Just after the Nov election we highlighted a caveat to our otherwise constructive view. We might have listed this very same item as a wild card. That would be the odds that lame duck “progressives,” still welded to their twisted ideology despite, to borrow a phrase from Irving Kristol, having been “mugged by reality” will do significant harm to their Country, and simply out of spite.
We are referring of course to the left’s insistence that the rich pay up. Why the jealousy, who knows, but it can be nothing else but envy as all but the most economically illiterate now understand that tax cuts fire growth. They are in everyone’s best interest. So what if a guy making $500M gets to keep a little more. All the more likely he will plant a new garden, or maybe buy a vacation home and in so doing enrich others (nurserymen, realtors to name two of these).
From Paul Bedard of US News, “Failure by Congress to extend the Bush tax cuts, especially locking in the 15 percent capital gains tax rate, will spark a stock market sell off starting December 15 as investors move to lock in gains at a lower rate than the 20 percent it would jump to next year, warn analysts. . . .While it is unclear how bad the sell off could be, it could wipe out the year's gains......”
Not really. There will be no Dec/15 massacre as the market’s take on the odds of the lame duck tax event are already being priced in.
But there’s still no excuse for the Dem’s sordid behavior.
Pelosi and fellow partisans (not retards as they know exactly what they are up to) continue to pimp two falsehoods, the first that gov’t spending counts for something aside from union payoffs, and the second that tax cuts “must be paid for.” They’re not fools. They’re traitors.
From Michael Boskin, econ prof at Stanford, “My colleagues John Cogan and John Taylor, with Volker Wieland and Tobias Cwik, demonstrate that government purchases have a GDP impact far smaller in New Keynesian than Old Keynesian models and quickly crowd out the private sector. They estimate the effect of the February 2009 stimulus at a puny 0.2% of GDP by now. By contrast, the last two major tax cuts—President Reagan's in 1981-83 and President George W. Bush's in 2003—boosted growth. They lowered marginal tax rates and were longer lasting, both keys to success. In a survey of fiscal policy changes in the OECD over the past four decades, Harvard's Albert Alesina and Silvia Ardagna conclude that tax cuts have been far more likely to increase growth than has more spending.”
Robert Craven
Saturday, December 4, 2010
Friday, December 3, 2010
Pause
Today’s key Nov Payroll release seemed to fly in the face of our long-held view that employment and spending activity would exceed expectations. For example, there was no change in the workweek, manuf employment dropped by 13M, private sector jobs increased only 50M vs 160M for Oct; finally, unemployment jumped to 9.8%.
Nothing moves in a straight line in this economy but in ratchet fashion. We have experienced nearly two months of results which have flattened estimates. It may be that forecasters, weary of being severely beaten about the head and body, figured it was time to reverse course, crowd fashion. Hiring instead took a time out and flattened these guys once more.
Our recommendation to corporate planners or investors would be to remain anchored; that is, the central flaw to street estimates over the intermediate term will be the under-estimation of vigor in payrolls and spending.
Robert Craven
Nothing moves in a straight line in this economy but in ratchet fashion. We have experienced nearly two months of results which have flattened estimates. It may be that forecasters, weary of being severely beaten about the head and body, figured it was time to reverse course, crowd fashion. Hiring instead took a time out and flattened these guys once more.
Our recommendation to corporate planners or investors would be to remain anchored; that is, the central flaw to street estimates over the intermediate term will be the under-estimation of vigor in payrolls and spending.
Robert Craven
Thursday, December 2, 2010
Wall St's Mega-Miss
We’ve known from October that employment and spending numbers would far exceed forecasts. Most forecasters were, many still are looking in the wrong direction.
Witness today’s chain store sales result for Nov. Sales at the 30 chains tracked by Retail Metrics exceeded estimates, rising 5.3% compared with a consensus prediction of 3.5%. “Across the board, there was widespread strength,” said Ken Perkins, president of Swampscott, Massachusetts - based Retail Metrics. “The consumer is feeling better about their situation and is more inclined to spend on discretionary purchases.”
Next, the private ADP employment report showed this week that small businesses added the largest amount of workers in three years in November. No wonder the average shopper in the U.S. spent 6.4 percent more over Thanksgiving weekend than last year.
