Review

A quick review is in order. Let’s not get lost for the trees.

Without central bank cooperation late Q4 ‘08 we would have witnessed a meltdown in world commercial activity. This is too scary to even contemplate yet we were within a whisker.

Why the crisis? World investment banks fed lamprey-style on the leavings of Fannie and Freddie. Whiz kids screwed up in structuring products around this lousy mortgage paper. These products imploded. But the feast was presented by Sen Obama, Sen Clinton, Rep Frank, Sen Dodd and other Dem’s who, in order to buy black votes protected the twins from repeated efforts by Bush to reform their shoddy practices.

Enter president Obama. Having inherited a bad situation (in which he played a central role) BO made it much worse by throwing up impediments to corporate risk taking; he thus personally hindered the recovery. From our blog of Dec/09: Dan DiMicco, CEO of steelmaker Nucor Corp, told the WSJ that, "‘Companies large and small are saying, ‘I am not going to do anything until these things - health care, climate legislation - go away or are resolved.’" We also hear from Porta-King CEO Steve Schulte who told USA Today that his company is not investing because, "proposals in Congress to tackle climate change and overhaul health care would raise costs." We have dozens of such testimonials. These guys naturally put hiring on hold.

Consumers were discouraged and shocked most of ‘09 then began a slow recovery in spending H1, ‘10. Slow because job insecurity was still high, exacerbated by the press. And even those with money looked forward to higher taxes beginning Jan/11.

That takes us through ‘09 and half of ‘10. From our blog of Aug/10: Not only are private-sector employers worried about new burdens, they are worried about anemic growth in general, looming deficits and tax hikes never ending. In the larger sense, private enterprise does no relish a future for the US as a social democracy, in the fashion of an economically stagnant Europe. Yet the perception by private enterprise is that this is where Obama is taking us.

Then, Nov/2 changed everything. We all know the details. Voters 1) stopped the damage and 2) ordered repairs to be made. Employers have taken note; consumers have been greatly cheered. Foreign investors will once again discover the US to be a place of safe and sound investment.

Finally, let’s return to our anchor. The last two payroll reports have been less-than-thrilling. We have had slippage on this front, yet expect this to be more pause then trend. Why? Exactly because of Nov/2 and employers’ reaction to that result. Levelers are no longer planning our economy and will no longer be allowed to kill us with debt and regulation. Burdens both perceived and real have been lifted.

Consumer activity has adhered well, blasting through Street estimates (with the exception of the most recent Chain Store sales results, dampened by extreme weather).

Stay tuned.

Robert Craven