Obama is leading the Los Angeles Times poll by 15 points against McCain and still takes Mrs. Clinton as his running mate - not officially, but asking donors to bailout the $22 mil. campaign deficit of Clintons, it is a clear sign to me. I think its not a good idea to ask for such a donation. First of all, why should regular people bailout the Clintons, who have a net worth of at least $50 mil.? Secondly, she is a dangerous running mate, since she/them (Hillary & Bill) are involved with many lobbyists, which will dilute his campaign and his overall 'change' stance.
For Wall Street, it will be a tough president, since Obama will be rigid about their income generation and taxation. We can expect fierce support for McCain and his competence is the "war against terror" as the Los Angeles Times poll confirmed. This brings us into the dangerous situation that President Bush gets into higher gear to fight terror in the coming weeks and months to create a winning edge. Furthermore, Bush has to get the economy out of the headlines as best he can. He can achieve that by lower oil prices, which he will achieve, he has the tools at hand and the chart confirms we have a top soon (in the coming weeks).
Economically Obama scored competent in the Los Angeles Times poll, although I do not see why, except for the fact that people are sick and tired of the Republican/Bush administration. Well, I understand why that is. In any case, whoever becomes president, soon after the elections, we will be in a severe bear market, probably the worst in at least 50 years. The only difference will be that the taxation and the FED policy might change since the new president (likely Obama) will have to nominate 3 governors. The dollar will be turning trends with Obama and get stronger again.
Greenspan said today "the economy is on brink of recession". The USA is on brink of depression and in the midst of a severe recession. There is no point in denying it, it's part of an overall cycle and politicians should be jailed for lies, since it should be their duty to prepare people for the severe downturn. A credit crunch like this cannot just go away, since the banks are loaded with trash in their leveraged balance 'cheats' and the steep curve will be not sustainable with exploding inflation. As I noted in an earlier post, it's not far fetched to expect Bernanke to be fired in 2009.
He is not responsible for the mess, but he was chosen to provide the policy methods that he is implementing, which will worsen the situation. So far, part of the balances of the banks are contaminated but the cancer is spreading with a deteriorating economy and banks will not have sufficient capital to stay alive even after all the new capital they have right now. The estimations of Goldman and others are understating the situation. Especially the investment banks - a leverage of 10 is the highest, the best ones might be able to carry going forward. A leverage of 10 means you have a tolerance of error for 10% a leverage of 25 gives you 4%, which can wipe you out in negative cycles and rising volatility easily. The FED is trying to provide save leverage plays, since the rate cuts only served the banks, not main street, but they cannot keep it up. Almost 50% of treasuries are sold to non-US investors and they are loosing severe money with getting paid negative interest - plus a weak dollar. That's why US inflation is rising, since they raise prices in return. The US consumer is the big looser - he looses on every end - his money looses value, the goods he buys get more expensive, his savings loose value. That is the making of a big crash, since at a near point he will stop charging his credit card and stop consuming whatever he can afford. The unlucky ones have to quit paying mortgages, more people get fired and the death spiral keeps on turning.
Excerpt from Barrons roundtable:
Hickey: A witch's brew is hitting the economy, including the biggest housing-market collapse in U.S. history. Home prices are declining by 14%, year over year. Oil is $135 a barrel, up almost 40% since January. Food prices are soaring, unemployment is rising and wages are stagnant. Lending standards are tightening. Auto sales are plunging. States have a budget crisis. This combination of problems is unprecedented unless you go back to 1929.
This pathetic statistical definition of a recession is in anyway useless and unfaithful. It doesn't help anyone to lie to the people. That's like telling people on the Titanic that there is no iceberg. Only the ones who want to get out of positions and need to get some suckers take their positions or a desperate attempt to get re-elected. Actually, the next president of the USA will have the most unenviable job, since he has no chance to do any good within one term. He will have to deal with the toughest choices and almost no one will thank him for that. Is that the reason why Obama might become the first black president? Sometimes it seems too easy how he came from nowhere to being the candidate and, as the polls say, the next president.
This useless hype of the daily economic releases is my personal daily torture, everybody knows that the FED will not do anything before elections (except cut rates and that is, in the current scenario, not very likely). This new housing bill to reduce foreclosures is just a paper tiger. In the real world, its effect is relatively small to negligible.
The rumor of an attack on Iran yesterday was again one off those "testing the water" events but more serious things are going on in the background. I came along the following article by chance.
Excerpt from Reuters:
Aide: plot to kill Ahmadinejad thwarted at U.N. meet
TEHRAN (Reuters) - An adviser of Mahmoud Ahmadinejad said there was a plot to assassinate the Iranian president during a U.N. food crisis summit in Italy earlier this month, an Iranian daily reported on Tuesday.
It came a few days after Ahmadinejad, who often rails against the West, accused the United States and its allies of plotting to kidnap and kill him during a visit to neighboring Iraq in March.
It would be a surprise if they did not try, although its not the single person who drives the politics in Iran. However, an attack on Iran would light the fire under the whole Middle East region and only help the oil owners interest. In any case, Iran will retaliate and world markets will come to a full stop with all of the new security implications, which would be activated. That could start the depression globally and would come at a high price for the whole world. Who has the right to discriminate who may own nuclear weapons, since Pakistan, India and (I am sure) Israel own them. It's only a matter of time that second and third world countries own them as well. I do not support the idea at all, it is just common sense.
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