist David H. Wang told BloggingStocks Friday the U.S. economy is not growing. 'U.S. economy headed in wrong direction'
"The U.S. economy is in recession. We don't have to wait for two-quarter date to confirm it. These are very bad numbers and the economy is headed in the wrong direction," Wang said. "Electioneering attempts aside, the U.S. economy is, objectively, in bad shape and anyone who fails to see this fails to recognize reality."
Economists differ regarding whether the U.S. economy has officially fallen into a recession, but for investor Mario Gabelli, the debate is the esoteric stuff of academicians and analysts.
Gabelli has his own reading on the U.S. economy and he isn't opaque about it.
"The consumer has been in a recession since November 2007," Gabelli told Bloomberg News Friday. "The economy has been bolstered by exports and a few other things."
Further, Gabelli, who oversees $28.3 billion as chief executive officer of Gamco Investors, Inc., said the U.S. Congress may have to boost the economy with additional tax rebates, Bloomberg News reported Friday. Congress passed and President Bush signed a $117 billion tax rebate package earlier this year.
Gabelli's comments occurred before the U.S. Labor Department announced Friday that the U.S. economy lost another 84,000 jobs in August, with the unemployment rate rising to 6.1% -- a 5-year high. The U.S. economy has now lost 605,000 jobs in 2008 after creating just 1.1 million in 2007.
Gabelli says takeover of Fannie, Freddie needed
Further, Gabelli said the federal government must take over Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the U.S.'s largest mortgage financiers, as a prerequisite for housing sector recovery, Bloomberg News reported.
Bill Gross of Pimco, one of the most respected bond investors in the world, thinks the credit crisis is about to get much, much worse. He also believes that the federal government is the only entity that can save the markets.
Gross's biggest concern is that financial companies will have to keep selling assets to raise cash. With home prices falling, he does not see an early end to this, and that troubles him. According toReuters, Gross wrote "Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami."
Gross may be right, but his suggested solution is wrong. He wants the U.S. Treasury to start buying distressed assets to help build a floor for their values. Of course, the funding source for Treasury is the U.S. taxpayer.
Solving one problem by creating a larger one is rarely a good program. There is a great deal of evidence supporting the fact that taxpayers are already stretched to the limit. Job losses are up. Easy credit is gone. Gas, oil, and food cost much more than they did a year ago. The average person, who may already be unable to handle his own financial burdens, can hardly be asked to help support the purchase of assets being sold by large financial institutions.
If Gross's vision about the future of the credit markets is right, the financial system is only at the beginning of a growing disaster. But, turning to the U.S. citizen for cash is like looking through a man's pockets for a spare change. All the more valuable paper money has been spent.
Douglas A. McIntyre is an editor at 247wallst.com.
The U.S. market is driving the world -- whose stock indices plunged after yesterday's 345 Dow rout. But what does today bring? A chance for recovery or further devastation depending on whether reported economic statistics are better or worse than economists expect. Early reports are bad.
Here are the reports to watch, and what analysts had been expecting according to CNNMoney:
Job cuts - Economists expected 75,000 lost jobs, but the 8:30am report was 84,000 lost jobs -- worse than expected.
Unemployment rate - They had forecast the jobless rate to stay the same at 5.7%, but economists were wrong on this one too and unemployment rose to 6.1%.
Hours worked - Economists anticipated the hour work week wouldn't change from July at 33.7, and they were right.
Change in hourly earnings - Economists saw a 0.3% increase in the hourly wage, the same as July, but hourly wages rose 0.4%. Some may interpret this as inflationary pressure, but the increase is likely not enough to increase consumer spending either.
In general, these statistics suggest consumers are less able to spend money. Since initial numbers suggest things are worse than had been anticipated, stocks could plunge, causing policymakers to meet this weekend to try to hatch another plan to boost investor confidence for announcement on Sunday night.
As everybody's focused on Apple Inc. (NASDAQ: AAPL)'s "Let's Rock" event and the expected new iPod lineup, today Dow Jones reported that T-Mobile Czech Republic AS, a Czech unit of Deutsche Telekom's (NYSE: DT), said it has sold more than 5,000 iPhones since the launch on August 22.
I know, 5,000 does not sound too much, definitely not in the context of overall iPhone sales globally. And it's particularly disconcerting after a Weisel analyst lowered revenue and EPS estimates on Tuesday, writing that "Retail store checks indicate decelerating sales,'' and that "iPhone unit sales have slowed in the past two weeks.'' But let's not forget the Czech Republic has a population of 10 million, and that this number doesn't include sales from the other two major local competitors, Czech units of Telefonica SA (NYSE: TEF) and Vodafone Group Plc (NYSE: VOD), both of which would not disclose sales.
