Capital Commerce
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Traders Give Up on Hillary
Continue reading… 0 CommentsIt's pretty much total capitulation time over at the Intrade betting markets. Traders now give Barack Obama an 80 percent chance of being the 2008 Dem nominee, Hillary Clinton 20 percent. In other words, they give the junior U.S. senator from New York a puncher's chance but not much more. Let the final Hillary haymakers begin.
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McCain's Iffy Tax Pledge
Continue reading… 0 CommentsJohn McCain is now on record as being against tax increases (via CNSNews):
"So on taxes, are you a 'read my lips' candidate, no new taxes, no matter what?" host George Stephanopoulos asked the Arizona Republican on ABC's This Week. "No new taxes," McCain affirmed, before making an argument that taxes ought to be cut if the economy deteriorates. "But under circumstances would you increase taxes?" Stephanopoulos asked in a follow-up question. "No," said McCain.
I only wish my fellow Greek journalist had asked McCain whether he is talking just about income taxes or also about Social Security taxes. McCain has spoken favorably in the past about the 1983 Greenspan commission, which endorsed higher payroll taxes. Plus, his idea to cap and trade emissions is tantamount to a tax increase.
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Iraq Is Turning Into a Budget Issue
Continue reading… 1 CommentMy pal Dan Clifton over at the Strategas Group anticipates the Iraq war turning from a foreign policy issue to a budgetary issue:
The key theme for Obama will be to bring the troops home.... Obama will make this case and claim he can use the money from troop withdrawal to fund domestic programs. However, this strategy will ultimately be determined by current events. If security related developments occur, McCain can fire back that Obama is cutting and running (i.e. soft on defense and security related issues).... The next president will determine the direction of the Iraq war and thus the future growth of defense spending moving forward. Since '01 the federal government has spent a total of $752 bn on the war, and war costs now represent 30 pct of the defense budget.
My take: A big part of the balanced-budget story in the 1990s was the big cut in defense spending. Will the Democrats play that card again despite the ongoing global war on terrorism?
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Stock Investors Bet on Growth
Continue reading… 0 CommentsJPMorgan economist Jim Glassman thinks the stock market is betting on a return to the global boom:
So why, in the presence of an unprecedented financial shock and rampant worries about recession, is the stock market weathering the storm so well? Yes, it's down. But please, down only 13½% from last fall's record high, and setting an all time record amid the financial storm?.... Yes, the economy is growing too slowly—it has been for more than a year, based on labor market trends—but it's not imploding. Some sectors are down but many are up. Some regions are paying for self-inflicted real estate excesses and some are not. The national economy didn't overheat and the Fed didn't have to slam on the brakes, two common precursors to recession. At the same time, the global economy is enjoying its best economic performance since the time of the dinosaurs, thanks to the forces that have contributed to the US trade deficit. Why else would equity investors hold high ground amid a once-a-century financial crisis and recession worries?
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Quick Hits for February 15
Continue reading… 0 Comments1) This one will leave a mark. Larry Kudlow, an official friend of the CapCom blog, paints Barack Obama as a "big-government bureaucrat who would take us down the wrong economic road."
2) Right on! Fund guru Kurt Brouwer at the Fundmastery blog has a great post on all the assets our kids will inherit, such as highways and parks and natural resources. This is something those "national debt calculators" ignore.
3) Over at the fine Carpe Diem blog, econ Prof. Mark Perry updates the famous Julian Simon bet on falling commodity prices.
4) A new search tool over at the Cato Institute site allows users to easily track the trade records of members of Congress. Open trade is the foundation of global growth, folks.
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Sovereign Wealth Funds in the Cross Hairs
Continue reading… 0 CommentsLast year's protectionist backlash against China on Capitol Hill—where there was a spate of bills attempting to force that country to let its currency appreciate vs. the dollar—has morphed into a "get tough" campaign on sovereign wealth funds. Earlier this week, Sen. Charles Schumer said that SWFs need to increase transparency—perhaps, at minimum, accepting an International Monetary Fund code of practices—or face congressional action. (Expect a flurry of bills from both the House and Senate.)
