By Jennifer Rubin
The stock market today took a tumble, with the Dow dropping more than 500 points. The jobs outlook is bleak. (“The number of people claiming new jobless benefits remained broadly flat at an elevated level last week, pointing to persistent weakness in the U.S. labor market. New claims for unemployment insurance fell by just 1,000 to a seasonally adjusted 400,000 in the week ended July 30, the Labor Department said Thursday.”) As the New York Times observed, the culprit was “intensifying investor fears about a slowdown in global economic growth and worries about Europe’s ongoing debt crisis, which is centered now on Italy and Spain.”
When I asked economist Douglas Holtz-Eakin of the American Action Forum about his assessment of our economic woes, he pointed to investors moving back to Treasurys (and out of the stock market) with the U.S. debt ceiling crisis resolved, the European debt crisis growing and the realization that “Obama has no strategy for growth and jobs.” He says, “Bottom line — the absence of good news leads to a cumulative lack of confidence.”
Not surprisingly, Republican presidential campaigns came out firing at the Obama administration. The Bachmann campaign put out a statement that reads:
“Unfortunately, Americans continue to feel the effects of President Obama’s failed economic policies as they see their life savings dwindle in the falling stock market, and watch the economy and unemployment continue in a no-growth spiral. Clearly, the markets are reacting negatively to giving President Obama a $2.4 trillion blank check, as well as the President’s promise to increase taxes on the American people and job creators. He has no intention of cutting spending. What the markets wanted, and what the country needs, is a fundamental restructuring in the way Washington spends taxpayers dollars that reins in unprecedented spending, gets our debt under control, and encourages pro-growth economic policies. Politicians can say what they want to say, but you can’t fool the markets.”
Tim Miller from the Jon Huntsman camp e-mailed me, “On the most important issue facing our country — the economy and jobs — the President has failed. He’s had 2.5 years to inject more confidence into the economy, create an environment for growth, pass free trade agreements, and he’s done none of that. To get the economy going again, the country needs new leadership, someone with a track record of creating an environment that allows entrepreneurs to create needed jobs.” Likewise, Andrea Saul,the spokeswoman for Mitt Romney, who has made jobs the centerpiece of his campaign, had this take: “In the past, President Obama has cited gains in the stock market as an indicator of a recovering economy and a healthy financial system. Now that the Dow is falling, he needs to explain what that says about his failed leadership and the state of the economy.”
Saul has a point. In May, President Obama told a Massachusetts DNC gathering: “But an economy that was shrinking at about 6 percent is now growing again. Over the last 14 months we’ve created 2 million private-sector jobs, starting to recover some of those jobs that were lost during the crisis. The financial system is stable. The stock market has doubled.” It’s sort of like last year’s “recovery summer” — it simply wasn’t true.
Obama’s entirely false assessment of the economy had real policy implications. Recall that Treasury Secretary Tim Geithner a year ago told us that the economy could “withstand” tax hikes. And so he doggedly urged tax increases, rather than cuts. And as we saw in Obama’s Rose Garden speech this week, his anemic program of items like an infrastructure bank and patent reform shows no sign that he connects his uber-regulatory schemes, Obamcare and the threat of ever-higher taxes to the faltering economy. His Keynesian spending spree didn’t work; he has nothing else.
This is an unpleasant reminder of just how perilous is our economy and how serious is the shortage of economic leadership and pro-growth policies in this administration.
By Jennifer Rubin
Thursday, August 4, 2011
Va. Tech locked down for hours over report of gun
(AP) BLACKSBURG, Va. — A report of a possible gunman at Virginia Tech on Thursday set off the longest, most extensive lockdown and search on campus since the bloodbath four years ago that led the university to overhaul its emergency procedures.
No gunman was found, and the school gave the all-clear just before 3 p.m., about five hours after sirens began wailing and students and staff members started receiving warnings by phone, email and text message to lock themselves indoors. Alerts were also posted on the university's website and Twitter accounts.
Maddie Potter, a 19-year-old from Virginia Beach, holed up inside a campus wood shop, where she had been working on a class project. Staff members locked the doors and turned off the lights.
"I was pretty anxious. We had family friends who were up here when the shooting took place in 2007, so it was kind of surreal," she said. "I had my phone with me and I called both my parents."
