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I appeared on Silvio Canto Jr's talk show from Dallas last night.   It's here.

AUGUST 8,  2011

SHORT TAKES ON THE DRIFTING WRECKAGE – AT 9:20 P.M. ET:

SPOIL SPORT? – Governor Rick Perry of Texas will announce his presidential plans on Saturday, with speeches in the two presidential primary states of New Hampshire and South Carolina.  Obviously, he's running.  You don't go to New Hampshire and South Carolina to announce that you're training for the senior Olympics.  Saturday is the day of the famous Ames (Iowa) straw poll, and one can ask whether Perry is trying to steal the thunder from other candidates who, unlike him, will be participating in that poll.  This coincidence of timing will not make Perry loved in certain circles.

THE GREAT STRATEGIST SPEAKS – Congressman Barney Frank of Massachusetts has pronounced that the cause of this nation's credit downgrade is the American military and its operations.  Frank will undoubtedly get plenty of support for this profound theory from the tofu-worshipping crowd in his congressional district.  Frank says he's now on a mission to reduce the military budget and, of course, bring the boys home.  He is a perfect example of the fact that the nutty left and the nutty right are both joining in a new isolationism.  Tried that before.  Didn't work.  Ask the gents who were at Pearl Harbor that December morning.

THE GREAT ARTIST ALSO SPEAKS – Michael Moore, who I think makes leftist-oriented movies like "Fahrenheit 911," has announced a solution to the downgrade situation.  He wants President Obama to have the managers of Standard & Poors arrested.  Among other charges, Moore claims that Standard & Poors is connected with the Bush ((!!) family.  There are many criticisms of S&P, some of them probably quite valid, but we generally, in democracies, investigate before we incarcerate.  But who said Moore ever believed in democracy?

COURAGEOUS MAYOR – Philadelphia, like other big cities, has been victimized by a series of flash mob attacks, in which gangs of African-American "youths" attack others and run through stores stealing what they wish.  (We note that they represent a very small percentage of black kids.)  Finally, Philadelphia's black mayor, Michael Nutter, has had the courage not only to impose tighter curfews in parts of the city, but has confronted the issue of race in these attacks.  No excuses, no invoking "root causes."  He has called the flash mobbers "a tiny minority of ignorant, reckless fools."  He has bluntly said that they are hurting their race.  And he has announced that parents will be held responsible if their kids violate curfews.  Solid stuff, and much needed.  Other mayors might take note.

August 8, 2011       Permalink

BULLETIN – DOW DROPS 634 POINTS – AT 4:23 P.M. ET:  The Dow Jones Industrial Average dropped about 634 points today (minor adjustments in the number might be made later), the first American market reaction to the downgrade.

We now await the opening of Asian markets, which occurs at 8 p.m. ET. 

The president spoke today, and basically called for an end to partisanship in Washington.  As usual, he had nothing of substance to say.

S&P has started to downgrade other financial products that are linked to the U.S. Government, such as loan guarantees to foreign nations.  This, too, will have a ripple effect.

The fool Barney Frank is blaming the American military for the downgrade.  The left already has its big eyes on the military budget, not understanding that, national security needs aside, the military budget is one of the great economic engines in this country.

Some concern has been raised that several states could be downgraded next.

August 8, 2011       Permalink

STOCKS DROP SHARPLY – AT 10:25 A.M. ET:  The stock market has opened sharply lower, following S&P's downgrade of America's credit.  From Bloomberg:

U.S. stocks retreated, following the biggest weekly drop in the Standard & Poor’s 500 Index since 2008, amid concern that a downgrade of the nation’s credit rating by S&P may worsen an economic slowdown.

Bank of America Corp. (BAC) and Citigroup Inc. (C) slumped at least 5.4 percent, pacing losses in financial shares. Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) declined more than 2.7 percent as oil futures tumbled to trade at an eight-month low.

The S&P 500 retreated 2.1 percent to 1,174.66 at 9:34 a.m. in New York, after losing 7.2 percent last week. The Dow Jones Industrial Average fell 197.92 points, or 1.7 percent, to 11,246.69.

“It’s panic selling,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview. His firm manages $275 billion. “There are no fundamental reasons for the selloff. We’re not going into a recession. We had a terrific earnings season. Now is not the time to panic. This is where you start to put cash back to work.”

COMMENT:  Volatility is expected throughout the day.  The Wall Street economy is not the real, Main Street economy.  As Felix Rohatyn, a true statesman of the financial sector, once said, it's something of a casino.  We'll see who comes away with more chips.

