August 10, 2004
Bush looking for jobs in the wide, blue skies of rural Minnesota…?
The picture shown above comes straight from the White House's website that promotes the great things America's latest President is doing for the country (although I cannot seem to find the Clinton archives!). This picture is the header for the latest entry on how the country is doing on the economic front, and I suppose it shows Bushie to be quite the visionary. Of course, you all know I had a good laugh…but then I started to read all the propaganda splattered all over the place, and for the first time I actually came to appreciate that our dear President HAS been trying…even if in vain…to get this old clunker of an economy going. My, oh my…so many wonderful and promising programs that should be trickling money down from corporate America to the hapless masses much faster than the current going rate. Unfortunately, the big SPLAT heard around the world on Friday featuring yet another month of sub-par jobs growth has hacked again at the credibility of the current economic regime. It is not so much a matter that it has not worked well, but that everyone from Greenie to the Bushies simply over-promised what could be done given all the headwinds. Ever since the economy took "too long" to respond to the Fed's rate cutting fever from 2001 to 2002, we all knew something strange was afoot. All that stimulus in the form of deep tax cuts, big deficit spending, and cheap money and credit got us the equivalent of a quick rush - a shot in the arm that lasted about as long as a 10-cent high. And now….SPLAT.
Bushie went back to calling this economy an "economy in transition" instead of his typical claim that the economy is showing robust growth. He also reassured folks that he will not be satisfied until everyone who wants a job gets one. Nevermind that he did not sound sincere. Full-employment is the holy grail of Presidential politics. Even if it could be done, no responsible Federal Chairperson would allow such an inflationary process to unfold. Imagine all the buying power that would be unleashed across the land! Imagine all the power labor would have if there were no spare bodies willing to work for less than the next person? In the end, Bushie inserted a nice caveat: he can simply claim the remaining unemployed must not want all the jobs he has been toiling to create. Presto! Instant full-employment! (I was searching for some reference material so you could verify my claims as to what Bushie said a few days ago. This led me to the White House site, but, alas, no transcripts of this speech he made at a community college. You will just have to believe me I suppose!).
Now, I could go and on with my typical diatribe against the current American regime, but it occurred to me that the esteemed Democratic contender for the high throne does not inspire much confidence either. Certainly, the market's current malaise is part fatigue from all the bad economic news and part fear from just what economic damage a Kerry administration could do. I am not yet in a position to judge the specifics, but when I have an opinion you know you will be the first to hear about it! For now, I will refer you to some interesting reading (courtesy of The Kirk Report), implicating BOTH major parties in a race to see who can bankrupt the country the fastest - mainly through the whole Social Security charade - see: "US being led down the path of 'financial destruction'." I find it more than noteworthy that an increasingly palpable unease is slowly bubbling in the American conscious about all the debt we are knitting together. It is a heavy quilt that threatens to suffocate us all - or if not us, some future hapless generation. This unease should grow stronger as people begin to realize how little we got out of our latest debt binge.
It is scarier still to think that neither of our major parties is well-equipped to take on our problems at their root. A segment I partially caught on National Public Radio yesterday reinforced my growing dismay. (Here is a synopsis: "Conservative Power in America, John Micklethwait, US Editor of the Economist discusses the American conservative movement. He chronicles the Right’s rise, from its deep seeds in American history to its takeover of the Republican Party beginning with Barry Goldwater in the 60’s and culminating in the Republican success of the 80’s and 90’s. His book is "The Right Nation: Conservative Power in America."") The (European?) speaker went through a list of characteristics demonstrating how America is essentially a conservative country when compared to other developed countries. We are the world's oldest Republic, we have a democracy older than Germany's or Italy's, we believe in government as a tool to enable people to be free to pursue their (American) dreams and not as a tool to ensure no one is left in need (many of the world's developed nations have socialist streaks), we are more nationalistic than many developed countries, and religious codes are essentially engrained in the very foundations of the country. I sat back and realized that when looking from the outside-in, a lot of people probably wonder what all the fuss is about in the Bush vs Kerry duel. To us Americans, particularly those of us who cannot wait to escort Bush back to Crawford, TX, this battle royale seems like the very life-and-death of the nation! Heck, we even worry that terrorists are going to try to scare us into voting for one candidate over another (as a sidebar, can I just mention how ridiculous this is?!? Kerry has not once indicated that if he wins he will go soft on these lunatics roaming the earth. If anything, such a pre-election attack could demonstrate just how unsafe we remain despite the supposed good we were supposed to get out of all that bombing and shooting in Iraq). Instead, if we the people do not pay closer attention, we will allow our party loyalties, even if varying from election-to-election, to blind us to the issues that are looming larger than any one party or ideology. Anyway, that's my political soapbox for the day…
So, despite the declining jobs numbers, stagnant wages, high energy and commodity prices, and waning corporate earnings growth, Greenie earned the gold star of the day by boldly declaring today that the economy is essentially just fine: "The economy nevertheless appears poised to resume a stronger pace of expansion going forward." Wow! Talk about trying to cheer the troops! The market tried to respond in kind by rallying into the rosy Fed announcement and after a brief "sell-the-news" dip following the announcement. Suddenly, no one cared that this statement alone meant that the Fed remains determined in its new campaign of "measured" rate hikes.
Well, count on Cisco to ruin a good Fed after-party. After the bell, the company reported "decent" earnings, but apparently short of the nervously high expectations of investors. All CEO John Chambers had to say was that the CEOs of Cisco's customers have been expressing more caution and conservatism now than in the first half of the year and =bam!= the stock took an instant dive. Analysts are apparently looking for any excuse to sell and added lower margins and flat quarter-to-quarter revenue growth to their pit of woe. And do not even count the number of times that Chambers mentioned that it was appropriate to give a conservative outlook. It could have been enough for even bullish Greenie to take pause and recalculate his forecasts for robust GDP growth from here to the next recession!
All in all, things ain't lookin' so good for Bob, Sally, and Joe. Tomorrow's market is likely to take out all the joyous gains from the "Greenie bounce." From here, one HAS to think that things are getting about as bad as they can get…all things considered. The problem is that we have no near-term catalysts to provide a counter-balancing excuse for the market to bounce for more than a one-day bear market kind of rally. One can hope for a sudden drop in oil. It is possible given the growing divergence between oil and gasoline prices (higher gasoline inventories reported last week - could demand also be cratering?), but it is not a good rack to hang your hat on. Even trying to be a contrarian in the face of catcalls for $50 and $100 barrels of oil seems futile (anyone still remember the skepticism oil traders has about ANY price hikes in oil when the Iraq invasion began in March, 2003?!? My how the tides turn!)
The most I can do for you now is to remind you….to be careful out there!