The emergency was triggered by three teens who were attending a summer program on campus and told police they saw a man walking quickly across the grounds with what might have been a handgun covered by a cloth, authorities said.
Police searched some 150 buildings on the square-mile campus and issued a composite sketch of a baby-faced man who was said to be wearing shorts and sandals, but they found no sign of him. They continued to patrol the grounds as a precaution even after the lockdown was lifted.
"We're in a new era. Obviously this campus experienced something pretty terrible four years ago," said Virginia Tech spokesman Larry Hincker. He added: "Regardless of what your intuition and your experience as a public safety officer tells you, you are really forced to issue an alert."
It was the first time that the entire campus was locked down since the shooting rampage in 2007 that left 33 people dead, and the second major test of Virginia Tech's improved emergency alert system, which was revamped to add the use of text messages and other means besides email of warning students.
The system was also put to the test in 2008, when an exploding nail gun cartridge was mistaken for gunfire. But only one dorm was locked down during that emergency, and it reopened two hours later.
Earlier this year, federal authorities fined Virginia Tech $55,000 for waiting too long to notify staff and students after two students were shot to death at a dorm during the 2007 rampage. An email alert went out more than two hours later that day, about the time student Seung-Hui Cho was chaining the doors to a classroom building where he killed 30 more people and himself. It was the deadliest school shooting in U.S. history.
This time, several thousand students and the school's 6,500 employees were on campus for summer classes, officials said. Most of Virginia Tech's 30,000 students are on summer break and won't return until the fall semester, which begins Aug. 22.
Michael Backus, a 20-year-old from Abingdon, was studying in the student center when a staff member told him and a friend to move away from the window because someone with a gun had been spotted. During the lockdown, they watched TV, studied and called and texted friends and family.
"Everyone was kind of doing their own business as if nothing was going on. People were doing homework, calling people. It wasn't mass hysteria like people might imagine," he said.
Backus' girlfriend, 22-year-old Rachel Larson of Winchester, got a text message alert at her off-campus apartment. She became worried when she realized her boyfriend was on campus, but she soon calmed down.
"Virginia Tech — ever since 4/16 — we've been so paranoid. We hear about everything that goes on on campus, which is good, but sometimes people freak out when it's a false alarm," she said.
More than 45,000 subscribers to the university's emergency alert program received the text and phone messages, school spokesman Mark Owczarski said.
In 2009, a woman was decapitated while having coffee with a fellow student in a cafe on campus. But police seized the suspect within minutes of being called, and the campus was not locked down.
___
Online:
Virginia Tech: http://www.vt.edu/
No gunman was found, and the school gave the all-clear just before 3 p.m., about five hours after sirens began wailing and students and staff members started receiving warnings by phone, email and text message to lock themselves indoors. Alerts were also posted on the university's website and Twitter accounts.
Maddie Potter, a 19-year-old from Virginia Beach, holed up inside a campus wood shop, where she had been working on a class project. Staff members locked the doors and turned off the lights.
"I was pretty anxious. We had family friends who were up here when the shooting took place in 2007, so it was kind of surreal," she said. "I had my phone with me and I called both my parents."
The emergency was triggered by three teens who were attending a summer program on campus and told police they saw a man walking quickly across the grounds with what might have been a handgun covered by a cloth, authorities said.
Police searched some 150 buildings on the square-mile campus and issued a composite sketch of a baby-faced man who was said to be wearing shorts and sandals, but they found no sign of him. They continued to patrol the grounds as a precaution even after the lockdown was lifted.
"We're in a new era. Obviously this campus experienced something pretty terrible four years ago," said Virginia Tech spokesman Larry Hincker. He added: "Regardless of what your intuition and your experience as a public safety officer tells you, you are really forced to issue an alert."
It was the first time that the entire campus was locked down since the shooting rampage in 2007 that left 33 people dead, and the second major test of Virginia Tech's improved emergency alert system, which was revamped to add the use of text messages and other means besides email of warning students.
The system was also put to the test in 2008, when an exploding nail gun cartridge was mistaken for gunfire. But only one dorm was locked down during that emergency, and it reopened two hours later.
