President Obama’s administration is trampling civil liberties and engaging in intimidation and harassment—plus they’re getting away with it. Read more...
It's starting to feel like every week there's a new scandal from the White House. Even old scandals are news again.
The question is, how they will move the markets and whether a teetering economy can take any more political fiascoes.
I still have tremendous misgivings about the underpinnings propping up the house of cards that Washington and all the other central banks have created. But personal opinions don't shape markets - profits and earnings do. And that story isn't showing up in the headlines.
In his State of the Union speech Tuesday night, U.S. President Barack Obama will risk the ire of Republicans by telling the nation the government needs to spend more money to restore economic prosperity.
President Obama will spend much of his fifth State of the Union address outlining several new initiatives aimed at bringing relief to middle-class Americans hard hit by the Great Recession, White House officials have told several major news organizations.
"Our single biggest remaining challenge is to get our economy in a place where the middle class is feeling less squeezed, where incomes sustain families," a senior administration official who had seen a draft of the speech told The Washington Post.
But while the U.S. economy will be the overriding theme of President Obama's State of the Union speech, many of the proposals will not coincidentally advance many of the president's other favorite issues, such as climate change and education.
According to those who have seen the speech, President Obama is expected to announce initiatives in education, infrastructure, clean energy and manufacturing. White House officials told The New York Times that the cost of these proposals would be offset by savings elsewhere in the budget - or new revenues.
The 18th National Party Congress is now underway in Beijing. Attendees are girding for a week of symbolic posturing and speeches, the culmination of which will be a new set of Chinese leaders and a new Chinese President for the next 10 years.
While this is a complicated process when things are running smoothly, this particular Congress is really critical. China is a mess. Recent economic challenges and corruption on a scale that has boggled even the most jaded of insiders are at the top of the "fix it" list.
Outgoing Chinese President Hu Jintao's replacement and China's presumptive new leader looks to be a man named Xi Jinping.
At 59 years old, he's a power player with close ties to the People's Liberation Army (PLA).
While he's not a military man per se, as the son of a revolutionary general he currently holds several significant offices that give him wide-ranging and very significant exposure to both the State and Communist Party.
What's significant about this is that there are three parallel strands in Chinese government structure: the Communist Party, State, and Military.
The Party and State are deeply intertwined, but the military is less so, except at the top levels of leadership. Consequently, China's new leader is intimately familiar with the Chinese military and also the likely new head of China's Central Military Commission.
I'm not so sure we've ever seen this exact combination before and I think it's going to challenge President Barack Obama in ways that he hasn't thought through yet.
Evidently, the markets are struggling, too.
As was widely expected leading up to the election, all of the major averages got slammed in early trading on news of President Obama's victory. Just over an hour into yesterday's session, the Dow dropped 262.51, the S&P 500 tumbled 27.58 and the tech- laden Nasdaq fell 59.55. Oil tanked 2.95% and $2.62 per barrel to $86.08 while 10-year bonds saw yields plummet 6.20% to 1.63%.
There is a bright side, though. Now that all the hoopla is over, investors can get down to business.
Here's what I'm expecting:
President Obama proposed that Congress pass a one-year extension of the Bush-era tax cuts set to expire at year's end for households earning $250,000 or less. He suggested letting the cuts expire for the wealthiest bunch.
"We don't need more top-down economics," the president said in an early afternoon press conference at the White House. "We tried that theory...we can't afford to go back to it. That's why I believe it's time for the cuts for the wealthiest Americans, including myself, to expire."
The Bush-era tax cuts, set up as a temporary measure, are due to expire on Dec. 31, meaning if they do the majority of Americans will see a steep rise in taxes overnight. A number of other tax increases are also set to take effect, giving the event the ominous Taxmageddon moniker.
The implications are huge. Families living paycheck to paycheck, or unemployment check to unemployment check, will be even more strapped. The result is an almost certain recession.
If you think gasoline prices are volatile now, stay tuned. President Obama's plan to clamp down on oil speculators is going to make things worse.
