Encouraged by the results of Nov/2 and Congressional follow through, employers came alive. Encouraged by the same event, including extended tax relief, consumers came alive. This brings us to Q1.
Momentum has now slowed. This is due to 1) permanent elimination of job positions by employers frightened to death by Obama’s statist agenda (Obamacare and other unpredictable costs) 2) billowing commodity costs related to a) Fed policy and b) Middle Eastern upheaval and 3) wage gains which have lagged #2.
Those businesses dependent on discretionary spending were encouraged late Q4 concerning economic reality ahead; those same businesses are now less buoyant, feeling let down.
Next Six months:
Fed policy is not a boon but a bust to the average consumer. Liquidity is not the problem; it is not needed. QE II has thus 1) inflated equity prices and 2) inflated commodity prices. Stock holders have done well. That’s not enough. The rest have been hurt.
Spending cuts ahead? Fine. The more the better. Don’t believe the nonsense that severe cuts will provide a stall. This will instead provide a spark. There is zero evidence that government spending ever provided anything but a wash (except to unions) and plenty that it threw a wrench in the works.
To the extent Fed and Congressional interference subsides we can grow increasingly constructive; the recovery will kick into 4th gear.
Just crude prices will remain the piano overhead. That is, the odds are very high for further violence in the Middle East as the adjustment (Arab Spring) continues.
Robert Craven
Momentum has now slowed. This is due to 1) permanent elimination of job positions by employers frightened to death by Obama’s statist agenda (Obamacare and other unpredictable costs) 2) billowing commodity costs related to a) Fed policy and b) Middle Eastern upheaval and 3) wage gains which have lagged #2.
Those businesses dependent on discretionary spending were encouraged late Q4 concerning economic reality ahead; those same businesses are now less buoyant, feeling let down.
Next Six months:
Fed policy is not a boon but a bust to the average consumer. Liquidity is not the problem; it is not needed. QE II has thus 1) inflated equity prices and 2) inflated commodity prices. Stock holders have done well. That’s not enough. The rest have been hurt.
Spending cuts ahead? Fine. The more the better. Don’t believe the nonsense that severe cuts will provide a stall. This will instead provide a spark. There is zero evidence that government spending ever provided anything but a wash (except to unions) and plenty that it threw a wrench in the works.
To the extent Fed and Congressional interference subsides we can grow increasingly constructive; the recovery will kick into 4th gear.
Just crude prices will remain the piano overhead. That is, the odds are very high for further violence in the Middle East as the adjustment (Arab Spring) continues.
Robert Craven
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