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It's the Economy, Stupid
Author: BobR    Date: 10/22/2008 12:29:35

John McCain says he wants to focus on the economy. All research shows that the electorate trusts Obama on the economy more than McCain. So if talking about the economy helps Obama, and that's what McCain wants to talk about, let's do it! Cue the organ music as we enter the Big Top of this 3 ring circus...

In the first ring, we have the stock market. Despite the bailout rescue package, there are still fears about a recession. The futures market is a good indication of where Wall St. thinks the market is headed, and it fell 250 points:
Wall Street headed for a sharply lower open Wednesday as investors again shifted their focus away from improving credit markets and fixated on corporate earnings that are raising worries about a deep and protracted recession. Ahead of the market's open, Dow Jones industrial average futures fell 250, or 2.76 percent, to 8,785.

On Tuesday, the Dow retreated 231 points after forecasts from DuPont Co., Sun Microsystems Inc. and Texas Instruments Inc. raised fears that companies' outlooks for the fourth quarter and beyond could signal a severe economic downturn.

The Standard & Poor's 500 index futures fell 32.80, or 3.42 percent, to 926.50, and the Nasdaq 100 index futures fell 25.50, or 1.97 percent, to 1,267.00

While reduced strains in world credit markets have eased some investors' nervousness about the economy, market anxiety remains high as hundreds of companies this week release third-quarter earnings and in some cases fourth-quarter forecasts that offer a glimpse of the rough conditions that may lay ahead.

Over here in the center ring, we have the world markets. While our military strength is ebbing, we still have the power to create a global recession. That's pretty impressive, right?
Stock markets around the world fell sharply again on Wednesday after concerns about economic recession and falling commodity prices were fueled by a fresh spate of gloomy corporate earnings.

Emerging markets were hardest hit by the global retreat and the fresh commodity pressure, with the U.S. dollar and government bonds the big gainers.

MSCI's main index of emerging equities fell some 4.5 percent to its lowest level since June 2005, sharply underperforming the 2.45 percent loss in MSCI's index of world stock markets.

Global miner BHP Billiton warned on Wednesday that Chinese demand was set to weaken, echoing concerns last week from rival and takeover target Rio Tinto.

China said on Monday its annual economic growth fell to 9 percent in the third quarter from 10.1 percent previously and that factory output in September was at a six-year low.

"There is an increase in risk aversion. The emerging market world appears to be starting to collapse; that means it'll be much more difficult for the global economy to recover," said Peter Mueller, rates strategist at Commerzbank in Frankfurt.

Commodity price losses mounted everywhere. U.S. crude oil futures fell under $70 per barrel and London copper futures were down almost 4 percent to their weakest since December 2005.

The "silver lining" in all this?

The commodity slide and emerging markets retreat all helped boost the U.S. dollar to two year highs, while gold prices fell to their lowest in over a month.

The dollar: as seemingly worthless as the paper it's printed on, and yet, it's headed back up. That's bad news for those that invested recently in gold though...

Over in the third ring we have - yes, you guessed it - yet another proposed economic stimulus package being debated by our fine elected leaders:
...Democrats have been pushing for a second stimulus package for months. Many of their proposals have featured direct cash assistance, while Republican plans have been focused more on providing tax incentives and tax breaks.

Among the proposals from Democrats: extend jobless benefits, increase food stamps and invest more money in infrastructure projects to create jobs in the near term.

Critics of the infrastructure spending idea say it takes too long to work as economic stimulus. But proponents say it can create jobs if the money is put toward projects that are ready to go but for the funding.

The American Association of State Highway and Transportation Officials estimates that $18.3 billion worth of such projects are pending.
[...]
Republicans would prefer that stimulus measures include more tax breaks than direct payments. Among them: a temporary reduction or elimination of the capital gains tax on stocks and lower income tax rates for companies that buy distressed assets.

House Republicans are also calling for purchasers of homes that are not primary residences to be entitled to the same capital gains exclusion as owners who sell their primary residences. Currently, a single homeowner can exclude $250,000 of capital gains on a sale, while couples can exclude $500,000.

So the Republicans want people to be able to dump all their stocks without having to pay taxes on the profits? How's THAT going to help the stock market? Besides - how many people struggling in this economy have stocks (or rental properties) to sell anyway? Oh yeah - the rich. Are you surprised?

As we exit the circus tent, it seems that the lurching extremes and the waves of fear have settled down, but the ripples are still flowing around the planet. The bubble has burst, and we'll have this economic malaise for a few years until the balloon is patched up, and we can start inflating it again.

With Democrats in charge, perhaps we can get some regulations back in there so that the balloon is kept under control... this time.

13 Days.

 

256 comments (Latest Comment: 10/23/2008 12:15:43 by Random)
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