Idol Chatter

In what seems to almost be his trademark style, President Barack Obama is taking Europe by storm in what is his first visit as our President.  His wife, Michelle, our first lady is making an almost equally impressive impression as she meets with England’s Queen as well as normal school girls.

What is not clear is whether there is any real progress being made in a cohesive effort among the world’s leading countries to end the current recession.  Certainly the President brought enough staff to get that job done but the likelihood of accomplishing anything meaningful in such a short time frame is not probable.

Meanwhile the economy continues to show us a mixed bag.  Home sales are increasing but prices are lowering.  Unemployment continues to increase and has been recently reported as high as 8.5% but in March the stock market posted a 20% increase.  It is likely that we will continue to see a lot of volitility until all facests of our market start to move in a more unified upward trend.

Let’s face it, the small business owner is under a lot of pressure with the weak economy.  Even in the best of times they have a harder time getting credit and now, that has nearly completely evaporated.  Small business owners struggle to get by.

Now with over 1,100 pages, it seems like nearly no one (and that includes your congressmen and senators) has actually read the bill.  But with President Obama addressing Congress last week there were no specific provisions mentioned there designed to really help the small business owner.  For example, while Obama seems to have little regard for tax cuts, actually implementing tax cuts for small businesses would enable many to hang on during these difficult times.  And by hanging on, more jobs are retained in the economy.

In a recent poll conducted by Merchant Circle over 10,000 respondents when asked about whether they approve of the stimulus bill overwhelmingly voted NO.  Not a surprise really to those of us in the trenches with them.  Too bad we are, once again, ingnored by our elected officials.

With the incentive plan now passed, President Obama now turns his views towards the housing market.  Certainly if the economy is to recover, the housing market, which started the quick downslide, must be addressed.  The problem is that there seems now to be significant factions within the country that just hate the idea of bailing out people who failed to pay on their mortages.

This isn’t an easy situation but it does seem that if one of the major issues was the ARM rates underlying much of this junk lending suddenly rose significantly causing people who would have paid their mortgage to now be unable to, the solution should address the rates, not try to bail out folks who chose to stop paying.

Moreover, it’s unclear how you help a family who has been foreclosed on.  Once foreclosure happens the family has to get out and it makes no sense to try to put them back into the home that has now been cleared of any possessions left behind.

In any event, there was a lot of chatter on talk radio today about the plan, much of it revealing a grow sentiment against the bail out ideas.  We’ll stay tuned to see what happens next.

Earlier this week I listened to President elect Obama address congress to move swiftly to put together and a approve a new economic recovery package.  Now that was to be expected but as I’m listening to the President elect I’m wonder who is this guy?

The ‘new’ Obama seems to have lost his optimistic outlook entirely.  This new guy likes to talk about how we are at the edge of an economic abyss from which there may be no recovery.  No recovery that is, unless congress approves his package.

The thing is that a package of incentives cannot do anything for the next 3 months and very little for the first half of the new year.  More people will get laid off which will be painful.  The housing market will not come back to life  anytime soon.  The big three auto dealers will be back in Washington DC shortly asking for a lot more money to survive.

However, what Obama won’t acknowledge is that there will be recovery without his package.  And whether the economic recession we are in gets any worse or last any longer without it is debatable.  What I do know (and I think the President elect does too) is that his job creation plans that have to do with infrastructure projects (yes folks we are talking about laying concrete for roads and bridges) won’t do anything for a single mother of 4 who gets laid off of her adminstrative job.  I won’t do anything for the 48 year old father of 2 in college who can no longer make any money being a real estate agent.  It just can’t help the hundreds of thousands of folks who are not physically capable of doing that labor.

So the bad news is that much of what gets included in this stimulus/recovery bill just won’t help us out and will just raise the deficit further.  We are in for a grim year this year.

But we will recover because we are a huge economic force.  Once the contraction stops – and it will – spending will slowly come back.  And that will lead to job growth.  We need to focus on just how vast this country is and how rich it is with not only natural resources but with a people who will raise to the occasion.  Americans do not need a hand out.  This country has survived worse and come back the stronger for it.

In a recent news article I read today on Reuters.com, the focus was on how we may go into a depression from the current recession.  Now the premise of this argument was that the recent and significant fall of oil prices is a bad thing.

Are you kidding me?

A much needed easing of one of the principle expenditures in any individual’s budget is now a bad thing.  Forget how the sky high prices were making us all cut back our driving and cut back on other discretionary expenditures, that supposedly is not as bad as getting this price break on gas.

The arguement is that “the swift fall in oil prices is now lowering the absolute level of consumer prices and bringing with it likely declines in nominal GDP over the next three quarters.”

Well isn’t that only a potential rollback of the steep incline we just saw during the first 3 quarters of this year?  Moreover I say ‘potential’ because many companies absorbed the price increases for a period of time before they started to raise their prices.  To say that they now will decrease prices is a bit of a stretch.

Of course if you bought the first arguement you could then buy the second which is that “Falling prices would cut demand and discourage employers from hiring.”  But really if prices came down significantly that would incent consumers to, well, consume again.  And there is a core demand in the economy that won’t be easily shut down.

With government bail outs for the financial industry and probable for the auto industry, two hard hit sectors are getting some relief.  And with Obama’s likely proposals to spend on infrastructure and maybe a tax cut, the economy won’t pull out of the recession anytime soon but sure won’t sink into a depression.

Black Friday 2008 has now come and gone.  With much trepidation many retail stores and, frankly, economists will be counting the numbers.  Is Black Friday a good barameter of the Holiday spending totals?  Or could it be that with all the hype about how dramatic the deals were going to be and how much price slashing would be evidient, customers were left feeling a bit disappointed?

If that’s the case, if Black Friday becomes Bleak Friday, there is still a modicum of hope.  The fact is that Christmas will come and some level of buying always happens.  Christmas 2008 is already fated to go down on the records as one of no growth and probable retraction of sales volumes that have been achieved in prior years.

And the real story about Christmas 2008 will be told after Christmas as some retailers just won’t be able to make it.  There’s no jolly in that thought.  But the US economy is one driven by the consumer.  Consumers are fearful.  There have been many job layoffs already announced and as folks reduce spending in fear that their jobs may be next, they actually promote the very outcome they seek to avoid.  Ironic isn’t it?

In a day or two we’ll all be told how it went.  In the meantime, perhaps I’ll make a trip to the mall or better yet wait until Cyber Monday and buy something online.