With a home near the capital of the world, decades ago the parents of yours truly were able to locate and purchase the best and most effective books for their children during their grade school development years.
Dad usually chose books that emphasized cognitive development, while Mom emphasized books and exercises that stimulated creativity, and that had happy endings.
Roach, who now also serves as Morgan Stanley's (NYSE: MS) Asia Chairman, takes the pulse of the U.S. and global economies, the housing slump, the credit crisis, and the financial system, in his most recent report. (pdf)
And, consistent with Roach's reputation for sobering analysis, his economic forecast for the quarters and years ahead is not pleasant, and it differs markedly from the current consensus in financial circles.
That current consensus argues that the U.S. Federal Reserve's recently-established liquidity facilities, combined with the U.S. Treasury's back-up measures, will enable banks and others with bad mortgages and bad mortgage-backed bonds to muddle-through, slowly working-off these debts as revenues increase as the U.S. economy recovers. Likewise, the U.S. housing sector and consumer demand also will recover, as home prices stabilize and consumption returns to more-normal levels as U.S. GDP increases. It's a sort of 'end to the banking and housing crises by a growing U.S. economy better-able to service those bad debts' argument.
Oil fell $2.24 to $107.11 per barrel Thursday at mid-day despite the fact the U.S. Energy Information Administration announced that weekly crude oil inventories unexpectedly fell by 1.9 million barrels.
Economists surveyed by Bloomberg News had expected crude oil inventories to increase by 450,000 barrels last week.
Gasoline supplies fell by 400,000 barrels to 194.4 million barrels. Meanwhile, refinery capacity rose to 88.7%, compared to 87.3% a week earlier, and 85.7% two weeks ago.
'It's all about slowing global growth'
Energy Trader Jim Dietz said the fact that oil fell despite the unexpected decline in weekly oil inventories underscores "a really troubling oil demand picture."
"Right now, it's all about slowing global growth. The oil market is definitely in sell mode now. The market senses global oil consumption growth will slow in Asia and when you add that to lower oil consumption in the U.S., we could see building inventories, which means oil is headed lower," Dietz said. "We still have to watch [Hurricane] Ike in the Atlantic because it may track toward the Gulf of Mexico but right now lower demand dominates [the market]."
Dietz added that he was currently short unleaded gasoline and oil, with monthly contracts.
Should those who own shares of Kraft immediately put an order in to dump the stock? Well, shareholders know what is best for them and their specific situations, but if you want my opinion, I don't think Kraft is a sell.
For starters, that $1.88 per share figure represents an adjustment related to the sale of the Post cereal asset. It therefore doesn't bother me too much. And as for the 2009 estimate, Kraft's $2-per-share guidance includes a $0.03 charge for the Post-cereal exit and monies devoted to cost savings. Analyst estimates for the most part don't factor adjustments into their bottom-line figures. So, this guidance doesn't really frighten me.
What I think is more telling is the issue of margins. Consumer-products companies such as Hershey (NYSE: HSY), Procter & Gamble (NYSE: PG), Kellogg (NYSE: K) and PepsiCo (NYSE: PEP) all have margins on their corporate minds. From what I can tell, Kraft has been pretty successful at protecting itself from inflation by utilizing price increases.
New evidence shows that online advertisers are building their search engine marketing and moving away from big display ad investments. According toThe Wall Street Journal, "Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ads that appear on search-result pages."
To state the obvious, the news seems to be bad for Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT), and AOL. These portals rely heavily on display ads for their revenue and have modest search income.
The data is much, much worse for newspapers. Companies like The New York Times (NYSE: NYT) are counting on online advertising to take the place of falling print revenue. A great deal of the advertising that runs at newspaper sites is retail and national display. Total ad revenue at The New York Times dropped more than 16% in July. Internet advertising was up less than 1%. Clearly, at that rate, online ads can do little to help that nation's big dailies.
The portals will struggle to keep their display growth intact. They have the lion's share of the market, so scale is on their side. They will almost certainly have the best chance of picking up the marketing dollars from the largest online advertisers. Even if the market keep slowing, their sales should be steady to modestly up.
Newspapers will not be so lucky.
Douglas A. McIntyre is an editor at 247wallst.com.
During the month, Ford was able to sell a total of 155,172 light vehicles, which was 3.6% below July's figures of 160,990, which was the worst month for U.S. car sales in the past 16 years.