Earlier this year, federal authorities fined Virginia Tech $55,000 for waiting too long to notify staff and students after two students were shot to death at a dorm during the 2007 rampage. An email alert went out more than two hours later that day, about the time student Seung-Hui Cho was chaining the doors to a classroom building where he killed 30 more people and himself. It was the deadliest school shooting in U.S. history.
This time, several thousand students and the school's 6,500 employees were on campus for summer classes, officials said. Most of Virginia Tech's 30,000 students are on summer break and won't return until the fall semester, which begins Aug. 22.
Michael Backus, a 20-year-old from Abingdon, was studying in the student center when a staff member told him and a friend to move away from the window because someone with a gun had been spotted. During the lockdown, they watched TV, studied and called and texted friends and family.
"Everyone was kind of doing their own business as if nothing was going on. People were doing homework, calling people. It wasn't mass hysteria like people might imagine," he said.
Backus' girlfriend, 22-year-old Rachel Larson of Winchester, got a text message alert at her off-campus apartment. She became worried when she realized her boyfriend was on campus, but she soon calmed down.
"Virginia Tech — ever since 4/16 — we've been so paranoid. We hear about everything that goes on on campus, which is good, but sometimes people freak out when it's a false alarm," she said.
More than 45,000 subscribers to the university's emergency alert program received the text and phone messages, school spokesman Mark Owczarski said.
In 2009, a woman was decapitated while having coffee with a fellow student in a cafe on campus. But police seized the suspect within minutes of being called, and the campus was not locked down.
___
Online:
Virginia Tech: http://www.vt.edu/
Tiger Woods to play with Darren Clarke
When Tiger Woods returns to the PGA Tour after an 11-week layoff on Thursday at the WGC-Bridgestone Invitational, he'll do so playing alongside a longtime friend.
Woods will be paired with reigning British Open champion Darren Clarke, who said he received texts from Woods after claiming his first major championship at the age of 42 last month at Royal St. George's.
"I'm looking forward to it," Clarke said Tuesday. "I've got the opportunity to play with Tiger in his first tournament back. I think it's brilliant. Hopefully, I'm able to give him a little bit of stick and make him laugh a little bit the first couple of days."
In his career, Woods has won seven times at this week's venue -- Firestone Country Club -- but hit bottom on the golf course there last year when he shot 18 over par and finished 30 shots behind winner Hunter Mahan.
Woods has also said he'll play next week's PGA Championship at Atlanta Athletic Club where, according to PGA.com, he practiced on Monday.
Woods and Clarke first played together at Royal Lytham & St. Annes in the 1996 British Open, Woods' final major before turning pro. They hit it off immediately and have remained friends, even after Clarke took him down in the final of the Match Play Championship at La Costa in 2000, when both worked under Butch Harmon.
How could two players who seem so opposite be such good friends?
"He sort of got my sense of humor and I got his," Clarke said. "I give him a little stick and what have you. I don't think anybody gives him that much stick. He's been a very, very good friend to me over a very long period of time. I've got no idea why, but we just get on very well."
It was suggested to him Tuesday that it was easy to root for Clarke, followed by this question: Why should someone root for Tiger Woods?
"Good question," Clarke said, pausing briefly. "Because beneath it all, beneath all the stuff that's happened, self-inflicted or otherwise, he's essentially a really good kid -- a man -- beneath everything. Sometimes his media image has been portrayed in a very poor, poor way, some of that, again, from some of the stuff that he's been through. But underneath it all, he has been a tremendous friend to me.
"And there's a real good side to Tiger Woods that nobody ever fortunately gets a chance to see. That's why."
Information from The Associated Press was used in this report.
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Woods will be paired with reigning British Open champion Darren Clarke, who said he received texts from Woods after claiming his first major championship at the age of 42 last month at Royal St. George's.
"I'm looking forward to it," Clarke said Tuesday. "I've got the opportunity to play with Tiger in his first tournament back. I think it's brilliant. Hopefully, I'm able to give him a little bit of stick and make him laugh a little bit the first couple of days."
In his career, Woods has won seven times at this week's venue -- Firestone Country Club -- but hit bottom on the golf course there last year when he shot 18 over par and finished 30 shots behind winner Hunter Mahan.
