Entries for April 2007

Which Democratic presidential candidate will pull the trigger? Which Democrat will come right out and advocate some old-fashioned protectionism–or "economic nationalism," as some trade warriors like CNN's Lou Dobbs prefer to call it? While both parties have grown more skeptical of trade, the Dems are certainly more so, especially after the last election, where many of their new House and Senate members ran with an anti-free-trade agenda. Now as I noted in my last posting, the recent Democratic presidential debate really didn't touch too much on economic issues. And even if it had, perhaps none of the candidates would have gone beyond the usual: calling for trade agreements to have more labor and environmental standards. But some "fair trade" advocates have gone beyond those ideas, pressing hard for a moratorium on new trade agreements and even reopening old ones, such as the North American Free Trade Agreement, so they can be "fixed." Here is one interesting idea, suggested to me by non-Democrat Patrick Buchanan in a recent appearance with him on CNBC's Kudlow & Co. It goes like this, as Buchanan recently explained:

The 2008 Democratic presidential candidates debate in Orangeburg, S.C., last night was as light on content–at least on economic policy–as the websites of the candidates themselves. At one point even John Edwards said, "We've had a lot of discussion tonight, not a great deal of discussion so far about the substance of very specific ideas that each of us have on big issues."

With the Dow industrials making new records every day of late–even cracking the 13,000 barrier to fascinate all the Wall Street numerologists out there–I thought it would be a real kick to see how the stock market has performed since Congress passed the 2003 Bush tax cuts on May 23, 2003. (The Jobs and Growth Tax Relief Reconciliation Act accelerated the 2001 tax cuts and cut taxes on capital gains and dividends.) Since then, the Dow is up 52 percent, the S&P 500 60 percent, and the Nasdaq 69 percent. (Overall, the stock market has created some $6.8 trillion in new wealth since then as the size of the economy has grown by some $2.8 trillion, not adjusted for inflation.)

I see it all the time: the too-common error of focusing on housing–you might have heard the sector's been a bit dodgy of late–to the seeming exclusion of virtually all other economic factors. The foolishness of that myopic mistake was once again illustrated by today's solid durable-goods report for March. Orders for "core" nondefense capital goods (excluding aircraft) jumped by 4.7 percent, and that strength helps alleviate fears that, in the words of Global Insight economist Brian Bethune, "business investment was on the cusp of spiraling downwards." One reason businesses can afford to invest is that earnings continue to surprise. But that shouldn't be surprising at all, given the strength of the global economy, which the International Monetary Fund predicts should grow about 5 percent again this year. And that growth is helping U.S. exports. They were up 13 percent last year, and the ISM export index rose 1.5 percentage points in March to its highest level since November. One more nugget from Bethune:

Sometimes you don't need a cute anecdote or bon mot in posting. Sometimes the numbers speak for themselves. So here's the latest–just out this afternoon–on the long-term financial condition of Social Security and Medicare:

More good news: The Dow Jones industrials are extending their record gains of late and also approaching the 13,000 level. So not only do consumers seem to be ignoring all the doom-and-gloom predictions about the economy–mostly from housing bears warning of a spillover to other sectors–but the same goes for investors. (Of course, the consumer and the investor often are the same character.)

Capital Commerce hosted a compelling, no-holds-barred economics debate last week between financial pros and blogging greats Donald Luskin and Barry Ritholtz, which had the one downside of not letting me address the controversy that flared up over which economy has been superior–the Bush economy or the Clinton economy.

The past few weeks, economists have been laying odds on two scenarios: a recession sparked by the housing downturn, or stagflation–lousy growth plus rising prices. Neither is very appealing. But the latest data provide a bunch of positives. Yesterday, we had news that retail sales rose 0.7 percent in March, with February sales being revised upward to a 0.5 percent gain from 0.1 percent previously. So despite all the concern that consumers will stop spending now that they're tapping less and less into their home equity, they are continuing to spend.

One frequent criticism of Rudy Giuliani and his 2008 presidential candidacy is that "America's Mayor"–a total policy wonk when running New York–seems to be winging it on the stump and is a little light on details. So I was happy to have the opportunity earlier this afternoon to participate in a conference call with Michael Boskin, Team Giuliani's senior economic adviser and former head of the White House Council of Economic Advisers under President George H. W. Bush between 1989 and 1993.

Bloodied, perhaps, but unbowed, the combatants in the inaugural Capital Commerce debate emerge from their corners for one last round. The two economists landing and dodging verbal blows this week are Donald Luskin, chief investment officer at Trend Macrolytics, an economics and investing consulting firm, and Barry Ritholtz, proprietor of Ritholtz Research & Analytics. Luskin blogs at The Conspiracy to Keep You Poor and Stupid, and Ritholtz writes The Big Picture.

It's Round 4 of the inaugural Capital Commerce slugfest between Donald Luskin, chief investment officer at Trend Macrolytics, an economics and investing consulting firm, and Barry Ritholtz, proprietor of Ritholtz Research & Analytics. In addition to being practitioners of the "dismal science" and finding much to fault in each other's analyses, they're bloggers: Luskin writes The Conspiracy to Keep You Poor and Stupid, and Ritholtz authors The Big Picture.

It's Round 3 of the inaugural Capital Commerce debate. The pugilists: Donald Luskin, chief investment officer at Trend Macrolytics, an economics and investing consulting firm, and Barry Ritholtz, proprietor of Ritholtz Research & Analytics. The bullish Luskin writes a popular blog, The Conspiracy to Keep You Poor and Stupid, while the bearish Ritholtz has an equally popular blog, The Big Picture.

The inaugural Capital Commerce debate between two economist/bloggers, one a bull and the other a bear, moves into its second round. The combatants are Donald Luskin, chief investment officer at Trend Macrolytics, an economics and investing consulting firm, and Barry Ritholtz, proprietor of Ritholtz Research & Analytics.

Will the housing slowdown tank the rest of the economy, or will job and income growth continue to support and eventually strengthen the current expansion? These are just two of the critical questions that will be vigorously analyzed and argued this week in the inaugural Capital Commerce debate.

Got to like the fresh jobs data from the Labor Department. It's perhaps the best sign yet that while the imploding housing market may yet kill America's current economic expansion, it won't happen anytime soon. Nonfarm payrolls rose a stronger than expected 180,000 in March. What's more, the prior two months' payrolls readings were revised higher by a total of 32,000 to a combined 275,000–as has happened the previous nine months.