Econ Contrarian

Personal Incomes, What? Rise? But We're In A Recession!

Personal income up more than expected

March 28, 2008 08:34 AM ET

WASHINGTON (Reuters) - U.S. personal income rose more than expected in February as the economy teetered on the brink of a possible recession, while both personal spending and a key price measure increased only slightly, a government report showed on Friday

Personal income rises, inflation moderates

The Commerce Department reported that February personal income rose 0.5 percent, exceeding a forecast of a 0.3 percent gain made by analysts polled before the report.

"The decline in the year-over-year core PCE is important in that it supports the notion the Fed is making the right decision in cutting rates aggressively and not threaten long-term price stability. It argues that the Fed can lower rates in the months ahead," said Zach Pandl, an economist with Lehman Brothers in New York.

Even Fewer People Are Looking For Jobs?

Jobless claims fell 9,000 last week

March 27, 2008 08:38 AM ET

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits fell by 9,000 last week, the government said on Thursday, though a more reliable gauge of layoff trends rose to its highest in more than two years. Full Article

Requisite footnote on the "Econ Contrarian" series:

As with so many other complex issues in this modern world, I don't claim to know what tomorrow holds for the economy. There are just too many competing systems interacting in labyrinthine layers. But, since no one else seems to want to focus upon any of the positive indicators in this complex mix, I think I'll stand in the gap and shine a small, small light to illuminate a few contradictory indicators – indicators which make the more balanced point that while certain segments of the economy will certainly retract a bit after years of unprecedented growth, this doesn't exactly mean the expansion of the new era of Mordor.

On Principle,

CBass

Bush Derangement Wearing Off

There are signs that the pandemic which is the "Bush Derangement Syndrome" (BDS) is starting to subside.

What is BDS?

BDS is that pervasive contagion which subversively and subtly causes one's perception of all events in life to be negatively interpreted and then be linked back to President Bush. BDS is the reason why Bush can both be a stumbling dunce AND the current evil mastermind behind the Vast Right Wing Conspiracy. BDS is how Bush can simultaneously be an inhumane, war mongering drunkard and a radical born again Christian who insanely feels personally called by God to the Office of the Presidency. BDS is why Bush is obviously the original, prime and personal point of causation for Global Warming, Hurricane Katrina and bridge collapses.

Is BDS Subsiding?

A recent poll reports some perspective may be returning to the populace:

• About 64 percent of likely voters approve of Bush's economic stimulus package passed earlier this year;
  
• 67 percent back his initiatives to help struggling home owners survive the current mortgage crisis
  
• 70 percent endorse his plan to allow monitoring of foreign communications of suspected terrorists
  
• 72 percent back his visit to the Mideast to promote peace. In addition, 52 percent approve of his surge of U.S. troops into Iraq.
  

If you are like me, you may not wholeheartedly support these specific initiatives, but it is encouraging to see folks finally being willing to attribute something positive to the President. If BDS antibodies continue to fight back this infection, perhaps the body politic will finally take a second looks at:

• An economic record which, despite the current unpleasantness, featured record growth in jobs, home ownership, minority income advancement, stock market levels, involvement in the stock market and GDP growth.
  

  
  

• A foreign policy record which features huge increases in international aid, the dismantling of an international nuclear weapons black market, the clearing of chemical weapons from Libya, alignment with Eastern Europe, the birth of Democracy in numerous nations and the building of alliances in the emerging Pacific super-market.
  

  
  

• A return of decorum and respect to the White House.
  

  
  

On Principle,

CBass

North Korea

One of the perpetual frustrations in US foreign policy for 2 decades has been our absolute stumbling response to North Korea's nuclear intentions. Any rational observer must surely admit the Clinton administration's back-slapping self-congratulations were a bit premature. But that same observer must scratch the head in wide-eyed wonder and the aimless dance of the Bush Administration's 6 party talks.

An analysis of the history of this problem and a dissection of the last 7 years of our policies toward North Korean would surely take a cumbersome tome to detail. In short, I think it all boils down to 3 key points:

1. It's not North Korea: A petty dictatorship which can't feed its own populace and which engages in blatant global narco-trafficking and counterfeiting of US currency is not our stumbling block. When interpreting the daily news out of this region, please don't fall into the trap of wondering "How does Kim Jong-il do it?" He doesn't. Any sort of naval blockade and economic sanctions supported by the US and China would quickly cripple this potbellied despite.
   