Woods has also said he'll play next week's PGA Championship at Atlanta Athletic Club where, according to PGA.com, he practiced on Monday.
Woods and Clarke first played together at Royal Lytham & St. Annes in the 1996 British Open, Woods' final major before turning pro. They hit it off immediately and have remained friends, even after Clarke took him down in the final of the Match Play Championship at La Costa in 2000, when both worked under Butch Harmon.
How could two players who seem so opposite be such good friends?
"He sort of got my sense of humor and I got his," Clarke said. "I give him a little stick and what have you. I don't think anybody gives him that much stick. He's been a very, very good friend to me over a very long period of time. I've got no idea why, but we just get on very well."
It was suggested to him Tuesday that it was easy to root for Clarke, followed by this question: Why should someone root for Tiger Woods?
"Good question," Clarke said, pausing briefly. "Because beneath it all, beneath all the stuff that's happened, self-inflicted or otherwise, he's essentially a really good kid -- a man -- beneath everything. Sometimes his media image has been portrayed in a very poor, poor way, some of that, again, from some of the stuff that he's been through. But underneath it all, he has been a tremendous friend to me.
"And there's a real good side to Tiger Woods that nobody ever fortunately gets a chance to see. That's why."
Information from The Associated Press was used in this report.
Cut 10 Strokes Off Your Score
Click Here!
Golf Like a Pro
Click Here!
Tuesday, August 2, 2011
Debt Ceiling Bill
Half Full or Half Empty?
By Fisher Investments Editorial Staff, 08/03/2011
Number 103
The House of Representatives and Senate have both now passed the debt limit increase bill. This may have surprised some, but not us—as we expected, the 103rd increase in the debt ceiling’s 94-year history passed both houses of Congress and has been signed by President Obama, lifting the debt ceiling. While many in the press have suggested this debate was unusually heated, the fact is it played out nearly exactly as past debt limit debates. Amity Shlaes and John Thorndike included an illuminating anecdote from the annals of debt ceiling debate history in their piece Sunday. And in our recent piece, “Full Faith and Credit,” we gave three timelines as examples of how these debates have unfolded in the more recent past. We could have given many, many more.
There will be more debt ceiling debates in the future. Just keep this as a reminder to take media coverage that doesn’t take politicians’ statements about default, doom-and-gloom and deadlines with many grains of salt.
But It’s a Bad Deal
Now that there’s a deal, some opine it isn’t a good thing—we’re either not going to appease ratings agencies (why we’d want to or how we’d actually appease these confused analysts is beyond us) or it’s going to hurt the economy somehow. Beyond the raters (whom we address here), the reality is the new debt ceiling deal has almost no economic impact. A higher ceiling? Meaningless. Not enough cuts? We might agree, but that’s not crisis-inducing, especially considering how cheap our interest rates currently are. Too much in cuts? Well, some in the more-government-spending crowd have argued for two years that 2009’s $787 billion stimulus was too small. If that’s too small to have an impact, we wonder exactly how “cuts” (which are really more like a slower rate of spending) averaging less than $150 billion a year (and are almost non-existent up front) are big enough to have a dire impact. That doesn’t seem like a recipe for a 1937 redux to us (especially considering 1937 wasn’t all about spending cuts).
“Zombie” Consumers Save More Money
June US consumer spending fell -0.2%, missing estimates for slight growth. Personal incomes, meanwhile, rose—pushing the strangely calculated savings rate higher.
Some have recently suggested the US consumer is overleveraged and therefore is unable to drive recovery. And we’re sure some will find confirmation in Tuesday’s spending data. But let’s check the theory. First, consumer spending (like all economic data) frequently fluctuates. Consumer spending has fallen multiple times, like points in 2003 and 2005—and that didn’t presage recession. Expectations widely continue to be for ongoing growth this year—and we agree. Seeing economic data that miss expectations—even decline for a month—is just normal.
As for arguments US consumers are overleveraged, that usually hinges on comparisons of total debt outstanding to income. Which can be a faulty comparison. For example, you don’t have to pay off your mortgage in a given month or year. Rather, your income must be sufficient to service it. So the comparison should be income to debt-servicing costs—and that’s shown in Exhibit 1:
Exhibit 1: US Household Debt Service Payments as a Percent of Disposable Personal Income
Source: Federal Reserve Bank of St. Louis.