I'm sure you've seen the news by now.
The president wants to clamp down on so-called "oil price manipulation" and has proposed a $52 billion plan to increase f ederal supervision of oil markets.
What the p resident doesn't understand is that the oil markets already have this function built in.
Speaking from the Rose Garden last Tuesday, President Obama noted specifically that we can't afford to have "speculators artificially manipulating markets buy buying up oil, creating the perception of a shortage and driving prices higher - only to flip the oil for a quick profit."
Evidently, the president hasn't passed Econ 101.
If he had he would know that prices on everything from eggs to houses are by their very definition self regulating.
Speculation, as opposed to manipulation, is a vital part of the markets - they are not the same thing despite the fact that the p resident is interchanging the terms.
If prices are too high, people stop buying. If prices are too low, they stop selling. By authorizing $52 billion in oversight, he's chasing a ghost that he'll never catch.
The Real Problem with Oil PricesThe real problem is that the United States consumes 20% of the world's crude but only produces 2%.
It comes a time when oil demand is expected to rise more than 25% (to 105 million barrels a day) by 2015, according to a new report titled Oil and Gas: A Global Outlook by Global Industry Analysts, Inc.
If you want the biggest piece of the pie from the deli, you have to pay a premium.
There is no hocus pocus and there's no additional oversight necessary. Rather, we need to enforce the laws we already have on the books.
Sure the $10 million fines he's jawboning about (up from $1 million) sound great but they're really a non-starter. In fact, given that Exxon Mobil Corporation (NYSE: XOM) alone generated an average of $1.33 billion a day in 2011, they're little more than an acceptable cost of doing business. Nice try.
Take gasoline, for example.
Prices have jumped 78.2% since the p resident took office and that doesn't sit well with the party faithful who are convinced that evil oil price speculators are responsible.
They are distraught that traders put hundreds of billions of dollars into energy every month because that may cause prices to rise.
This is not complicated. Any time there are more buyers than sellers, prices go up. Any time there is more demand than supply, prices go up.
Contrast what's going on in the oil markets with what's happening in natural gas.
Prices for natural gas are at ten- year lows. Demand has risen but supply has risen faster. There are more suppliers than buyers. So natural gas prices drop.
Natural gas, by the way, is traded by many of the same traders who trade oil.
U.S. President Barack Obama's proposed solution to painfully high prices is to limit speculation in oil markets.
The new bids that the president proposed seek more money ($52 million) for market enforcement and monitoring activities, call for loftier penalties for market manipulation, and require oil traders to put up more of their own cash for transactions.
At a White House press conference Tuesday President Obama said, "None of these will bring gas prices down overnight. But they will prevent market manipulation, and help protect consumers."
The move is in stark contrast with Republicans, who have been lobbying for more domestic drilling to help alleviate the near record-high gas prices. Paying more at the pump takes a bite out of consumer spending and has the potential to stall the slow-going economic recovery.
The maneuver, however, may be focused more on political strategy than consumer interest.
It is extremely doubtful that House Republicans will pass any measure that aims to implement more limits on Wall Street while the GOP looks to reduce regulation of the financial sector.
House Speaker John Boehner, R-OH, called it a political ploy and disparaged President Obama for not using the means already at his disposal to deal with the oil situation.
"The president has all the tools available to him if he believed that the oil market is being manipulated," Boehner said. "Where's his Federal Trade Commission? Where is the SEC? He's got agencies there. So instead of just another political gimmick, why doesn't he put his administration to work to get to the bottom of it?"
Although the president never actually lied, he repeatedly left out facts that contradict his claims of success.
President Obama hadn't yet left the House chamber when the reality check started. And it didn't take long to find some pretty big the holes in the State of the Union address.
As with any game-changing direction - landing a man on the moon in a decade, bringing an end to the Cold War, curing cancer, or weaning our economy off of coal and crude oil - leaders such as President Obama provide the enticement.
But the market has to figure out how to get it done.