Rick Newman
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4 Money Problems Obama Can't Fix
Continue reading… 22 CommentsThe talk sounds reassuring, even if we know these are vapid campaign promises. As fixing the economy surges to the top of the candidates' to-do lists, Barack Obama and John McCain are starting to promise free money as if it were just sitting there in Washington, undiscovered. OK, what the heck? We'll take some!
Obama has been sticking his neck out by promising to strengthen the middle class and help struggling families, and now it's time to explain exactly how he would do that. Part of his plan would be a second round of stimulus checks to taxpayers, totaling perhaps $115 billion, according to the Wall Street Journal. Obama also envisions a huge new government health insurance umbrella for those who can't get coverage elsewhere. He plans to create thousands of jobs by funding new roads and other infrastructure projects. Perhaps most irresistible: a big package of middle-class tax cuts, to be paid for through tax increases on the wealthy.
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Frugal, Shmoogle
Continue reading… 3 CommentsThis commentary aired recently on the PBS program Nightly Business Report.
Most Americans probably think they're pretty frugal. But we're not. We buy bigger homes and cars than we need, we run the air conditioning when we're not even home, and when we need to boost our spirits, we go shopping.
But now that's ending. Soaring energy costs, a housing meltdown, and a lame economy are reining in our overspending. It's called the New Frugality. Just like the Old Frugality, back in the days when Ozzie and Harriett were a model family and Americans had never heard of a latte. Back then, they didn't have Everyday Luxuries like Tuscan bread and high-thread-count sheets. Most people only had a couple pairs of shoes. It was a treat to go out for dinner once a month.
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How Bankruptcy Would Wreck GM and Chrysler
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What Paulson Learned From the Pentagon
Continue reading… 1 CommentWhen smart generals develop a war plan, they try to anticipate every possible scenario. But they don't hold a press conference to announce the details—mostly they keep everything secret. They may even leak a deceptive nugget or two to throw the enemy off-track.
Treasury Secretary Henry Paulson isn't exactly waging war with Fannie Mae and Freddie Mac, or with the bond markets. But it's certainly a high-stakes standoff. Paulson wants big investors to bail out the two struggling mortgage giants by continuing to buy their bonds and equity shares. But to keep investors from bailing themselves, Paulson has pledged that, as a last resort, the government will inject money into Fannie and Freddie if that's what it takes to keep them in the mortgage business. And that's about all he has said.
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Fannie and Freddie: The Next President's First Migraine
Continue reading… 3 CommentsJohn McCain and Barack Obama have been choosing their words carefully when it comes to the foundering mortgage giants Fannie Mae and Freddie Mac. No doubt they're starting to realize that whoever gets elected in November is likely to get saddled with this massive problem on Day 1.
In July, when Treasury Secretary Hank Paulson secured the authority to bail out or even nationalize the two huge mortgage underwriters, the hope was that the government's explicit backing would be enough. If the government pledged to bail out the two agencies in an emergency, the theory went, that would reassure investors, who would keep buying Fannie and Freddie debt, since they wouldn't have to worry about a default. And the capital raised in the debt offerings was essential to keeping the two firms solvent so they would continue to buy mortgages and prevent the housing market from sliding even deeper into gloom.
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The Risks of Falling Gas Prices
Continue reading… 9 CommentsSmart investors know all about the "suckers' rally"—a temporary pause in a downward trend that amateurs mistake as a turnaround. Motorists might have to get used to the phenomenon, too.
There's a national sigh of relief as oil prices fall and the cost of gasoline drifts down from record highs. Since peaking on July 17 at $4.11 per gallon, gas prices have dropped about 25 cents. Some analysts think fuel prices have a lot farther to fall. If so, it would be a welcome breather for a gasping economy.
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The Obama/McCain Energy Charade
Continue reading… 53 CommentsThat smell on the nation's highways isn't just car exhaust. It's also the rank odor of political populism, as John McCain and Barack Obama both try to score points with dubious energy ideas.
Obama has now reversed an earlier stance and declared that the U.S. government should sell 70 million barrels of oil from the Strategic Petroleum Reserve to help ease the sting of $4 gas. That comes less than a week after Obama changed his mind about offshore drilling, deciding that some drilling in sensitive waters would be OK with him after all, given good environmental safeguards.
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Is It a Recession? That's the Wrong Question
Continue reading… 1 CommentDon't know about you, but I can't take it anymore.
It's a popular parlor game these days to argue over whether we're in a recession or not. By now, everybody knows the competing claims. In this corner are the quantonomists, who say it can't be a recession because we haven't had two consecutive quarters of economic contraction. And in this corner are the populonomists, who insist that people feel pain, and that makes it a recession whether the technical metrics say so or not.
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How General Motors Plans to Muddle Through
Continue reading… 8 CommentsIt's been one lousy year for General Motors—and it still might get worse. For the first half of the year, the biggest U.S. automaker lost a whopping $15.5 billion. Sales are down more than 15 percent, with buyers fleeing the big trucks and SUVs that have been GM's mainstay. Analysts are even warning that GM could run short of cash in 2009 and are floating the dreaded B word—bankruptcy. I sat down recently with GM marketing chief Mark LaNeve and asked about the company's prospects. Excerpts:
There's been a lot of bad news lately: plunging car sales, more restructurings, the huge dropoff in trucks and SUVs. Do you feel like GM has a handle on where it's going?
What we don't have a handle on is the industry, especially at the retail level. We're doing better than Ford or Chrysler in some segments, but the only manufacturer doing well year-over-year is Honda. So the whole question is where is the industry going? I'd like to think it's somewhere near the bottom.
