Stopped Clock Is Right Alert

Even a stopped clock is right twice a day, and even the Wall Street Journal occasionally has responsible op-ed articles in it that cast some healthy skepticism on the current "bull market". In this case it's market critic and author Andy Kessler.(emphasis mine)

A rising market means that banks are able to raise much-needed equity from private money funds instead of from the feds. And last Thursday, accompanying this flood of new money, came the reassuring results of the bank stress tests.

The next day Morgan Stanley raised $4 billion by selling stock at $24 in an oversubscribed deal. Wells Fargo also raised $8.6 billion that day by selling stock at $22 a share, up from $8 two months ago. And Bank of America registered 1.25 billion shares to sell this week. Citi is next. It's almost as if someone engineered a stock-market rally to entice private investors to fund the banks rather than taxpayers.

Can you see why I believe this is a sucker's rally?

The stock market still has big hurdles to clear. You can have a jobless recovery, but you can't have a profitless recovery. Consider: Earnings are subpar, Treasury's last auction was a bust because of weak demand, the dollar is suspect, the stimulus is pork, the latest budget projects a $1.84 trillion deficit, the administration is berating investment firms and hedge funds saying "I don't stand with them," California is dead broke, health care may be nationalized, cap and trade will bump electric bills by 30% . . . Shall I go on?

Until these issues are resolved, I don't see the stock market going much higher. I'm not disagreeing with the Fed's policies -- but I won't buy into a rising stock market based on them. I'm bullish when I see productivity driving wealth.

For now, the market appears dependent on a hand cranking out dollars to help fund banks. I'd rather see rising expectations for corporate profits.

And while I don't agree with everything Kessler says (especially on the stimulus and cap and trade) he does have a damn good point: The only money flowing into the system right now is coming out of Helicopter Ben's Magic Printing Press.

And that's not going to be healthy for long. When the second wave of the recession hits, it's going to hit hard.

It's A Hard Knock Life

Everybody's got a sad story to tell these days. Some are sadder than others.

Postal authorities say a Michigan postal worker has admitted to stealing some $20,000 worth of first-class stamps since September and trying to sell them to online auction-site customers to help pay his mortgage.

An arrest warrant has been issued for John Auito, 42, of Macomb, Michigan. Auito, a postal employee since 2003, resigned after investigators confronted him on April 30.

He has made arrangements to turn himself in, authorities said.

Deputy Special Agent-in-Charge Breck Nowlin of the USPS Office of the Inspector General told CNN that Auito has admitted to stealing stamps that were being shipped to retail stores, and he said he used the money from selling them to make delinquent mortgage payments.

Nowlin said Auito was contacting customers of the online auction site eBay, and offering to sell them stolen stamps at below-retail prices.

Not to validate or make any excuses for this guy's allegedly criminal actions, but tough times lead to more crimes. More and more folks are going to turn to less than legal ways to make ends meet.

Pray you don't have to.

Zandar, Editor-At-Large

Today's NY Times:

Forty-five House Democrats in the party’s moderate-to-conservative wing have protested the secretive process by which party leaders in their chamber are developing legislation to remake the health care system.

The lawmakers, members of the fiscally conservative Blue Dog Coalition, said they were “increasingly troubled” by their exclusion from the bill-writing process.

They expressed their concerns in a letter delivered Monday to three House committee chairmen writing the bill, which House leaders hope to pass this summer.

Representative Mike Ross, an Arkansas Democrat who is chairman of the coalition’s health task force, said: “We don’t need a select group of members of Congress or staff members writing this legislation. We don’t want a briefing on the bill after it’s written. We want to help write it.”

Fixed for accuracy!

In Which Zandar Answers Your Burning Questions

Richard Cohen at the WaPo asks:

Blogger Alert: I have written a column in defense of Dick Cheney. I know how upsetting this will be to some Cheney critics, and I count myself as one, who think -- in respectful paraphrase of what Mary McCarthy said about Lillian Hellman -- that everything he says is a lie, including the ands and the thes. Yet I have to wonder whether what he is saying now is the truth -- i.e., torture works.