We have been able to anticipate these headlines before they come into print. There will be more. Economists will marvel at job growth, at discretionary spending just ahead.
There are two keys to Wall St’s mega miss: One is the failure to anticipate the results of Nov/2, that cheering of both employer and consumer. The other is lack of respect for the tenacity of a free America, where creativity and resourcefulness still thrive and this despite the occupation of the WH by the Great Leveler.
We wrote in Oct as follows: In the present situation a spark will be provided by the US masses, suddenly aware that they’ve been taken. That spark to be provided through the voting booth. This is not accounted for in forecasting models! Neither is the celerity with which the process will be accomplished, the overturning of BO’s agenda with the health heist first in line. Neither is the thoroughness in the de-lousing of an economy for two years contaminated by statists. All of this provides fire. Most see a rout by the Republicans but few understand the economic traction to come of it.
Robert Craven
Witness today’s chain store sales result for Nov. Sales at the 30 chains tracked by Retail Metrics exceeded estimates, rising 5.3% compared with a consensus prediction of 3.5%. “Across the board, there was widespread strength,” said Ken Perkins, president of Swampscott, Massachusetts - based Retail Metrics. “The consumer is feeling better about their situation and is more inclined to spend on discretionary purchases.”
Next, the private ADP employment report showed this week that small businesses added the largest amount of workers in three years in November. No wonder the average shopper in the U.S. spent 6.4 percent more over Thanksgiving weekend than last year.
We have been able to anticipate these headlines before they come into print. There will be more. Economists will marvel at job growth, at discretionary spending just ahead.
There are two keys to Wall St’s mega miss: One is the failure to anticipate the results of Nov/2, that cheering of both employer and consumer. The other is lack of respect for the tenacity of a free America, where creativity and resourcefulness still thrive and this despite the occupation of the WH by the Great Leveler.
We wrote in Oct as follows: In the present situation a spark will be provided by the US masses, suddenly aware that they’ve been taken. That spark to be provided through the voting booth. This is not accounted for in forecasting models! Neither is the celerity with which the process will be accomplished, the overturning of BO’s agenda with the health heist first in line. Neither is the thoroughness in the de-lousing of an economy for two years contaminated by statists. All of this provides fire. Most see a rout by the Republicans but few understand the economic traction to come of it.
Robert Craven
Monday, November 29, 2010
Spending - An Update
We noted mid-Oct that the error to the consensus forecast for the US economy was a significant under-estimation of vigor, especially payrolls and related consumer spending, and especially spending on discretionary items. That is, the Wall St. forecasting crowd were all looking in the wrong direction.
We then reminded readers on Nov/9 - If we are right, discretionary spending will expand. Those whose income is linked to this sector may at this time purchase a case of medium-priced champagne, to be traded for the finer stuff perhaps once odds approach 85%.
Recent data has cooperated. Those who have found themselves gasping for oxygen past year, may now make the trade.
Look for economists to continue to revise their forecasts higher.
We will have Chain Store sales result for Nov., this Thursday (Dec/2), followed by the key employment report for Nov., on Friday (Dec/3). Look for these releases to cooperate, broaching expectations.
We also know now that retail activity for the Nov/26-30 period blew through forecasts. Thank you very much.
Business planners should not calculate for more of the same for H1, 2011. That warehouse, just too expensive, about to be sold? Don’t. Not yet. About to release another 20% of staff? Wait until after Christmas, then take a look.
Robert Craven
We then reminded readers on Nov/9 - If we are right, discretionary spending will expand. Those whose income is linked to this sector may at this time purchase a case of medium-priced champagne, to be traded for the finer stuff perhaps once odds approach 85%.
Recent data has cooperated. Those who have found themselves gasping for oxygen past year, may now make the trade.
Look for economists to continue to revise their forecasts higher.
We will have Chain Store sales result for Nov., this Thursday (Dec/2), followed by the key employment report for Nov., on Friday (Dec/3). Look for these releases to cooperate, broaching expectations.
We also know now that retail activity for the Nov/26-30 period blew through forecasts. Thank you very much.
Business planners should not calculate for more of the same for H1, 2011. That warehouse, just too expensive, about to be sold? Don’t. Not yet. About to release another 20% of staff? Wait until after Christmas, then take a look.
