Friday, July 27, 2012

Stuck in the Mud (July 27, 2012)

You may recall a few weeks ago I asked my anonymous friend from Connecticut – clearly a Republican – for a view on the Connecticut Senate race.  He seems to have taken the opportunity to appear on to the max!  Here is his rant on the Presidential campaign… plus a few thoughts on Connecticut!  He calls it:

Summer Heat Wave Breaks, Clarity Emerges:  “Stuck in the Mud”

For regular readers of this number-crazed blog, you know the author clearly is a "micro-view" guy - obsessed with various zeitgeist measures.  He avidly tracks and averages these measures, contending this will lead to an accurate prediction of the upcoming Presidential race.

This post is a contrary view from the macro side.  The "micro" stuff doesn't matter:  forget charisma factors,  small-base polls, swing states, disputes over who ran Bain, how Mitt got $100 million in his IRA (my theory:  in LIBOR-based derivatives of Spanish bonds held off-shore in a Barclays account, with a lot of leverage on top + a share of Bain Capital management fees). 

But Tom, I do like to look at the pretty charts!  Lots of action!  Love the analysis!  You're the best!

But go back to 1992 brush up on your James Carville - it's "the economy, stupid."  Moreover, the growth rate trend in the economy is what really matters.  And loyal readers (are you out there Chris Matthews and Sarah Boxer of CBS News?), this baby is slowing.  The hopey-changey thing is over, Obama's charisma will only matter to slices of the swing states, where his base is thinning and might stay home in November nursing their disappointment that he didn't go far enough on his quasi-Socialist agenda.

Now that the Summer Heat Wave 4 has broken in Connecticut, economic reality has emerged.  As the Chairman said this week we are “stuck in the mud.”  For avid readers of the Beige Book like me, who stupidly invested in TBT back in 2008 at 44+ (yes, that's the 2x short of the 30-year Treasury) believing there was no way we could see 5 years of 0% interest rates, the following truths are now coolly clear:

  • Obama's stimulus did nothing.  2/3 went to prop up states and indirectly, the labor unions. (Beneficiaries of the Citizens United decision, btw).   It's gone - there's nothing to replace the revenue.  Check out Ravitch's report - state budgets are in the crapper.  Problems and fights loom with the state employee unions across the country.
  • 10 Year rates hover at 1.5% - a 25% drop from the 2% rate back in January.  There's the final signal - we are becoming Japan - low rates + excessive government spending + looming over-regulation = NO GROWTH.  Oh, JPY 10-year is now at 0.8%.
  • More importantly, the low rate, no growth scenario has begun to trigger a giant reverse wealth transfer from the 50+  (how about those unfunded pension liabilities) to the government!  To fund what - a wasteful $550 million bus lane to run between Hartford & New Britain?
  • The Supreme Decision (yes, Roberts did the right thing -it's a tax, plain and simple) to allow Obamacare go forward dooms us all to escalating health-care costs - now 20% of the economy - to be funded by:  more government spending!
  • The macro view:  this election, like most Presidential re-elections, will depend on the economy.  The election is not about Romney, it's a referendum on Obama and his arrogant strategy that expanding the government's role in the economy is good for the people, and will generate growth.
The truth is emerging:  It's wrong.  It didn't work.  The economy is slowing.  We are “stuck in the mud." Continuing with Obama will send us on our way to a Japan-like lost decade. 

But the American people get it.  Economy slows, Obama loses.  Precious few months remain for him to put some good numbers on the board before the votes get decided in September.  The music will stop (but keep writing Tom!).  Charisma and surprises won't matter.  Nor, really does Romney! 

Oh, and since this was supposed to be the view from Connecticut:

ATTENTION REGISTERED CONNECTICUT REPUBLICANS - Vote Chris Shays in the AUGUST 14 PRIMARY.  We need a NE Republican to join Scott Brown in the Senate.  Linda (sorry) can't win.  BUT CHRIS CAN!! 

Oh, and one more thing:  Tom, keep wearing that shirt, I believe in Brett.  Let's go Yankees!

1 comment:

  1. Yes, unless we have a crisis of a different stripe, in November voters will pull those levers based on the economy. But honestly, you sound like a smart guy. Do you really think the Obama administration is responsible for this wreckage? Even Sandy Weill is calling for a return to some version of Glass Steagall. I’m in the camp that says the stimulus was too little; not to mention that this is a worldwide economic fiasco that can’t be turned around on a dime and that surely isn’t of Obama’s making. Yes, it’s the economy that will bring voters to the polls, but it should be so much more. What about immigration? What about women’s reproductive rights? Gay rights? God knows, gun control (which won’t get any traction in either party)? What about the next Supreme Court appointment? Global warming? Not to mention the crises erupting all over the globe? These things matter. A lot. I’m not too happy with what’s happened to my wallet since 2008, but I’m confident it will turn around (though unlike you, I didn’t invest in TBTs); no matter who’s calling the shots, the economy needs the balm of time. But the prospect of a Republican at the helm with a Republican congress makes my blood run cold on these other issues.


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