In some sense, this is an arcane point since the United States insists it will not torture anymore -- not that, the Bush people quickly add, it ever did. Torture is a moral abomination, and President Obama is right to restate American opposition to it. But where I reserve a soupçon of doubt is over the question of whether "enhanced interrogation techniques" actually work. That they do not is a matter of absolute conviction among those on the political left, who seem to think that the CIA tortured suspected terrorists just for the hell of it.

Cheney, though, is adamant that the very measures that are now deemed illegal did work and that, furthermore, doing away with them has made the country less safe. Cheney said this most recently on Sunday, on CBS's "Face the Nation." "Those policies were responsible for saving lives," he told Bob Schieffer. In effect, Cheney poses a hard, hard question: Is it more immoral to torture than it is to fail to prevent the deaths of thousands?

Cohen misses the point completely. His question is actually completely irrelevant to the actual debate. The question he should be asking is this: "How did the Bush/Cheney One Percent Doctrine's assumption that terrorists must be exposed to these techniques hundreds of times in order to gain dubious information become our first choice when dealing with suspected terrorists, given all the risks, the illegality of the measures, and the suspect information it gave interrogators?"

That however would require real journalism and not the knee-jerk reaction of genuflecting to a monster like Cheney and framing the debate in terms of the idiotic false choice of "we must use these techniques or Americans will die."

Life is not a Vince Flynn novel.

Raw Deal

The stark reality of the US automaker bankruptcies (Chrysler is being remade as we speak, GM's coming bankruptcy is all but assured now, and Ford's fate is still uncertain) is that anywhere from 25% to as much as 40% of Chrysler and GM dealers are going to lose their businesses. That means thousands of shuttered dealerships nationwide, and hundreds of thousands of additional lost jobs across the country.

This week, General Motors is expected to tell between 1,000 and 1,500 of their 6,200 dealers nationwide that the corporation will not renew their franchise agreements, and Chrysler will notify 25% of their US dealers - 800 out of 3,200 total - that their days as new car dealers are over, too.

As Ken Bensinger, who has been following the dealer crisis for the Los Angeles Times, wrote this weekend, "... it amounts to a blood bath for dealers, who employ hundreds of thousands of people nationwide and pump billions of dollars into their area economies. With dealers unsure whether their names will be called, a pervasive sense of dread has crept into showrooms."

The National Automobile Dealers Association (NADA) and groups of Chrysler and GM dealers are taking various steps to try and stem the tide of forced closings, many involving complicated and expensive legal challenges to the car-makers but some aimed at the general public, too. NADA is taking out advertisements in major publications urging President Obama "to choose Main Street over Wall Street."

The strong state franchise laws which govern the sales ballet and love/hate relationship between car-makers and their dealers (most all written with dealer-only input) are from the same eras when Detroit was concerned with only five things: 1) Making enough cars to fill demand, 2) Avoiding any trouble with unions or dealers which could slow sales, 3) Spending all the money they were making, 4) Protecting executives' annual bonuses, and, in GM's case, especially, 5) Avoiding being labeled a monopoly by Washington and being split into separate companies.

Needless to say, the fight over dealership jobs and UAW jobs is really just beginning. And as more and more Americans lose their jobs, the situation is just going to get more dire for the economy. The legal battles alone may take years, draining both sides of the battle when neither can afford to lose, and neither can afford to win.

Meanwhile, the number of people buying new American cars will continue to fall.

StupidiNews!

• Gas prices are back on the rise, but analysts say they shouldn't hit $4 a gallon again anytime soon.
• Hundreds of thousands of Pakistani refugees are fleeing the fighting in Swat Valley between the Taliban and Pakistani Army.
• President Obama and Defense Secretary Gates have chosen a new commander of US forces in Afghanistan.
• A new survey of economists predicts unemployment above 8% well into 2011.
• Groups of "scam baiters" take the fight against internet scam-artists to a whole new level.

Last Call

Via Atrios, we learn Chicago's suburbs are getting inundated with foreclosures.

Across the six-county Chicago metropolitan area, foreclosure filings rose 6% in the first quarter to 17,819, the highest one-quarter total since the housing crisis began in mid-2006.