   
   

2. South Korea: The sad reality is that the US has not had a strong partner in South Korea at the negotiating table. South Korea is separated from its deranged sister by an imaginary line drawn to win a quick peace. While the world could crush North Korea with economic sanctions, South Korea would be left of mop up the mess of fleeing refugees and familial ties which have bridged the Demilitarized Zone for half a century. These concerns have tied the hands of the US in pushing for negotiations which are stronger than South Korea is willing to pursue.
   

   
   

3. China! China!: Many folks don't understand why China would ever support US policy toward North Korea. Won't China do anything possible to thwart our interests? Perhaps. But reality on the ground is far more basic than that. North Korea also poses a HUGE destabilizing, boiling pot of potential refugees. While China's economy is booming, it is extremely unstable and the addition of hundreds of thousands or millions of poverty stricken refugees won't help its stability. Well, isn't China concerned about a nuclear armed North Korea? Probably only marginally. North Korea exists largely because of the economic, agricultural and pharmaceutical aid of China. China's military might outstrips that of North Korea beyond any analogy of David and Goliath. So, in short, no – China is not that concerned about North Korea's nukes, but it is very concerned about onerous economic sanctions.
   

Based on the above, how can the US hope for any progress in this year? The answer lies in changing the dynamics of one of these points. In this case, South Korean's democratic electorate has decided for a change. The new South Korean government, headed by President Lee Myung-bak has strongly stated its intention to align with the US and its willingness to place pressure on North Korea again – changing years of South Korea's policy of friendship toward North Korea. So, perhaps, this impediment to progress may be adjusting into an additional push for progress.

With this change, the US now has some key momentum to move China. China, in addition to fearing economic instability from a refugee crisis also eagerly desires economic leadership in the Pacific realm. South Korea, not a small player in the new economy, may not be willing to work in unison with the US and Japan to build a network of supports for China and sanctions for North Korea which will move China into a more proactive role of ending North Korea's ambitions.

Kim Jong-il is China's lap dog. Present China with a much enlarged dog dish and I think they may be willing to neuter this tramp.

On Principle,

CBass

Econ Contrarian – Trade Deficit

Another installment of posts which stand against the obvious torrent of negative news about the economy.

It seems the US Trade Deficit dropped by 9% in 2007. In my world of consulting, companies pay HUGE bucks to improve their efficiency by 10%. (Note: if you work for one of these large companies and write those large checks, please see my business at www.successant.com).

http://www.forbes.com/feeds/ap/2008/03/17/ap4780608.html

On Principle,

CBass

Travelocity Tort

Now see, if this happened in America, someone would be taking the Roaming Gnome of Travelocity to court for pain and suffering. . .

'Creepy gnome' terrorizes town

""One of my friends was so scared after seeing that thing that we had to take him to the hospital."

Economic Contrarian

There is much economic doom and gloom being broadcast and re-broadcast and re-broadcast and re-broadcast and. . . (you get the point).

It seems that every day brings new "wisdom" about how the US Economy is on the crux of a major collapse, how prices are rising faster than 80's-90's Argentina, how consumers must stop buying anything but absolute necessities – like milk and bread (oh, sorry, milk is too expensive now – so just buy bread) and how we are all going to lose any and all value from our homes – the quintessential cornerstone of the quixotic American dream.

Run for the hills, chicken little, the global financial sky is about to crumble upon our miserable, poor, recession sickened heads.

Look, as with so many other complex issues in this modern world, I don't claim to know what tomorrow holds for the economy. There are just too many competing systems interacting in labyrinthine layers. But, since no one else seems to want to focus upon any of the positive indicators in this complex mix, I think I'll stand in the gap and shine a small, small light upon the few contradictory indicators that while certain segments of the economy will certainly retract a bit after unprecedented growth, but this doesn't exactly spell the new era of Mordor.

Looks like not ALL jobs are evaporating. . .

U.S. jobless claims tumble 24,000 last week

Does this sound like Stagflation?

Wal-Mart February same-store sales up 2.6 pct

On Principle,

CBass

The Case for Clinton

Well, this year's primary process has taken yet another turn in presumed direction – this time in favor of team Clinton. I must state that I wasn't surprised by last night's results, but that doesn't make the current state of the Democratic race any less fascinating to behold.

