This leads me to consider where we now find ourselves and who
can (and, more importantly, who will have the courage to) lead the US
Eurozone and European Central Bank – New sovereign
debt problems (or the same old problems) in Italy
and Greece
US Exports to the Eurozone – According to a Brookings Institution research report1,
we export over $300 billion a year to Eurozone countries and virtually all of
the rest of our exports go to nations that also export to the Eurozone. If the European economy continues its sag,
this would have a measurable effect on the US
1 source: http://www.brookings.edu/papers/2011/0822_euro_crisis_elliott.aspx#note1,
Why Can’t Europe Get it Right the First Time…
or the Second… or the Third?
The Federal Reserve – Chairman Bernanke’s speech in Jackson Hole last Friday didn’t lay out any new actions
it might take with respect to stimulating economic growth. Was that just a kick of the can down the road
to motivate the Congress and the WH to engage in meaningful fiscal policy before
the Fed committed to any additional actions --- or is the Fed limited by the remaining
tools in its monetary toolbox --- or both?
In spite of the no-news Jackson Hole
speech, the market moved higher. I think
prematurely.
President Obama – Can we trust Obama to have the
imagination and courage to put a big jobs package on the table in his Joint
Session of Congress Address next week and really fight for it? And, more importantly, even if the answers are
affirmative, does he have the political skill and capital to effect a
bipartisan result?
Congress - Can we trust the House and Senate to agree
to anything that looks like it will give Obama new life for the 2012 election
process? Speaker of the House Boehner
won’t even agree to the date and time of a speech by Obama --- how can we trust
him to get his Republican caucus to agree to meaningful fiscal stimulus to
salvage the US recovery and lower unemployment levels before the election?
Congress’ Super Committee - Lots of questions and
little optimism on my part at the moment.
Infrastructure Investment – This is something that
needs to be put in place now to effect long-term economic growth. Will the WH and Congress have the courage to
do something big now when borrowing costs are so low?
Big U.S. Banks - These banks and smaller banks need to make loans available to small/mid-sized businesses (the real job
creators). Can we trust the banks to do this or will the big banks, subsidized by the Fed over the past three years with
near-zero interest rates, just keep on arbitraging the effectively-free funds with low-risk
investments (i.e., US Treasury securities and the like)?
Consumers – We had one decent consumer spending number this past
Monday. This gave some encouragement to
the markets that the consumer isn’t totally sitting on the sidelines --- but we
need consumers to keep spending.
Gold and Swiss Franc Investors – As global uncertainly has been the watchword of late,
investors have sought the “safe-haven” of gold and strong currencies. However, if we are to see the equity markets
move to the upside, a prerequisite will be that these investors see less risk in the global
economy and redeploy funds into other than these “safe-haven” investments.
Corporations – Can we trust them to
hire without legislated fiscal incentives or without an increase in demand for
their products? In a word, no. And, as a free-market capitalist, I wouldn't expect or advocate corporations to do anything that isn't in their own long-term self interest (to be read as including all their constituencies --- shareholders, employees, customers, communities, etc.).
Having said all that, there may be some hope that September
will be better for the equity markets than was August. (In August the S&P 500 opened the month @
1292 and closed it @ 1219, a decline of 5.6%.)
Some of what normally happens in September happened in August, such as
economic forecast revisions. Also, some of the
shocks from the Eurozone and the US
As a final comment, I noted within the past couple of days (after
we regained communication with the world following Hurricane Irene’s pass
through our area) that earlier this week CNBC conducted an interview with Abbey
Joseph Cohen of Goldman Sachs (an equity market guru who merits considerable
respect). It was reported on CNBC’s
website that Cohen “reiterated her forecast for the Standard & Poor’s 500
reaching 1450.” At first read, this really surprised me and with good reason. This is terrible
reporting --- and I have commented to that effect on the CNBC website.
Cohen’s 1450 forecast was made in June 2011 --- this when the S&P 500 was trading near the 1300 level. Specifically, the Cohen/GS prediction, based
upon all the information available in June, was that the S&P 500 would close
out 2011 in the 1450 range. However,
if you view the tape of the recent interview2, what Cohen actually says is
this, “the US
To end on a positive note,
the Yankees beat the Red Sox last night and are tied in the loss column for
first place in the AL East. The Yankees
have one more three-game series with the Red Sox this year --- on September 23rd,
24th and 25th at Yankee Stadium. If both teams take care of business between
now and then, it will make for an exciting close to the regular season.