The shifting locus of new foreclosures shows how the recession and job losses are supplanting subprime lending as the main driver of mortgage defaults, says Geoff Smith, vice-president in charge of research at Woodstock. While the first wave of foreclosures hit hardest in poorer city neighborhoods targeted by high-interest-rate lenders with loose credit standards, the latest round is striking middle-class areas where most borrowers qualified for standard-rate mortgages.

Foreclosures in the suburbs aren't likely to abate until unemployment stops rising. That means more downward pressure on home values across the metropolitan area as foreclosed homes hit the market at fire-sale prices. Suburban communities also will face the consequences of vacant houses and dislocated families, which range from overgrown yards to increased demand for social services.

"We were able to ignore (the foreclosures) for a while, but we can't ignore it anymore," says Donna McQuade, president of the Realtor Assn. of the Fox Valley and managing broker for the Geneva office of Coldwell Banker Primus Realty.

In the far western suburbs along the Fox River from North Aurora to Elgin, nearly one in five homes listed for sale is a foreclosure or a short sale — one in which a seller owes more in mortgage debt than the home is worth, according to the association. Comparable data for last year isn't available, but Ms. McQuade says the percentage of foreclosures and short sales couldn't have been higher than 5% a year ago.

In affluent St. Charles, with a median household income of $75,181, about 9% of the 697 homes for sale are foreclosures or short sales.

This is the beginning of the second wave of foreclosures, those brought on by rising unemployment and adjustable rate mortgages resetting and exploding in people's faces. We're going to see a lot more of this in 2009 and well into 2010. All this talk about the housing market bottoming out this summer is premature. We're going to see a lot more foreclosures in a short period of time, and that's going to lower home values even more, causing banks to get hurt, causing more people to go underwater, causing more problems across the board.

This is the eye of the storm, folks. We have another year or so of serious pain to go before the real bottom hits...maybe longer.

The Obama Recession, Con't

Obama's 100 days are up and he hasn't fixed the economy yet. Time to punish him.

The new Democratic administration has made it necessary for the federal government to borrow just under one half of every dollar it must spend this year to fund its existing obligations and all the new spending the new president and his allies in Congress approved during Obama's first 100 days in office.

As the Associated Press explains, the FY2008 deficit will increase "by $89 billion to above $1.8 trillion—about four times the record set just last year." Which Orszag and others want us to believe is somebody else's fault.

The Reagan deficits, which used to be held up as an example of the former president's mismanagement of the economy, were, at their worst point, only about a tenth of what Obama has given us in his first year—no, his first days—in office. Today Reagan's $221,245,000 billion budget deficit for FY 1986 ( U.S. Office of Management and Budget, Historical Tables, annual), once the worst year on record, looks like the good old days. And that deficit occurred during a period of economic expansion, unlike the Obama deficit, which is being incurred during a serious recession.

The deficit is not the only weakness in the Obama policy. Unemployment, which is now just under 9 percent, continues to rise. And increased joblessness leads to increased government spending for things like additional unemployment benefits and food stamps. At the same time the much promised transparency in stimulus spending has yet to appear. As the AP is reporting, "Federal auditors acknowledge they can't yet track the transportation money that is leaving Washington and there is no single list of the thousands of projects planned in each state."

The days of blaming Bush are at an end. At some point Obama's White House is going to have to step up and accept responsibility for the fact that its economic program, for the moment at least, is failing, that it is not producing the promised results and that it is, as the non-partisan Congressional Budget Office suggested early on might be the case, making things worse.

This guy must have hated Bush adding $5 trillion to the national debt over 8 years then and leaving Obama with such a huge problem. It wasn't Obama who signed TARP into law, you know. How quickly people forget Bush did that on the way out the door and stuck Obama with the bill.

Look, economically Obama has a crapload of problems, and I disagree with what he's doing with the banks. But the fact remains if John McCain was President, he'd be bailing out the banks, only we'd have a spending freeze and no stimulus whatsoever. I'll take Obama's approach to McCain's worst of all options neo-Hooverism.

The Obamacare Gambit

Obama's health care announcement that several health care industry groups are signing on to pledge to reduce health care costs by $2 trillion over 10 years has garnered a lot of praise, but many people besides myself are wondering what the other shoe dropping is.

