Economic Recovery

Forget the Doom-and-Gloom, Now Is a Time to Be Bullish

A little girl named Carol Anne became famous for saying "They're h-eee-rrr-e" in the 1982 movie "Poltergeist."
She was talking about the "TV people."
Well, we have our equivalent digital denizens, and they're also returning in force lately. Except ours are largely from the investment shadows, awaiting the next opportunity to brandish heavy fear tactics to convince you the energy market is about to collapse... again. (These guys have correctly predicted eight of the last three recessions.)
At issue this time is the latest financial obstacle the market must overcome: the sequestration scheduled to hit a week from today. The draconian cuts will occur automatically, although it will also take at least a month for them to have any impact. Of course, the markets are not going to wait that long. For the past two days, the first wave of nail biting started.
But I urge you to ignore those talking heads - and as Congress gets back to "business."
Here's why.

Disastrous U.S. Jobs Report Pummels the Market

Let's just say it: The May U.S. jobs report released today (Friday) was abysmal.

American businesses in May added the smallest number of workers in a year, only 69,000 - less than half of the median analysts' estimate of 150,000.

The unemployment rate unexpectedly ticked up from 8.1% to 8.2% as job seekers returned to the workforce, the Labor Department report revealed.

In addition, revisions from previous months showed the economy gained fewer jobs in March and April than originally believed. March's employment numbers were reduced by 11,000 jobs to total 143,000, while April's plunged by 38,000 to total a lousy 77,000.

The disappointing numbers cast doubt on the strength of the U.S. economic recovery, and also overshadow any evidence that the labor market is improving.

The news sent the Dow Jones tumbling some 160 points on the open and more than 220 points by noon, with the other indexes following. While many traders were anxious to see May end, June hasn't started off in the right direction.

"Yuck, this is really not good," Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust, bluntly told Bloomberg News. "We're at a very precarious point right now as far as investors' psyche is concerned."

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The Stimulus Secret Obama Doesn't Want You to Know

As he campaigns for re-election, U.S. President Barack Obama wants voters to believe his 2009 stimulus package played a key role in the economic recovery.

But while the American Reinvestment and Recovery Act (ARRA) did indeed help many people by spreading more than $787 billion around the country, it fell short of its goal of stimulating an economic recovery.

That's because about two-thirds of the stimulus package either went to debt reduction or into people's savings accounts. Neither boosts the economy.

That's the perspective - with some exaggeration for effect - you'll hear from Republicans during the presidential campaign.

"At the signing of the 'stimulus' three years ago, President Obama said he wanted to be held accountable for the results of his spending binge," House Speaker John Boehner said last week. "Today, there's no denying the fact that his 'stimulus' policies not only failed, they made things worse."

President Obama will need to shift the focus to ARRA's benefits. It did put a lot of money into the hands of millions of people through the tax rebates and extra entitlement spending on Medicare and unemployment benefits. And he can fall back on his mantra that the stimulus package kept the crisis from getting worse.

"Most economists - almost every economist - will tell you that had we not put [ARRA] in place we could've tipped into a great depression," President Obama recently told ABC News.

And yet that's not quite the same thing as jumpstarting the economy.

"Ultimately the stimulus did not live up to the promise of what the American public expected it to do, and that's bring about a strong, sustainable recovery," Michael Grabell, author of a new book on ARRA, "Money Well Spent?" told The Daily Ticker.

A Massive Stimulus Package

One would think the sheer size of the stimulus package would have done more than just keep things from getting worse.

"In raw dollars, inflation adjusted, the stimulus comes out as the biggest - bigger than the moon race, the [Works Progress Administration], the Louisiana Purchase, the Manhattan Project," Grabell told The Fiscal Times.


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Our Economic Recovery has been Hijacked

Money Morning Chief Investment Strategist Keith Fitz-Gerald joined CNBC Asia's "Squawk Box" program to discuss U.S. President Barack Obama's new jobs proposal. President Obama is in a tough spot, trying to get approval for new tax increases to pay for a $447 billion jobs package — and Fitz-Gerald said it's unlikely he'll be able to […]

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U.S. Government Spending is the Biggest Threat to Economic Recovery

A handful of factors threaten the strength of the U.S. economic recovery this year, like U.S. government spending and high unemployment, leading many to wonder just how well the country's economy will fare in 2011.

The U.S. Commerce Department reported last month that U.S. gross domestic product (GDP) growth slowed in 2011's first quarter to 1.8%, down from 3.1% at the end of 2010. High gasoline prices and rough winter weather combined to drag down GDP.

The news came a day after U.S. Federal Reserve Chairman Ben Bernanke held the first-ever Fed press conference and said he expects the U.S. economy to grow at a rate of 3.1% to 3.3% this year (down from the 3.4% to 3.9% previously projected).

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Hidden Inflation: Rising Prices Are Hitting Consumers Harder Than the Fed Will Admit

Any U.S. consumer that goes to the grocery store or the gas station on a regular basis knows that prices are rising.

Unfortunately, those rising prices are set to soar even higher - and their effects on consumers will continue to be ignored by the U.S. Federal Reserve.

The United States has had a break from inflation the past couple years, while it exported higher prices to emerging market economies. The Fed's easy money policies created excess money that flowed overseas, and now those countries are seeing prices rise to threatening levels.

