Wall Street Weekly | 10/23/2009 12:30 pm

Brittle Obama Thrashes Wall Street: All Form, No Substance, by Liz Peek

What do we need right now? Soothing and encouraging leadership …

Image: Pete Souza/WhiteHouse.gov

Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 10/19)

Editor’s Note: Liz Peek is a financial columnist.

Green shoots – economic or otherwise – need tender loving care to become young saplings. For the fragile sprouts that appeared last spring to bloom into a full-blown recovery, we need capital, demand and encouragement. While we have made some progress on funding and consumption, we are woefully lacking positive leadership. Instead, we have an administration that sows discord on every front, prompting Lamar Alexander – that most mild-mannered of senators – to liken President Obama to Richard Nixon, and not in a good way.

The Paulson-Geithner-Bernanke tag team did an admirable job fending off the collapse of the capital markets that loomed a year ago. (Remember when Treasury yields turned negative?) Sound companies are able to raise money and the steep yield curve promises a slow but steady recovery of banking profitability. The stock market has staged a convincing rally off the March lows with corporate profits beating the most pessimistic forecasts forged during last spring’s meltdown. Businesses, faced with an unprecedented slide in demand, slashed inventories and headcounts, effectively protecting their bottom line.

This is where we stand, and it is shaky ground. An enduring upturn in consumer confidence (which surprisingly slipped in October) and spending remains elusive. While business confidence is on the rise in Germany, France, China and elsewhere, expectations in the United States are wavering. Private equity managers tell me that only 30% or so of their companies are seeing any top-line growth, which is consistent with still-depressed consumer spending. Most are comfortable that the economy will grow at around 3% in the fourth quarter, as businesses stop running down inventories. Next year, though, growth may again falter if Americans can’t find jobs.

Unemployment is a threat not only to renewed spending, but to our country’s stability. Americans are angry – angry at Wall Street, angry at China, angry at Congress and anyone else thought responsible for the millions of jobs and homes lost. The most recent tally puts some 26 million people looking for full-time work, unemployment among teens is 26%, and among African American teens it’s 41%. How long before all that anger erupts?

We need soothing and encouraging leadership. Instead, we have an administration that has proven itself thin-skinned and vindictive, reminding many (including Mr. Alexander) of the paranoia of Richard Nixon. The attacks on insurers, on the Chamber of Commerce, on Fox News, on drug companies, on greedy bankers, on the poor schlub at the CBO whose estimates set back health-care legislation – on anyone and everyone who opposes Obama’s policies – are shocking and unsettling. Where is Obama the campaigner, who promised to bring the country together?

The administration has decided that it is politically expedient to fan the populist rage against Wall Street. To score points with Main Street, they have proposed to slash bankers’ pay, rather than undertake more meaningful but less splashy measures. Pay Czar Ken Feinberg’s draconian cuts in compensation for workers at the seven largest TARP recipients make for good headlines, but are of questionable value. Does anyone really think that preventing Bank of America from paying its top people competitively will strengthen the firm’s prospects? Instead of weathering the outcry that would have greeted paying Andrew Hall an agreed-upon bonus of $100 million, the administration pressed Citicorp to sell the extremely profitable trading operation that Hall worked for. Does lopping off a stellar unit benefit taxpayers, who now own 34% of Citigroup? Feinberg knows better; word on the Street is that Rahm Emanuel is directing this play, and it’s all about politics. Unfortunately, taxpayers will be the losers.

384 Reader Comments (so far…) Sign In or Register to comment

What most of Wall Street needs is to be in the same place Bernie Madoff is. All they’re doing is building yet another house of cards and this one is not only lacking a foundation, it’s sitting on an active fault line.

There is no way in hell the market can legitimately be at 10,000 with millions of people unemployed, millions more underemployed, most of them without health care benefits and no growth in the job market in this country.

It doesn’t take an economist to figure out that those people aren’t buying products or services.

The market is no longer a monitor of the economy of this country. It’s nothing more than a bookie’s tote board show how much the rich are betting and where they put the odds of their own performance.