Looks like debt service to income has been falling recently. It may make a good headline, but it doesn’t look like consumers are increasingly overleveraged to us.
Moreover, if you fear consumers are overleveraged, then a report like today’s should be encouraging. Disposable incomes rose and consumers spent less—which makes them more liquid.
It’s Not All Government
Over in the UK, the punditry commonly bemoans the nation’s slow rate of growth—much as they do in the US. But beyond that point, there are some stark differences. Britain passed austerity measures in 2010 and has attempted to follow through—with a higher VAT tax, spending cuts, lower corporate tax rates and more. In the US, we’ve largely pursued a program of greater federal government spending. Yet growth rates are eerily similar—which should tell you there’s much more to what determines an economic growth rate than government policy. Just consider that point when you hear the competing arguments for either greater government spending or more austerity, both ostensibly to foster growth.
It’s Not All the Fed, Either
Amid the debt ceiling debate, an odd thing happened: Treasury rates fell. We’ve already discussed the fact this should have called into question the theory that the debt ceiling was such a problem, but beyond that there’s something else: QE2 ended a month ago and rates are down. So much for the theory the Fed was solely keeping rates low.
The Tug of War, Illustrated
It seems to us today’s debate over matters both economic and political (like the debt ceiling) are pure examples of the bifurcated sentiment we’ve written about this year. And they don’t stop with the discussions above—just consider China, who some fear will overtake the US as the world’s largest economy, while others simultaneously fear China tightening too much and tanking its economy. Or blaming corporations for boosting profitability while not hiring much. There’s fodder in each for bulls and bears alike.
Ultimately, a balanced, apolitical point of view is needed to see markets and the economy clearly. Otherwise, you’re likely to interpret any piece of data in line with your bias—and be highly disappointed by the outcome of every political debate. (After all, politicians often promise a lot and deliver very little.) A clear view shows solid global economic growth and US economic growth that isn’t torrid presently but has recouped nearly all of the output lost in the recession. Corporations are flush with cash generated by rising revenues, productivity and earnings. Stocks have roughly doubled since the beginning of the bull market. And there’s likely far more fuel in the tank for continued growth beyond what we see as a year of rotation within a broader bull market.
Feeling frustrated by political bickering in Washington is perfectly understandable (and believe us, we share that angst). Good thing we don’t have to rely on them economically. When you look up from the debt debate (in its many forms) and the primary worries of the day, the innovation and dynamism of capitalism become easier to see. Don’t believe us? Buried beneath all of Tuesday’s headlines was this story of industrial rebirth in what many still see as America’s “rust belt.” And that dynamism is the antidote to a frustrating Washington that’s utterly disconnected from Wall Street, Main Street and every street in between.
*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.
By Fisher Investments Editorial Staff, 08/03/2011
Number 103
The House of Representatives and Senate have both now passed the debt limit increase bill. This may have surprised some, but not us—as we expected, the 103rd increase in the debt ceiling’s 94-year history passed both houses of Congress and has been signed by President Obama, lifting the debt ceiling. While many in the press have suggested this debate was unusually heated, the fact is it played out nearly exactly as past debt limit debates. Amity Shlaes and John Thorndike included an illuminating anecdote from the annals of debt ceiling debate history in their piece Sunday. And in our recent piece, “Full Faith and Credit,” we gave three timelines as examples of how these debates have unfolded in the more recent past. We could have given many, many more.
There will be more debt ceiling debates in the future. Just keep this as a reminder to take media coverage that doesn’t take politicians’ statements about default, doom-and-gloom and deadlines with many grains of salt.
But It’s a Bad Deal
Now that there’s a deal, some opine it isn’t a good thing—we’re either not going to appease ratings agencies (why we’d want to or how we’d actually appease these confused analysts is beyond us) or it’s going to hurt the economy somehow. Beyond the raters (whom we address here), the reality is the new debt ceiling deal has almost no economic impact. A higher ceiling? Meaningless. Not enough cuts? We might agree, but that’s not crisis-inducing, especially considering how cheap our interest rates currently are. Too much in cuts? Well, some in the more-government-spending crowd have argued for two years that 2009’s $787 billion stimulus was too small. If that’s too small to have an impact, we wonder exactly how “cuts” (which are really more like a slower rate of spending) averaging less than $150 billion a year (and are almost non-existent up front) are big enough to have a dire impact. That doesn’t seem like a recipe for a 1937 redux to us (especially considering 1937 wasn’t all about spending cuts).