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Rising Prices Mean Cautious Year Ahead for U.S. Household Spending

Following the crippling economic turmoil of the past few years, many U.S. households worked hard to tighten budgets, slash excessive spending, and live within their means.

But there are signs that consumers are starting to open their wallets again, and U.S. consumer spending - which makes up 70% of the economy - could help sustain the cautious economic recovery.

U.S. consumer confidence in February hit its highest level in three years, bolstered by economic optimism and salary increases, spurring hope that 2011 could be a year of increased household spending.

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Is Your Household Spending More This Year?

After crippling economic turmoil over the past few years, many U.S. households worked hard to tighten budgets, slash excessive spending, and live within their means.

But there are signs that consumers are starting to open their wallets again, and U.S. consumer spending - which makes up 70% of the economy - could help sustain the cautious economic recovery.

U.S. consumer confidence in February hit its highest level in three years, bolstered by economic optimism and salary increases, spurring hope that 2011 could be a year of increased household spending.

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An Open Letter to Washington: How to Fix the Deficit and End the Bush-Tax-Cuts Debate

Dear Mr. President and members of Congress:

In the months that follow Tuesday's midterm elections, and into the New Year, you all face three very significant challenges. You must:

  • Find a solution to the Bush-tax-cuts controversy.
  • Rein in the huge-and-growing U.S. budget deficit.
  • And better police Wall Street, which got us into this mess in the first place.
You can solve all three of these problems with a single, simple proposition. And you can do so without having to ask U.S. taxpayers to dig into their wallets or savings.

Let me explain.



To see Hutchinson's solution, and to see how to join our campaign, please read on...

Singapore Moves to Restructure Asia's Stock Exchange Model With Australia Merger

Singapore Exchange Ltd. (SGX) announced yesterday (Monday) it agreed to buy Australia's main stock exchange, ASX Ltd., for $8.3 billion. The deal came about because both countries seek strength against growing Asian market competition, and Singapore strives to be a more sophisticated global financial center.

In a cash and stock deal, Singapore's stock market operator is offering A$48 (U.S. $47.11) for each ASX share, consisting of A$22 in cash and 3.743 SGX shares per ASX share. The offer is at a 37% premium to what ASX shares traded on Friday.

"The combination of ASX and SGX, offering innovative new products and services to the market, will allow customers to maximize future opportunities, where Asia Pacific takes center stage globally as the source for capital, wealth creation and trading opportunities," SGX Chief Executive Officer Magnus Bocker said in a joint statement.

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Wall Street Bonuses Will Cost Us All in the Long Run

Wall Street firms may not be reaping the record-breaking revenues of 2004-2007, but they're paying themselves the lofty bonuses of that lavish era - and they're doing it at our expense and with the government's blessing.

Wall Street's pay packages, including bonuses, are set to total 4% more in 2010 than in the already record year of 2009, The Wall Street Journal recently reported.

I yield to nobody in respect for the investment banking business - having served as an investment banker for 27 years - but these salaries and bonuses derive from U.S. Federal Reserve subsidies, and are mostly being taken out of the hide of the rest of us. 

Wall Street's record bonuses come out of bank earnings that have been pretty robust, though not necessarily record-breaking. This is mainly the result of two Fed subsidies:



To find out how you're paying for Wall Street excess and how the economy stands to lose read on...

Is the U.S. Federal Reserve Setting the Stage for Hyperinflation?

The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.

After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."

The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.

But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.

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The 10 Most Pressing Questions About the U.S. Economy – And Their Answers

Will the economy lapse into a double-dip recession? What can be done about the soaring U.S. budget deficit? What's next for the stock market?

These are just a few of the tough questions facing investors. And there may be no one better to offer answers, insight, and advice than Money Morning Contributing Editor Shah Gilani.

A retired hedge-fund manger, Gilani has routinely been there to shepherd investors through blinding market uncertainty. He's used his contacts on Wall Street to give Money Morning readers the inside scoop on the collapse of American International Group Inc. (NYSE: AIG), the May 6 "Flash Crash," and most recently the "Mortgagegate" scandal that currently threatens to undermine the fragile U.S. recovery.

Indeed, Gilani has been a tireless advocate for investors and a prescient market maven. That's why Money Morning's editors recently sat down with Gilani to talk about today's most pressing issues and discover what he expects for financial markets in the months and years ahead.

In the partial transcript of that interview below, Gilani discusses why it's a good time to invest in stocks, what steps should be taken to fix the U.S. economy, and whether or not gold prices have peaked.

In short, the U.S. government has failed the public as a matter of course, but there is still a way out of our current economic malaise and ample opportunity for investors to profit.

To find out the answers to the ten most pressing questions facing the economy, read on...

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The Jobs Market May Look Bleak, But Your Investments Don't Have To

There's no getting around the fact that the U.S. jobs market is bleak. Ultimately, though, it's a stark reminder that as investors, we should be looking abroad for maximum profits.

Indeed, investors must turn to countries where the number of people working is rising along with standards of living and consumption.
But that's not all.

There are a few companies that have been performing exceptionally well and are poised to bring investors some joy this holiday season. Before we get to those, though, let's take a quick look at the job market.

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