By Sherrie Crews on 10/23/2009 12:37 pm

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Sherrie: …the rich are betting and where they put the odds of their own performance.

The reality is there are many, many small investors… people with retirement funds in the market. Ten percent unemployment means 90% are living their lives as usual. Right now, on term Certificates of Deposit, banks are paying something like 1.75%. Regular (as opposed to rich) people have to use the market to avoid running in place. They gamble, they lose… or win.

By Marjorie C. on 10/23/2009 12:51 pm

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It doesn’t take an economist to figure out that those people aren’t buying products or services.

Well stated Miss Sherrie…Thank you.

Amy, PennDragon Studios

simpletownUSA.com

By Amy Stewart Hale on 10/24/2009 7:38 am

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As history has proven, the "market" is usually anticipating the future and is usually thinking 6 months out. So the realities of today have already been factored into the market 6 months ago. It’s a good time to continue to purchase stocks if you have the money. If not the money, feel comforted that investors are positive about the future.

By Suzanne Frazier on 10/25/2009 11:53 am

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IF all you choose to focus on, is the money lost, then expand that look under the microscope at those who created the debacle, rather than the one who is assigned the task of cleaning up the mess.

China sells more cars that America—-and America was the ‘car-capital’ for many years. WHO do you think ‘allowed’ that to happen? Really, now….is it Obama’s ‘fault’? Who moved all manufacturing out of this country? Who manipulated the money creating 50+ loans using $1?!

Do we ‘reward’ failure? Just because it is Wall Street? and they are ‘powerful people who know things?’ even if they destroy the economies of the world? Sorkins’ Book points out that there were only 10-20 people in control of the world economy when everything collapsed…the Wall Street Banks…..10-20 people in the whole friggin world, creted the TARP plan….and you expect ONE person to undo the mess in 9 months?

Taxpayers have already lost everything!!!!! There comes a time when there is nothing left to lose—-the only solution is to ‘do something different’… and the right side of the aisle that wants to keep things the way they ‘always have been’ is way more ‘political motivated’ than what you are accusing Obama of. Obama is pulling no punches in trying to do what is wanted by ‘we the people’……as opposed to howmuch money he can put in his private bank account offshore.

By Patty E on 10/23/2009 12:47 pm

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Patty what is Obama doing to bring the manufactoring jobs back to the US? I havent heard anything and I can’t find it?

Patty what about the jobs lost since the pork package? What about the jobs that this pork package was supposed to create and havent?

By C Hardy on 10/23/2009 2:47 pm

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http://www.wickedlocal.com/cambridge/news/x2078850231/President-Obamas-speech-at-MIT

The above is Obama’s speech today, at MIT…..after you read it, pomder on this—-so far TWO manufacturing plants have been pened in my part of the world, foused on alternative energy production—-solar.

Secondly—for the past 2-3 years, I have been investing in alternative energy stocks…a lot of what I read is not covered by mainstream news…in fact there is a LOT that mainstream news is negligent in covering, which is why I research any and all questions that pop into my head, rather than wait for someone to ‘tell me’ or ‘show me’….

"All" of the money in what you call ‘the pork money’, has not been delivered yet…for various reasons: there was a timeline, and those dates have not yet occured; Several of the governors, ie Texas for example and Louisiana, DECLINED the money when it was politically advantageous to the Republicans, in making a point of stomping their feet in tantrum proportions—-but I have to share with you, that Jindal in LA., has since taken some money—yet it is not being reported in the news, is it? Especially interesting, is that Fox News, who actually got the court permission to ‘lie’ under the protection of free speech a few months back…has no interest in reporting something if it is not advantageous to their stance, politically.

Even though I am in MI….we have the highest unemployment rate in the country, MY side of the State has been reported as doing better than the rest of the State, and better than some other States who are statically better off—-why? Stim money—it has created employment here….

There are all sorts of colors in a rainbow..and then there are two colors, which are not—->Black, and White. But when you put ALL the colors in one container, you get Black, or you get White. Those other colors are still there—you just cannot see them any more.