It is now three days since the downgrade, and President Obama has yet to comment on it.  His leadership, or lack of it, has got to be a factor in the economic decisions that people and corporations make.  There's not much glow left, or much love.

August 8, 2011      Permalink

IMPORTANT MEDICAL NEWS – AT 9:38 A.M. ET:  We report, as medical observers, the meltdown of one Albert Gore, former vice president of the United States and former husband of one Tipper, at a meeting on August 4th in the Democratic Party's capital city of Aspen. 

Mr. Gore, who has our sympathies and good wishes for a speedy recovery, spoke as follows:

Speaking Aug. 4 at the Aspen Institute, Gore claimed global warming critics have used the same tactics allegedly used by the tobacco industry to prevent needed anti-smoking regulations for four decades, according to The Colorado Independent, a liberal website.

"The model of media manipulation used then, Gore said, 'was transported whole cloth into the climate debate. And some of the exact same people — I can go down a list of their names — are involved in this. And so what do they do? They pay pseudo-scientists to pretend to be scientists to put out the message: This climate thing, it’s nonsense. Man-made CO2 doesn’t trap heat. It may be volcanoes. *@##!@%*!  It may be sun spots. *%!@%*&!#!  It’s not getting warmer. #!**%#@!'  Gore exclaimed," the Independent reported.

“'When you go and talk to any audience about climate, you hear them washing back at you the same #!@% over and over and over again,' he continued. 'There’s no longer a shared reality on an issue like climate even though the very existence of our civilization is threatened. People have no idea! … It’s no longer acceptable in mixed company, meaning bipartisan company, to use the %@#!*&n word climate. It is not acceptable. They have polluted it to the point where we cannot possibly come to an agreement on it.'"

Mr. Gore is receiving get-well cards at any of his residences.  He will also be teaching master classes in good taste and fine vocabulary to local underprivileged youths.

A full text of his remarks, for mature adults, is available.

August 8, 2011       Permalink

IOWA WEEK – AT 9:18 A.M. ET:  Call this Iowa week in American politics.  We have a primary system, and each event in a primary takes on great significance because it can narrow the presidential field.  Narrowing may well occur this week.  From The Politico:

The most important week of the 2012 presidential race so far begins now.

Whatever happens in Thursday’s debate and Saturday’s straw poll in Ames, the Republican field is likely to be narrowed. No candidate will come out of Ames the same as he or she went in. Some may not come out at all. And one will emerge as the top challenger to Mitt Romney, whose decision not to compete in the straw poll turned the voting largely into a contest between Tim Pawlenty and Michele Bachmann.

The week will also be key for Rick Perry, the Texas governor who’s been weighing a run, but won’t be on the Ames ballot. The less strength everyone else in the field shows, the wider the opening for him to get in.

For all its detractors who claim the straw poll has little predictive value, it has shaped every Republican presidential race for years. Even those who skipped competing — Romney, Newt Gingrich and Jon Huntsman — won’t be able to ignore the results. And those votes won’t be cast until after the debate — Huntsman’s first — two days before Ames.

It’s a week that will prove or disprove the conventional wisdom: Ron Paul’s struggling to be taken seriously, Rick Santorum’s hoping for attention, Herman Cain’s fading fast, Gingrich is sliding toward irrelevance and Michigan Rep. Thaddeus McCotter’s run remains mostly confusing.

The stakes are highest for Pawlenty and Bachmann, as the former Minnesota governor pits two years of organizational build-up against the enthusiasm that has made the congresswoman the Iowa frontrunner as both try to prove their viability.

COMMENT:  Thursday's debate will be televised by Fox.  I encourage you to watch it.  Watch to see if Michele Bachmann continues the winning streak she established by her remarkable performance in the first debate of the campaign many weeks ago.  Watch to see if Tim Pawlenty can get a pulse.  Watch to see if Ron Paul will reveal himself to be the bag of nuts that he really is.

Rick Perry has been mentioned.  I'll be discussing him in upcoming days.  He is expected to jump into the race later this month, and there is great excitement in some circles.  I've been studying Perry and find, very frankly, that he's currently a local politician with narrow appeal – the Rudy Giuliani of Texas – who will have only months to prove himself on a national stage, not only to GOP primary voters, but to the independents needed to win a presidential election.  More on that later.

August 8, 2011      Permalink

SOME COMMON SENSE ON THE DOWNGRADE – AT 8:54 A.M. ET:  The big story of the day is about to begin...the American stock market's reaction to the downgrading of American credit by Standard & Poors. 