Robert Craven
Saturday, November 20, 2010
US Economy - An Update
With Obama’s agenda behind us, or at least stalled, businesses and consumers alike are cheered.
From the Wash Times, “The economic outlook has brightened noticeably in recent days, with a splurge of car-buying by consumers unexpectedly lifting retail sales and businesses putting some of their nearly $2 trillion in stashed cash to work buying other companies with an eye toward growth.”
From Irwin Stelzer in the Weekly Standard, “Nationally, sales at retail shops increased for the fourth consecutive month, and recorded their sharpest gains in seven months. Mid-priced retailers, Macy’s, J.C. Penny, and Kohl’s, report that sales are beating expectations, giving reason to believe that the fears that have kept middle-income shoppers out of the malls are dissipating. New York City’s mid-priced restaurants report that non-rich consumers are once again dining out.”
Bernard Baumohl, an economist at the Economic Outlook Group, said the surge in auto sales is a telling sign for the economy, showing that consumers felt confident enough to take out loans, increase their debt loads and buy new cars for the first time this year.
“Consumers also have been shelling out cash to dine out more, as well as indulge in their favorite sports, hobbies and gambling - key discretionary spending areas that usually do well only as the economy improves,” he said.
Jeffrey Kleintop, chief market strategist at LPL Financial explains that businesses were put off by the sweeping legislative and regulatory reforms enacted by the Democrat-controlled Congress. "Businesses had been hesitant to make the capital commitments to growth" before the elections, he said. Now, "business leaders are more likely to make the commitments to growth that drive the economy, including additional hiring."
Agreed.
From the Wash Times, “The economic outlook has brightened noticeably in recent days, with a splurge of car-buying by consumers unexpectedly lifting retail sales and businesses putting some of their nearly $2 trillion in stashed cash to work buying other companies with an eye toward growth.”
From Irwin Stelzer in the Weekly Standard, “Nationally, sales at retail shops increased for the fourth consecutive month, and recorded their sharpest gains in seven months. Mid-priced retailers, Macy’s, J.C. Penny, and Kohl’s, report that sales are beating expectations, giving reason to believe that the fears that have kept middle-income shoppers out of the malls are dissipating. New York City’s mid-priced restaurants report that non-rich consumers are once again dining out.”
Bernard Baumohl, an economist at the Economic Outlook Group, said the surge in auto sales is a telling sign for the economy, showing that consumers felt confident enough to take out loans, increase their debt loads and buy new cars for the first time this year.
“Consumers also have been shelling out cash to dine out more, as well as indulge in their favorite sports, hobbies and gambling - key discretionary spending areas that usually do well only as the economy improves,” he said.
Jeffrey Kleintop, chief market strategist at LPL Financial explains that businesses were put off by the sweeping legislative and regulatory reforms enacted by the Democrat-controlled Congress. "Businesses had been hesitant to make the capital commitments to growth" before the elections, he said. Now, "business leaders are more likely to make the commitments to growth that drive the economy, including additional hiring."
Agreed.
Thursday, November 18, 2010
Wild Cards
We remain optimistic re US growth, believing that it will exceed expectations, especially employment numbers. But we noted earlier the existence of “wild cards,” events presently off radar.
The business of the future is to be dangerous. So let’s take a look at the odds of significant damage; that is, the odds of an event that has not been priced in and which would retard US growth.
A strike on Iranian nuclear facilities is such a wild card. This event would spike crude prices, at least by 50%. That’s a retardant folks. The Iranians would strike both Saudi oil fields and the Israelis, and attempt to blockade the Straits. Odds for such an event - 40%.
Another wild card is related to the present crisis of peripheral European credits. At the moment Ireland may soon loose her sovereignty; Portugal is in miserable shape, Spain not far behind. This turmoil has been partially priced in. The EU has an emergency fund but more prosperous credits like Germany aren’t anxious to contribute (attesting to the stupidity of the EU in the first place and the accuracy of Thatcher’s prediction). The wild card here is not that Ireland or Portugal become EU protectorates, like Greece, but is for contagion on a grander scale - an EU/Euro collapse and then the bank pandemonium that may follow. From Jeremy Warner in today’s Telegraph, “There must come a point where bailing out the fringe threatens the creditworthiness of the core. We are not there yet, but it's plainly not beyond the bounds of possibility.” Odds - 35%.