By Patty E on 10/23/2009 3:26 pm

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Exceptional and very true points Miss Patty, Thank you.

Amy, PennDragon Studios

simpletownUSA.com

By Amy Stewart Hale on 10/24/2009 7:42 am

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You missed the point Margorie. No big surprise there though.

By Sherrie Crews on 10/23/2009 1:05 pm

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Sherrie: You missed the point Margorie.

So what’s the point? Do you really believe only the evil rich have funds in the stock market?

By Marjorie C. on 10/23/2009 1:12 pm

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I know a few people who are not in the "evil rich" category that are investing in the market. It’s a good time while everyone things everything is bad. When the good times start to appear, it will be too late to make any money in the market.

My recommendation is to stop watching TV and start investing. You could put the money you save paying for cable TV into stocks each month. And by the end of the year, you might have some good savings going.

By Suzanne Frazier on 10/25/2009 12:03 pm

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Suzanne, Could you let us know what your background and financial expertise is? Thanks.

By Leigh Hart on 10/26/2009 12:10 am

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No credentials. I’ve just observed the market since I was a teenager…..so that’s about 46 years. My father paid me to chart his stocks according to price/volume when I was a teenager. Ever since then I’ve invested in the market and have made some good money at it. OF course, the first rule is that you never invest any money in the market that you might need to have access to in a hurry. It’s a gamble. Sometimes it works and sometimes it doesn’t.

By Suzanne Frazier on 10/26/2009 2:02 pm

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Right now Obama is on a money-raising tour for his Democratic friends. He’s been in N.J., MA, CT this past week and who knows where he’ll be next week. He leaves the government for others to run… he is simply the spokesman, and goodwill ambassador for his party. All others be damned. This administration is 100% politics. Every decision is made with re-election in mind.

Clipping the salaries on overpaid CEO’s sounds good, but that money doesn’t find its way back into the taxpayer’s pockets. As Liz mentioned, nothing is gained by it… it’s just a gesture for show.

By Marjorie C. on 10/23/2009 1:07 pm

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Marjorie C, The American people have every right NOT to trust President Obama! Obama Administration Admits: Government Takeover of Health Care Would Increase Costs, Hike Taxes, Reduce Care Posted by Kevin Boland on October 22nd, 2009

Yesterday the Obama Administration dropped a bombshell - admitting in a memo to Ways and Means Committee Ranking Member Dave Camp (R-MI) that their government takeover of health care would increase the cost of health care for millions of Americans.

The memo, from the Obama Administration’s Chief Actuary for the Centers for Medicare and Medicaid Services (CMS), Richard Foster, estimated, “Total national health expenditures under [H.R. 3200] would increase by an estimated 2.7 percent in calendar year 2019.” Over the next 10 years, CMS predicts overall national health expenditures will jump by 2.1 percent, or $750.3 billion.

That’s not all the memo says. The CMS Actuary goes on to describe the extent of the Democrats’ government takeover of health care - one riddled with tax increases, sharp and painful cuts to seniors’ Medicare benefits, cost shifting that puts a massive unfunded mandate on the states, and budget gimmicks that attempt to hide the massive costs the bill be paid for by our children and grandchildren. Some highlights, compiled by the Ways and Means Committee Republican staff:

Big tax hikes: “$59 billion in new taxes will be levied on individuals who don’t have health insurance.” [Page 5]
Government “Option” an offer you can’t refuse: 40 percent of Americans enrolling the Democrats’ new Health Insurance Exchange would be in the government-run plan. [Page 7]
Rationing of Care: “The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.” [Page 14]
Think again about keeping your plan if you like it: “We estimate that such actions would collectively reduce the number of people with employer-sponsored health coverage by about 12 million.” [Page 7]
Cutting off funding for Medicare Advantage: “Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).” [Page 8]

more here….it’s an interesting read…

http://gopleader.gov/blog/

By deber B on 10/23/2009 2:35 pm