“Zombie” Consumers Save More Money
June US consumer spending fell -0.2%, missing estimates for slight growth. Personal incomes, meanwhile, rose—pushing the strangely calculated savings rate higher.
Some have recently suggested the US consumer is overleveraged and therefore is unable to drive recovery. And we’re sure some will find confirmation in Tuesday’s spending data. But let’s check the theory. First, consumer spending (like all economic data) frequently fluctuates. Consumer spending has fallen multiple times, like points in 2003 and 2005—and that didn’t presage recession. Expectations widely continue to be for ongoing growth this year—and we agree. Seeing economic data that miss expectations—even decline for a month—is just normal.
As for arguments US consumers are overleveraged, that usually hinges on comparisons of total debt outstanding to income. Which can be a faulty comparison. For example, you don’t have to pay off your mortgage in a given month or year. Rather, your income must be sufficient to service it. So the comparison should be income to debt-servicing costs—and that’s shown in Exhibit 1:
Exhibit 1: US Household Debt Service Payments as a Percent of Disposable Personal Income
Source: Federal Reserve Bank of St. Louis.
Looks like debt service to income has been falling recently. It may make a good headline, but it doesn’t look like consumers are increasingly overleveraged to us.
Moreover, if you fear consumers are overleveraged, then a report like today’s should be encouraging. Disposable incomes rose and consumers spent less—which makes them more liquid.
It’s Not All Government
Over in the UK, the punditry commonly bemoans the nation’s slow rate of growth—much as they do in the US. But beyond that point, there are some stark differences. Britain passed austerity measures in 2010 and has attempted to follow through—with a higher VAT tax, spending cuts, lower corporate tax rates and more. In the US, we’ve largely pursued a program of greater federal government spending. Yet growth rates are eerily similar—which should tell you there’s much more to what determines an economic growth rate than government policy. Just consider that point when you hear the competing arguments for either greater government spending or more austerity, both ostensibly to foster growth.
It’s Not All the Fed, Either
Amid the debt ceiling debate, an odd thing happened: Treasury rates fell. We’ve already discussed the fact this should have called into question the theory that the debt ceiling was such a problem, but beyond that there’s something else: QE2 ended a month ago and rates are down. So much for the theory the Fed was solely keeping rates low.
The Tug of War, Illustrated
It seems to us today’s debate over matters both economic and political (like the debt ceiling) are pure examples of the bifurcated sentiment we’ve written about this year. And they don’t stop with the discussions above—just consider China, who some fear will overtake the US as the world’s largest economy, while others simultaneously fear China tightening too much and tanking its economy. Or blaming corporations for boosting profitability while not hiring much. There’s fodder in each for bulls and bears alike.
Ultimately, a balanced, apolitical point of view is needed to see markets and the economy clearly. Otherwise, you’re likely to interpret any piece of data in line with your bias—and be highly disappointed by the outcome of every political debate. (After all, politicians often promise a lot and deliver very little.) A clear view shows solid global economic growth and US economic growth that isn’t torrid presently but has recouped nearly all of the output lost in the recession. Corporations are flush with cash generated by rising revenues, productivity and earnings. Stocks have roughly doubled since the beginning of the bull market. And there’s likely far more fuel in the tank for continued growth beyond what we see as a year of rotation within a broader bull market.
Feeling frustrated by political bickering in Washington is perfectly understandable (and believe us, we share that angst). Good thing we don’t have to rely on them economically. When you look up from the debt debate (in its many forms) and the primary worries of the day, the innovation and dynamism of capitalism become easier to see. Don’t believe us? Buried beneath all of Tuesday’s headlines was this story of industrial rebirth in what many still see as America’s “rust belt.” And that dynamism is the antidote to a frustrating Washington that’s utterly disconnected from Wall Street, Main Street and every street in between.
*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.
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