The Kroog likes the plan, but wonders what the real costs are. Jon Cohn seems to think there's a real opportunity, but doesn't trust the players. Matt Yglesias figures the health care guys will have to meet their promises, but Ezra Klein flat out smells a rat.

We'll see what legislation comes out of all of this. Without a public option as an alternative to private insurance, the plan is all but worthless.

Home, Home I'm Deranged

Latest Republican insanity: Barack Obama is destroying the economy on purpose to gain political power.

At the beginning of April, a Fox News poll asked respondents whether they believed that President Obama “wants the financial crisis to continue so government can take over more businesses and grow the federal government.” Only 23 percent said that they thought Obama wanted it to continue, but that minority view was recently endorsed by a top-ranking Republican official. Rep. Pete Sessions (R-TX), the chairman of the NRCC, told the New York Times that he believes President Obama aims to “‘diminish employment and diminish stock prices‘ as part of a ‘divide and conquer’ strategy to consolidate power”:

His counterpart at the House Republicans’ committee, Representative Pete Sessions of Texas, may indeed face an uphill fight with his argument that Mr. Obama is not trying to create jobs. In an interview, Mr. Sessions cited rising unemployment in asserting that the administration intended to “diminish employment and diminish stock prices” as part of a “divide and conquer” strategy to consolidate power.

Mr. Sessions, in his seventh term, said Mr. Obama’s agenda was “intended to inflict damage and hardship on the free enterprise system, if not to kill it.” By next fall, he predicted, voters may regain appreciation for the era of Republican governance when “many dreams were achieved,” the size of the economy doubled and employment and financial markets hit record levels.

Remember, this is a sitting member of Congress saying this, not a "crackpot" or a talk radio loudmouth or a special interest group lobbyist or a think tank shill or a blogger.

This is an elected Congressional Representative who believes this and is saying this publicly.

The GOP is insane.

[UPDATE] Naturally, Rush Limbaugh is now all over this talking point. Expect it to be standard issue GOP garbage for the next several weeks.

Mr. Popular

People still like Obama...if anything his approval ratings have gone up slightly.

President Barack Obama appears to be slightly more popular with Americans at the start of his second 100 days in office than he was, on average, during his first 100. Gallup Poll Daily tracking from May 7-9 finds 66% of Americans approving of how he is handling his job, compared with an average 63% from January through April.

Obama's approval rating has registered 66% or better in each Gallup three-day rolling average since May 2. His 68% approval rating reported on May 3 is tied for the second highest of his presidency, exceeded only by the 69% recorded immediately after his inauguration. And except for one 66% approval rating in late April, all of Obama's previous 66% to 68% readings were obtained near the start of his term.

Job approval is typically an important barometer of a president's re-election chances, and a 66% approval rating in the first half of 2012 would almost guarantee Obama's success in that endeavor. However, that is three years away, and, as Gallup presidential approval trends show, things can change -- sometimes radically -- over a president's first term. But despite today's seemingly positive environment for Obama, a separate Gallup question, asked in late April, indicates the degree to which Americans are keeping an open mind on the next election.

On balance, the majority of Americans nationwide say they would be inclined to vote for Obama in the 2012 presidential election: 53% say they would definitely or probably vote for him while 37% say they definitely or probably would not. Another 9% offer no opinion. This is based on people's early impressions about Obama, with no references to who his Republican opponent might be. (The figures are about the same among all registered voters.)

Sadly, with two-thirds of Americans liking the job the guy is doing, the Village has declared that Obama's not actually in charge of the country at all but in fact Evan F'ckin Bayh is.

Go figure.

Zandar's Thought Of The Day

Rush Limbaugh gets to vent all sort of bile and hate on a daily basis, for several hours a day, with no consequences whatsoever. The Village press accepts this as fact.

Wanda Sykes tells a joke about Rush at a once a year Washington event and the Village press declares she's over the line.

Poor Rush. He's apparently no match for a black lesbian comedienne.

[UPDATE] Andy Serwer nails it cold.