Over the weekend we saw, via the mouths of John Kerry and others, the Democrats' awkward attempt to blame the downgrade on the Tea Party.  True, the Tea Party doesn't rank very high in opinion polls, but the attempt fizzled rather quickly.  Barack Obama is president, not the Tea Party, and Americans are actually aware of that.

At the same time, the administration was attacking Standard & Poors for issuing the downgrade itself.  But The Wall Street Journal, while skeptical of ratings agencies like S&P, argues for some common sense in dealing with this humiliation:

is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.

This is not news.

In that context, the Obama Administration's attempt to discredit S&P only makes the U.S. look worse—like the Europeans who also want to blame the raters for noticing the obvious. Treasury officials and chief White House economic adviser Gene Sperling denounced S&P for relying on a Congressional Budget Office scenario that overestimated the U.S. discretionary spending baseline by $300 billion through 2015 and $2 trillion through 2021.

But even adjusting for that $2 trillion would only reduce U.S. publicly held debt to 85% or so of GDP—still dangerously high. And that assumes that recently agreed upon spending caps are sustained over a decade, something which rarely happens.

We think the larger problem with S&P, Moody's and Fitch is that they make no distinction over how a nation balances its books—whether through tax increases or spending reductions. Like the International Monetary Fund, the raters care only about balance.

This takes too little account of the need for faster economic growth, which is the only real path out of a debt crisis. Britain's government has earned rater approval for its fiscal consolidation, but its increases in VAT and income tax rates are hurting its tepid recovery. Letting the credit raters dictate tax increases is the road to an austerity trap.

The real reason for White House fury at S&P is that it realizes how symbolically damaging this downgrade is to President Obama's economic record. Democrats can rail all they want about the tea party, but Republicans have controlled the House for a mere seven months. The entire GOP emphasis in those seven months—backed by the tea party—has been on reversing the historic spending damage of Mr. Obama's first two years.

COMMENT:  You'll probably see more economic analysis in the next week than you've seen in a lifetime.  Everyone is out there with a theory, but the Journal is fundamentally correct.  We will get out of this only by growth in the economy, growth that has so far eluded the Obamans.  Achieving that growth may mean putting aside some perfectly good social goals for a time in favor of economic growth which, in turn, will make social goals more attainable.

I am not an economist, and don't pretend to be one, but it does seem to me that the manufacturing sector – expanding and enriching it – may well hold the key to growth, and that working on ways to make this country more competitive again in manufacturing can produce quick dividends.  But ideology too often rules this administration, and its middle-level administrators have little regard for a sector that too many of them loathe.

August 8, 2011     Permalink

AUGUST 7,   2011

SHORT TAKES ON THE DRIFTING WRECKAGE - AT 10:45 P.M. ET:

ASIAN MARKETS - Asian markets are sliding right now, partly as a reaction to the downgrading of America's credit rating.  It is the fifth straight session of loss on the Asian markets.  Everyone, of course, is anticipating the opening of the American stock market tomorrow morning.  At the same time, European bankers are strangling to save the economies of Spain and Italy, which are in desperate trouble.  The current saying is, "Spain is too big to fail, and Italy is too big to save."  You may be sure that there will be attempts in America tomorrow to stabilize the markets and prevent a Dow dive.  We can predict nothing.

INCREDIBLE – Saudi Arabia is withdrawing its ambassador to Syria in protest against the government crackdown on dissenters...just as the United States is sending its ambassador back to Damascus.  Can't we coordinate with our presumed allies?  By sending our ambassador back we once again show weakness in the face of another dictatorship, while even Saudi Arabia, not regularly known as one of the great backers of democracy, is taking a stronger stand against the Syrian regime. 

THE NEXT NIGHTMARE – Some economists are warning that, if we go into a second recession, it could be worse than the Great Recession that President Obama faced when he took office.  Their argument is that the economy is far weaker than it was then, and that we have fewer resources to fight economic decline.  We might also add to that the psychological factor of discouragement.   Our economic crisis began with the collapse of September, 2008.  We live in a fast-moving, impatient age.  If we go down again, the discouragement could be so great that it perpetuates the very problems we're trying to solve.

August 7, 2011       Permalink

BUT WHO ARE THESE DUDES? – AT 11:37 A.M. ET:  Now that "downgrade" is the word of the year, maybe we should introduce readers to the guys who made it so.  From the New York Post:

The Wall Street bean counter who trashed America's global credit reputation is a New Yorker who never studied economics, majored in literature and philosophy, and has a master's in English lit.

Yet John Chambers, 55, who lives with his wife, daughter and two dogs on Riverside Drive, has become the stern public face of Standard & Poor's, the private agency that wreaked havoc Friday night by notching down the nation's credit to double-A from triple-A.