How strange. While you could make the argument that the strong yuan is hurting the American economy, SWF money has been a huge boost so far, propping up beleaguered U.S. financial institutions like Citigroup. But I guess it's the idea of accepting "foreign handouts" that rankles some people, especially when they come from nondemocratic governments. Plus, whenever the economy sours, the country has a tendency to turn inward.
But Judge Richard Posner, in his blog with Nobel laureate economist Gary Becker, makes a couple of good points about SWFs: 1) SWF investments create long-term wealth in this country by placing money in the hands of U.S. asset owners here that they can then invest for a higher return. 2) SWF investments in nondefense companies don't undermine our national security because they in effect create financial hostages. "It's as if to guarantee China's good behavior the president of China sent his family to live in the United States," Posner writes.
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Now This Is Worrisome...
Continue reading… 2 CommentsEconomist Michael Darda over at MKM Partners attempts to ruin my weekend with this observation:
Swap spreads (simple version: the difference between interest rate on private and government debt) officially re-entered "crisis territory" today (which we view as 75-80 [basis points] or more). This indicator has tended to lead other areas of credit over time, including during the summer and fall of 2007. Our bullish view of stocks had been built around the previous narrowing in swap spreads (and the parallel improvement in the commercial paper market), attractive relative valuations, and very bearish investor sentiment (a contrary indicator). While we remain constructive on stocks long-term, the recent aggressive widening in swap spreads—and the renewed weakness in the commercial paper market—are a significant setback that may signal more near-term equity market weakness to come.
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A New Name in the McCain Veepstakes
Continue reading… 2 CommentsHere's a new name you can add to the list of possible John McCain running mates, a Republican source tells me: Rep. Paul Ryan of Wisconsin, a member of the Ways and Means Committee. Although he's only 38, Ryan was elected to Congress back in 1998. So he has more national political experience than Barack Obama. What's more, he's a rock-solid, supply-side conservative who recently coauthored a bill that would create a simplified tax system. Under the plan, there would be two rates, 10 and 25 percent, a huge standard deduction of $25,000 for married filers (half that for singles), and a $3,500 personal exemption. It would eliminate all other deductions and credits that litter the current tax code. The dividend and capital-gains-tax rates would be made permanent at the current 15 percent. Other Ryan pluses: 1) he's from a swing state; 2) he's a family guy (three kids) who could help McCain appeal to suburbanites wanting to hear about more than just the war on terrorism; 3) he's a sharp-looking fellow.
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Obama's Trillion-Dollar Spending Plan
Continue reading… 78 CommentsWhat does "change" cost? About a quarter of a trillion bucks a year, according to Barack Obama. But first, this: "I wish Obama would go further than that, but it's a start," was the reaction of one DailyKos poster to Barack Obama's economic plan unveiled yesterday in a campaign appearance in Janesville, Wis. Some hard-core liberals may be underwhelmed by the scope of Obama's agenda—after all, there's no single-payer healthcare plan or Scandinavian-style "flexicurity" worker benefits program in the mix—but my guess is that the average person would find it all pretty aggressive. Here are the priciest parts:
- A $65 billion-a-year health plan
- $15 billion in green energy spending
- $85 billion in tax cuts and credits
- A $25 billion-a-year increase in foreign aid
- $18 billion a year in education spending
- $3.5 billion for a national service plan
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Barack Hussein Reagan? Ronald Wilson Obama?
Continue reading… 11 CommentsIs Barack Obama the Democratic version of Ronald Reagan? That blog post yesterday got plenty of reader responses. Different people answered that question in different ways. Let me sum up:
Liberals: Yes, Obama is the next Reagan, the Great Communicator of the Left. More accurately, he's the anti-Reagan who, along with an overwhelmingly Democratic Congress, will begin to undo the so-called Reagan Revolution, smash the Republican rump minority, and transform America by raising taxes on the rich and actively using the federal government to help average people. ¡Viva la Revolución!