Then she got really personal. She joked that Limbaugh was a racist who doesn't want black people to "escap[e] the underclass." She accused him of being responsible for killing "a million babies a year," and aired her friend's theory that Limbaugh himself was a terrorist attack," a followup to 9/11. She also, most disgustingly, said that if conservatives kept apologizing to Limbaugh, they'd eventually contract "anal poisoning." She wondered when Republicans would finally stop "bending over and grabbing their ankles" for Limbaugh, and finally concluded that Limbaugh was just a "bad guy."

Oh wait. Wanda Sykes didn't say any of these things. These are things Rush Limbaugh has said about Obama or other Democrats in the past year, the kind of statements few reporters found offensive enough to write about, despite the fact that most of them were said with the utmost seriousness. And while Sykes is a mere comedian whose influence on the Democratic Party is negligible, Limbaugh's influence in the party is so great that Republican leaders can't even criticize him without having to issue apologies after the fact.

Once again, Rush spouts this crap daily. But his skin is so thin he has to have other wingnuts to make his crappy defenses for him.

A Stimulatin' Development

The Kroog wants another stimulus package.

The United States risks a Japan-style lost decade of growth if it does not take aggressive action to stimulate its economy and clean up its banking system, Nobel Prize-winning economist Paul Krugman said on Monday.

"We're doing half-measures that help the economy limp along without fully recovering, and we're having measures that help the banks survive without really thriving," Krugman said.

"We're doing what the Japanese did in the nineties," he told a small group of reporters during a visit to Beijing.

He said it was not clear that China would suffer sub-par growth as a consequence of the fallout of the present crisis.

"I'm mostly worried that the U.S. and the euro zone will have Japanese-type lost decades," he said.

Krugman said he expected little or no employment growth this year or next in the United States, where the jobless rate in April hit a 25-year high of 8.9 percent.

"A second stimulus is becoming clearly urgent. They need a very, very strong stimulus," said Krugman, a Princeton University professor and a New York Times columnist.

Cleaning up the bank system is more important, I think. Even more important is dropping hardcore Plan N on the insolvent ones. But of course, politically neither will be possible until 2010.

And by then it will be far too late. When the euphoria of this Dead Cat Bounce wears off and the silly talk of a V-shaped recovery and 6% positive GDP growth in 2009 is put to rest, the reality that remains will not be pretty.

Obama will not be able to blame Bush for much longer. He will be able to blame the Party of No somewhat. But in the end, it'll be the ConservaDems that kill the economy.

Bill Bennett's Head Scratcher

Bill Bennett doesn't believe Sarah Palin and Rush Limbaugh are the future of the GOP. (He will of course be made to apologize for this.) It's who he does think is the GOP's future that boggles the mind.

“One of the things the media could do – some of the media – is to move the debate off Sarah Palin and Rush Limbaugh,” Bennett, a CNN Contributor, said on State of the Union. “This is probably not the future of the Republican Party,” added Bennett.

“You don’t think Gov. Palin’s the future of the Republican Party?” queried CNN Chief National Correspondent John King.

“I do not,” said Bennett. “It could talk about a Paul Ryan or a Mike Pence. It could talk about a Bobby Jindal. It could talk even about a John Kyl or a David Petraeus. You know, there’s a lot of talent in this party.”

Bobby Jindal and talent in the same sentence without the qualifier "complete lack of"? Honestly? The GOP wants to break into the 21st century with anti-science goons like Mike Pence? They want to go with another country club "Let's have Social Security invest in the stock market" Bushie like Paul Ryan? They want another Arizona Senator and torture apologist like John Kyl? And Bennett wants David Petraeus as much as America is sick of these wars?

Bennett's wrong of course. The new future of the GOP has nothing to do with who he named. It's being decided instead by the GOP's failed past: Dick Cheney, John McCain, and Newt Gingrich.

StupidiNews!

• Pope Benedict XVI begins his controversial visit to the Middle East, staring with Israel.
• The US military denies accusations of using white phosphorus in Afghanistan, but says the Taliban may be.
• Congress takes up emergency funding for Afghanistan, Iraq, and swine flu.
• The Obama administration plans to "aggressively enforce" anti-trust legislation.
• A new cyber-bullying bill's vague language could potentially be used to censor the internet.