David Beers, S&P's global head of sovereign ratings, Toronto analyst Nikola Swann and Chambers are the downgraders-in-chief who lowered the boom.

Now the trio is the focus of increasing scrutiny.

As economist and money manager Zachary Karabell said last month, their subjective decisions make them "emperors" wearing "very frayed robes."

Chambers grew up outside Kansas City, Kan., and went to liberal Grinnell College in Iowa, where he was a star on the swim team, ranking eighth in school history in the 1,000-meter freestyle.

After graduating in 1977 with a bachelor of arts in literature and philosophy, he went Ivy League, enrolling at Columbia University, where he got a master's degree in English literature.

Yikes.  The Columbia English Department is famous for contentiousness and pettiness.  There was a period, for years, when it couldn't hire professors because no one could agree. 

David Wargin, an S&P spokesman, told The Post that Chambers, a chartered financial analyst, chairs the agency's sovereign-rating committee, made up of "senior sovereign analysts" with various backgrounds.

But Wargin wouldn't say whether the committee was in disagreement over the US downgrade, Chambers declined to be interviewed for this story, and his wife backed her man, telling The Post, "I go on the wisdom of the people involved, including my husband."

Gulp.

Oddly, S&P's US downgrade was a departure from its rivals -- both of whom reaffirmed the triple-A rating last week when President Obama inked the debt-ceiling increase into law.

And...

Warren Buffett, for one, thinks S&P got it wrong. The United States, the billionaire investor yesterday told Bloomberg TV, merits a "quadruple-A" rating. The Oracle of Omaha also predicted that the nation would avoid another recession.

COMMENT:  We hope he's right, but it wouldn't hurt to change presidents next year. 

August 7, 2011       Permalink

THANKS, GUYS – AT 11:03 A.M. ET:   Standard & Poors certainly knows how to ruin a weekend.  From The Politico: 

One day after lowering the nation’s platinum triple-A credit rating, Standard & Poor’s analysts warned Saturday that the U.S. government could face a second downgrade if the economy continues to struggle and the government fails to make the cuts outlined in the debt ceiling agreement.

The ratings agency on Friday downgraded the nation to AA+ for the first time in history, saying partisanship in Washington is preventing dramatic deficit reduction.

S&P managing director John Chambers told reporters on a Saturday conference call that the toxic mix of a listless economy and political infighting will cause government debt to grow.

“Compared to some other highly rated governments, the U.S. government does not have the proactive ability to put public finances on a firm footing,” Chambers said.

His colleague David Beers said the partisan discord increases the risk that Washington will not achieve effective policy remedies.

“For that reason, there’s a lot of uncertainty about the future debt burden,” Beers said.

COMMENT:  I think this should be taken very seriously.  Aside from our international reputation, we are seriously risking major instability in the United States. 

And President Obama has yet to make a major statement on the downgrade. 

No enemy of the United States could have dreamed that we would come to this state, just two decades after our victory in the Cold War. 

August 7, 2011       Permalink

ZOLOFT IS AVAILABLE – AT 10:28 A.M. ET:  Markets overseas are reacting to the downgrading of the U.S. Government's credit rating.  The Israeli stock market is down five percent.  And the beat goes on:

Standard & Poor’s waited until all the stock markets went beddy-bye on Friday before announcing that President Obama’s borrowing of nearly $4 trillion since becoming president cost the nation its AAA credit rating.

While the Asian markets won’t open for a few more hours, Saudi Arabia’s stock market traded on Saturday and experienced a drop of more than 5%.

Most Mideast markets operate Sunday to Thursday. As the others opened on Sunday, they fell nearly as steeply.

And, from The Times of India:

DUBAI: Stocks are tumbling across the Middle East as most of the region's markets open for their first day of business following a historic downgrade of the United States' credit rating.

The main market index in the regional financial hub Dubai led the declines Sunday, plunging over 5 percent before rebounding slightly to a 4.4 per cent drop by midday local time. Other Gulf markets also opened sharply lower.

Mideast markets are the first to react to credit rating agency Standard & Poor's decision late Friday to cut the U.S. level one notch from its top AAA rating.

COMMENT:  The ultimate test will come tomorrow, August 8th, when the American markets open, unless we can figure out a way to declare a national holiday. Wait, wait.  Donny Most was born on August 8th in 1953.  You don't know who he is?  He was one of the cast of "Happy Days."  Ask your kids.  The man deserves a day for making your kids happy.  Take tomorrow off.  Close the markets.  Avoid the pain.  And celebrate Donny Most day properly.

August 7, 2011     Permalink