It seems to me that neither candidate is really THAT close to clenching the nomination in terms of pledged delegates and due to the Dem's method of delegate distribution, I don't foresee this changing. Thus, at this point in time, it certainly seems as though the eventual winner will become the winner due to extra delegates from 1 of 2 sources:

1. John Edwards: He holds only 26 Delegates, but as the race tightens, those 26 may make all the difference in the fight for Super Delegate votes. Who offers him the best perk is likely to get his support. Clinton is in a better, and more desperate, position to offer VP as a trump to Obama's likely Attorney Generalship.
   

   
   

2. Super Delegates: This monstrous invention of the Democratic party invites party insiders to make leviathanic backroom deals. While Obama currently lays claim to popular and delegate vote leads, Clinton can stake a convincing claim that her victories are the ones which will matter most in the General Election – the entire purpose for this primary process. And when all else fails, Bill Clinton has 4-5 months to raise the funds necessary to buy Super Delegate support.
   

   
   

3. Unseated Delegates: How this sticky issue is decided may make or break the Clinton candidacy. She stands on solid ground arguing that she honored all DNC rules while also honoring all Democratic voters and that she and the voters should not be further penalized by having January votes disenfranchised. Her compromise solution may be to follow the GOP and allow only half the delegates to be seated. This honors DNC rules, honors voters and allows her to pull closer to Obama – while claiming any Super Delegates representing these two states.
   

John Edwards:

The nearly forgotten spoiler in this race is John Edwards. The trial lawyer turned populist rhetoritician has not yet revealed to which candidate he will encourage his 26 pledged delegates to favor. There is no rule that I know of stating these delegates must act in accordance with his eventually stated wishes, but since this is an unknowable black box and since delegates tend toward following the expressed wishes of the candidate to whom they are pledged, let's assume the vast bulk of them become pledged to which ever candidate he chooses. This could be the game winning boon needed by both candidates. With whom will Edwards side? It's anyone's guess. Both candidates have pilgrimaged to his humble home of class conscience to make obeisance at his altar of hair flare.

I predict that if the race becomes tighter, the stakes of courtship become higher. Edwards will eventually throw in his lot with the candidate who offers him the biggest and best sacrifice. Obama can't afford to entice Edwards with the VP slot as the preening former Senator from NC has nearly as little experience as does candidate Obama – leaving the the weakest flank completely open to GOP attack. I predict this leaves Obama with the somewhat spotted calf of Attorney General.

Clinton, on the other hand, has nothing to lose by offering Edwards the coveted VP position. He's a Dem populist to her Washington insider experience. If she were the front runner, I would predict she would merge her strength (convincingly demonstrated last night) with that of Gov. Strickland and turn Ohio into the MAJOR battleground of the general election. But, since she must win the nomination to play in the general, I postulate that Edwards and his precious 26 delegates are needed more. Indeed, Hillary has already demonstrated her strength in Ohio and she isn't likely to lose the support of Strickland – there are many more perks a confirmed nominee Clinton can confer upon a supportive Governor if successfully elected.

Who knows, Obama may take the general election poison pill and extend the VPship to Edwards as a last ditch effort (though unlikely as the 26 delegates are less important to him). Perhaps Edwards really just can't stand the Clintons and will act as a spoiler. Perhaps Edwards calculates an AGship in the hand is better than a VPship in the bush. Perhaps an infinite myriad of contrary passions lead Edwards in any number of directions. . .

But when left with only speculation, I count on reasoned judgment and position envy. Clinton may offer VP and Edwards will jump to accept. Plus, she's a Clinton; she doesn't have to actually follow through if doing so becomes inconvenient.

Supper Delegates:

Surely there is no one left in this country who doesn't know about the Dem's Super Delegates. These individuals, anointed by position and prestige, have been conferred power by the party to cast votes for the nominee unhindered by the electorate, unaccountable to the electorate and unlike the electorate – without the confusion of ignorance. Yes, the Dem's are truly the part which empowers the "forgotten man".