Another wild card is a sudden strike by the Chinese on US debt. Odds - 25%.
Another, with the same result, is a rapid blow back of inflation/weak $ tied to recent Fed antics, requiring a sharp contraction by the Fed and/or a full blown currency/trade war. We put this one at 25%. (This is not to say that the Fed’s recent actions are constructive in any way; they aren’t and they’re damaging to the integrity of the Fed to boot.)
Another, contributed to this piece by our friend Christian de Ryss, is traction by the way of muslim thuggery, perhaps a lucky strike at major infrastructure in the UK or Germany; perhaps even in the US and the paralysis that follows. We don’t dare print the odds, even if we had a clue.
No doubt THE key wild card is there, right now, beyond our grasp, waiting in the sidelines for a trigger.
Cross the fingers.
Robert Craven
The business of the future is to be dangerous. So let’s take a look at the odds of significant damage; that is, the odds of an event that has not been priced in and which would retard US growth.
A strike on Iranian nuclear facilities is such a wild card. This event would spike crude prices, at least by 50%. That’s a retardant folks. The Iranians would strike both Saudi oil fields and the Israelis, and attempt to blockade the Straits. Odds for such an event - 40%.
Another wild card is related to the present crisis of peripheral European credits. At the moment Ireland may soon loose her sovereignty; Portugal is in miserable shape, Spain not far behind. This turmoil has been partially priced in. The EU has an emergency fund but more prosperous credits like Germany aren’t anxious to contribute (attesting to the stupidity of the EU in the first place and the accuracy of Thatcher’s prediction). The wild card here is not that Ireland or Portugal become EU protectorates, like Greece, but is for contagion on a grander scale - an EU/Euro collapse and then the bank pandemonium that may follow. From Jeremy Warner in today’s Telegraph, “There must come a point where bailing out the fringe threatens the creditworthiness of the core. We are not there yet, but it's plainly not beyond the bounds of possibility.” Odds - 35%.
Another wild card is a sudden strike by the Chinese on US debt. Odds - 25%.
Another, with the same result, is a rapid blow back of inflation/weak $ tied to recent Fed antics, requiring a sharp contraction by the Fed and/or a full blown currency/trade war. We put this one at 25%. (This is not to say that the Fed’s recent actions are constructive in any way; they aren’t and they’re damaging to the integrity of the Fed to boot.)
Another, contributed to this piece by our friend Christian de Ryss, is traction by the way of muslim thuggery, perhaps a lucky strike at major infrastructure in the UK or Germany; perhaps even in the US and the paralysis that follows. We don’t dare print the odds, even if we had a clue.
No doubt THE key wild card is there, right now, beyond our grasp, waiting in the sidelines for a trigger.
Cross the fingers.
Robert Craven
Monday, November 15, 2010
Spending
In spite of Obama throwing every constraint imaginable at the employer, in spite of doing all he can to discourage the consumer, the economy continues to exceed expectations. Today’s key Oct Retail Sales release printed + 1.2% vs expectations of +0.7%. Plus the past two months were revised higher. Retail Sales are still 1.8% below their Nov/07 peak but are 7.3% above their year ago level. Not bad, and in spite of our friend BO. Consumers are spending; they are less cautious. This speaks well for discretionary spending ahead.
We predicted earlier that economic vigor will blow through expectations, H1 11, that economists will continue to change their predictions, to revise those higher, ongoing. We know they will do that before they do.
Our prediction was made prior to the Rep sweep of Nov/2. There is some risk that the new Congress, in their enthusiasm for belt tightening, may retard growth. Some observers in fact predict a double-dip as a result. Nope. That won’t happen. There may be some slight dampening to vigor, but, short of a wild card event, our anchor will hold.
Robert Craven
We predicted earlier that economic vigor will blow through expectations, H1 11, that economists will continue to change their predictions, to revise those higher, ongoing. We know they will do that before they do.
Our prediction was made prior to the Rep sweep of Nov/2. There is some risk that the new Congress, in their enthusiasm for belt tightening, may retard growth. Some observers in fact predict a double-dip as a result. Nope. That won’t happen. There may be some slight dampening to vigor, but, short of a wild card event, our anchor will hold.
Robert Craven
Subscribe to:
Posts (Atom)