As expected, truck sales really took a beating last month for the company. With consumers dealing with record high gasoline prices, truck sales have been weak for some time now, and last month the company saw truck off by more than 32%. Its car sales fell by nearly 9%.
Wall Street, really a typical, small, village-like setting, save for the fact that about $8-12 trillion dollars in capital passes through its vortex daily, is a pulse-taking community. And for a dose of reality to counter-balance the sometimes too-rosy institutional research, the Street looks to the 'perpetual pessimist,' Stephen Roach, Morgan Stanley's (NYSE: MS) Asia Chairman.
Roach's take on economic state-of-things as the United States gets back to work this fall? Don't play "Happy Days Are Here Again" just yet. Roach said the global economic slowdown has only just begun, with the United States heading into a recession and the impact of the credit crunch still roiling through financial institutions around the world, Bloomberg News reported.
"There's more to this macro event than just the credit-market contagion itself," Roach told Bloomberg News. "Maybe two-thirds of that is behind us, but the impacts on the real side of the U.S. economy and the global economy are at an early stage.''
U.S., global economies slow together
Economist David H. Wang told BloggingStocks Wednesday Roach's analysis and comments should not be ignored by executives, small business owners, or typical citizens as they set their budgets and financial plans for the year ahead.
This morning, GLW opened at $17.74. So far today the stock has hit a low of $17.41 and a high of $18.20. As of 12:30, GLW is trading at $17.49, down $2.01 (-10.3%). The chart for GLW looked bullish before today and S&P gives GLW a positive 5 STARS (out of 5) strong buy ranking.
For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $22.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in 4 and a half months as long as GLW is below $22.50 at January expiration. Corning would have to rise by more than 28% before we would start to lose money. Learn more about this type of trade here.
The dollar strengthened to a six-month high versus the euro Tuesday, and also rose against the world's other major currencies on a growing consensus in foreign exchange circles that global economic fundamentals are shifting in favor of the greenback.
The dollar strengthened about 1.5 cents to $1.4465 versus the euro, and about 1.4 cents to $1.7877 versus the British pound Tuesday at mid-day. The buck also gained one-half yen to 108.62 versus Japan's yen.
Pivotal for dollar: Europe, Asia GDP
Further, although Tuesday's dollar catalyst was the realization that Hurricane Gustav would cause considerably less-than-forecast damage to Southeast U.S. oil production and the refinery infrastructure, trader Andrew Resnick told BloggingStocks the longer-term focus remains regional GDP growth.
"With Hurricane Gustav out of the way, sentiment's building that this dollar rally has legs. European growth has slowed to recession levels, and China's economy has slowed as well. For Europe, lower interest rates are likely to follow, and that's dollar bullish," Resnick said. Resnick added that he expects the Bank of England to cut its benchmark interest rate by a quarter-point to 4.75% when it meets September 4. He doesn't expect the European Central Bank to lower its 4.25% refinance rate on September 4, but that stand-pat policy may change to accommodation, later this fall.
The losses from Gustav are significant, but not nearly as bad as they could have been.
That's the early read regarding onshore / offshore property and infrastructure damaged caused by Hurricane Gustav, with losses pegged at $4 billion to $10 billion, according to estimates by Risk Management Solutions. In contrast, Hurricane Katrina in 2005 caused about $50 billion in damages.
Risk Management said losses from Gustav were lessened by the fact that the storm weakened, and hit the coastline as a Category 2 hurricane, and the fact that it came ashore about 70 miles southwest of New Orleans. Those factors, combined with better preparation by companies with vulnerable property in the area, will result in lower damages totals, Risk Management said.
However, RMS was quick to point out that the $4-10 billion damage total does not include loses from flooding in New Orleans that could occur in the days ahead.
Gustav: Little U.S. GDP impact
Economist David H. Wang, who runs U.S. GDP models each quarter, said Tuesday he expects "only a minimal U.S. GDP impact from Gustav."
"Of course human safety is the primary concern. But regarding regional GDP, the Southeast U.S. will incur a 0.1-0.3% GDP reduction in the third quarter from the hurricane, but the overall impact on U.S. GDP will be minimal," Wang said.
Political science empirical research teaches us that when U.S. unemployment is rising and job losses occur over many months, the political party in charge of the White House will have a difficult presidential election. (See: 
The U.S. market is driving the world -- whose 
Oil fell $2.24 to $107.11 per barrel Thursday at mid-day despite the fact the 
August was yet another tough month for American auto maker 
The comeback of the beleaguered dollar continues.
Stocks have their worst week in six years
Why haven't the Republicans said much about the economy?
Chasing Value: Are you watching WaMu?