Current conventional wisdom states that the Super Delegates will not cast votes counter to the will of the people and will reinforce Barrack's lead in the popular vote. This is certainly possible, but I believe Clinton has a compelling case to make to these party insiders:

1. The Electoral College: While Barrack has won more states and has won a better apportionment of delegates, Hillary has won the largest states. If the Dem nomination were a winner takes all race, akin to the general election's Electoral College, she would be leading in the Delegate count. Since the General Election is what the entire nomination is about, she has actually demonstrated more strength in states important to the General Election. Thus important to the party being protected by the Super Delegates.
   

   
   

2. The Winning Base: Extending this argument, Clinton can also point out that Barrack's wins are largely in states that will be solidly "red" in 2008. His strength may put the GOP candidate on the ropes defensively, but no matter how strong he is nominee Barrack would not be likely to ultimately win in these states. Clinton, by contrast, is winning the states which the Dem's MUST hold in 2008 (Michigan, New York, California). In a tight election, a party wants the candidate who has the deepest, most solid in-roads with the base. This is especially important as the candidate must pivot in the general to proclaim a moderated message. Barrack excites more of the base, but not in the states the Dem's must hold.
3. Swing States: This argument can convincingly be extended to the General Election's swing states (Ohio, Florida, Pennsylvania, etc). Clinton beat Obama convincingly in OH and FL, both important swing states in 2008. While PA hasn't voted yet, Clinton is polling well ahead there. If she wins PA and makes the arguments outlined here, I think she may be able to cinch a majority of the Super Delegates.
4. Bill Clinton – Fundraiser: If all else fails, Hillary has something many of the Super Delegates want, Bill Clinton is still a dominant figure in Democratic fundraising. Team Clinton has gotten Bill off the wreckage of the campaign trail. They should keep him entirely focused upon buying Super Delegate votes through fundraising. Barrack has outspent Hillary in political donations to these individuals by 4:1. Bill Clinton, provided 4 – 5 months of dedicated service can even these donation odds.
   

Unseated Delegates:

The arcane and somewhat bizarre rules of the Democratic National Committee decided to punish Democratic voters in two important swing states (Michigan and Florida). At present, these millions of voters won't be represented when delegates select the candidate at the Dem convention. I, along with most of the political world, think this will change. The method of this remedy may determine the final selection of the nominee.

Hillary abided by the same rules as did the Obama camp, meaning she hasn't been shown to have broken any rules. Yet, being a Clinton, she surely played the rulebook with much more cunning than did the great savior from Chicago. Her judicial audaciousness gave her two much needed infusions of "momentum" in January (which made last night's wins possible) and resulted in her claim to a valuable and fairly large cache of Delegates.

Many in the party want both states to simply "re-vote". In such a matchup, if held today, Barrack would likely do well in MI and Hillary would do well in FL. The near draw would probably result in a slight gaining of delegate ground by Clinton, but nothing large enough to secure her the clear nomination.

Team Clinton will angle to argue the following:

1. She didn't break any rules, she simply honored the entirety of the Democratic electorate. Obama quickly wrote them off. Why should he be honored for this?
   

   
   

2. Obama actually did participate. In Michigan, his campaign and its surrogates actively encouraged voters to select "Uncommitted". That he chose this negative strategy rather than Hillary's positive strategy is not her fault, it's his.
   

1. Clinton may opt to compromise with the GOP solution to the same problem. The GOP penalized states half of their delegates for holding primary contests "too early". She could "compromise" that half the delegates be seated at convention. That would provide 105 FL delegates and 78 MI delegates. As "Uncommitted" received sizable votes, Clinton would not receive ALL the delegates, but she would probably receive around 85. Clinton could argue that based on the above two points, she played by the rules – as did the voters in those two states. Neither should be penalized by acting as if the votes cast in January somehow didn't mean anything. And by halving the delegates, the DNC is still penalizing the states and her contested "advantage" against Obama is getting muted. It's a pretty clever and convincing argument.
   

I suspect the outcome of this argument will be determined by how well Obama and Clinton court the Super Delegates. If Clinton is successful in that courtship, I think she may win this argument and lay claim to winning 2 more large and swing states – further bolstering her claims for Super Delegate support. If Obama does the better job courting, I would look for a rematch in both states. In a rematch, Obama both maintains his delegate lead and the very "solution" points toward a Clinton who isn't winning Super Delegate votes as she must.

On Principle,

CBass