Dow now up under Obama

[The Duke]

Temporary bull market driven by the return of stable expectations for the financial stocks.

You'll notice the second round of crashing came when Washington started talking about bank nationalization.  This scared ivnestors because 1) Nationalization was scary and 2) if things were so bad we might need to nationalize then that would be even scarier.  When Citi and Wells Fargo and BofA posted profits, everyone started to get real happy real fast and now that the stress test results are in and nationalization talk is over, we have some stability to our expectations.

But I think the rally will dissipate in July and August.  Why?

Because the stock market is trying to price in the coming recession.  And the stock market is significantly underestimating the pain of the coming recession which means it hasn;t fallen wuite enough.  Every projection has proven too optimistic.  For example, the White House projected that unemployment would not exceed 8% and that it would peak this fall.  But the unemployment rate is already at 8.5% and we don't even know how much worse it got in April.  Most economists projected Q1 GDP would shrink but 4.5% or so, but it shrunk by 6.1% instead.

I repeat: Almost every prediction made so far has proven staggeringly overly optimistic.  This recession is going to be worse than the stock market thinks which is why I don't expect the rally to continue.  When the Q2 data comes in, it will become obvious to Wall Street that this will be several painful years.

Speaking over overly optimistic proedictions, the stress tests "worst case" scenario has an unemployment rate of only 10%.  Really?  Geithner thinks 10% is a worst case scenario?  If we only hit 10% I'll turn cartwheels.  I expect it to top out at 12%-15%.

Cramer has announced the end of the bear market and says we are now in a bull market. I am still wary of that claim.

If Cramer says we're out of the bear market then your best investment is probably canned goods and ammunition.

[I spent the winter writing songs about getting better]

Cramer has announced the end of the bear market and says we are now in a bull market. I am still wary of that claim.

Bear and bull markets are a typical point of the market cycle. My point is simply that the evidence is against your fellow blue avatars with their "sky is falling" raving and claims that it's more likely the US will end up under a military dictatorship than the economy recovering before the end of Obama's term.

[Torie]

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Who made that claim, BRTD?

[I spent the winter writing songs about getting better]

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Who made that claim, BRTD?

Sam Spade. He's hardly the only one I have in mind here though.

[opebo]

Job losses under Obama: 1.3 million.

Started under the previous administration.

Not just started under the previous administration, but every bit of the current unemployment was caused by that administration - Obama may bear some 'responsibility' for where unemployment is at the end of 2010, but not in 2009.  The idea is absurd.

[Sam Spade]

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Who made that claim, BRTD?

Sam Spade. He's hardly the only one I have in mind here though.

Yes, and I'm sticking to it.  Of course, you need to remember that there is the always the possibility of neither result. 

[Rowan]

Job losses under Obama: 1.3 million.

Started under the previous administration.

Not just started under the previous administration, but every bit of the current unemployment was caused by that administration - Obama may bear some 'responsibility' for where unemployment is at the end of 2010, but not in 2009.  The idea is absurd.

Isn't that what the "stimulus" was for? How has that worked out?

[Sbane]

Job losses under Obama: 1.3 million.

Started under the previous administration.

Not just started under the previous administration, but every bit of the current unemployment was caused by that administration - Obama may bear some 'responsibility' for where unemployment is at the end of 2010, but not in 2009.  The idea is absurd.

Isn't that what the "stimulus" was for? How has that worked out?

You really think the stimulus will work in a few months?

[Rowan]

Job losses under Obama: 1.3 million.

Started under the previous administration.

Not just started under the previous administration, but every bit of the current unemployment was caused by that administration - Obama may bear some 'responsibility' for where unemployment is at the end of 2010, but not in 2009.  The idea is absurd.

Isn't that what the "stimulus" was for? How has that worked out?

You really think the stimulus will work in a few months?

Then what was with the "sky is falling, we need to pass it now attitude"?

[Marokai Backbeat]

Job losses under Obama: 1.3 million.

Started under the previous administration.

Not just started under the previous administration, but every bit of the current unemployment was caused by that administration - Obama may bear some 'responsibility' for where unemployment is at the end of 2010, but not in 2009.  The idea is absurd.

Isn't that what the "stimulus" was for? How has that worked out?

The stimulus will take time to come into full effect (construction projects are getting started in many areas of the country right now, and I've personally seek the increase in some safety net benefits like unemployment compensation and food stamp increases) however it's important to keep in mind that it was probably woefully inadequate.

Government spending is the most efficient way in these times (in one way or another, usually target spending or goods and services directly, accompanied by public works projects) and if the spending is kept under a certain limit pretty much "just because" and hampered further by tax cuts (or rebates, whatever you prefer, they are in effect, tax cuts) which, according to the Wikipedia article, amount to a whopping 37% of the bill, essentially leaving us with about 45% for direct spending, and 18% for aid to the states, which as I've explained why in the past, is critical.

Unfortunately we skimped on some of the most important aspects of government stimuli. Education (paying more people to stay involved and prevent cutbacks), infrastructure (roads, bridges, schools), welfare (food stamps are one of the most, if not THE most, effective safety net program we have running, unemployment compensation is similarly effective) and so on. If you get down to the specific provisions, only 82 billion is spent on the safety net (leaving out medicare) and only 51 billion are spent on "core" infrastructure projects, things like bridges, roads, etc.

Some of THE most important and critical government stimulus amounts here to only 133 billion! If you look where the individual payments are going, less than 20 billion is going to food stamps! That's right, the most effective program for stimulus is receiving a paltry 19 billion dollar increase. That should have been, and could have been, easily doubled. Similarly, unemployment benefits, the second most effective on our list, could have been doubled, being originally placed in around 40 billion dollars and 25 dollar increases in benefits.

Infrastructure projects in the stimulus don't amount to much in the fine print either. Quite frankly, the entire plan for infrastructure spending should have been quadrupled. Less than 30 billion for highway and bridge construction, a pitiful 8 billion for railway construction and development, and more disappointing investments in infrastructure. Infrastructure projects are another important component on our list here, and have the potential, as was done during the New Deal under the Works Progress Administration (a model we should replicate) build an infrastructure for future prosperity, and improve public transportation to lessen the burden on individuals paying ever rising gas prices.

Other minor investments could have made a big difference in people's lives, such as greatly increasing the amount of money for free lunch programs at schools, which I also know from personal experience is a substantial drain on a family's resources when lacking it. Tax relief, while certain tax relief measures are stimulative, are not that effective because the general strength of a tax cut or a rebate isn't a long term benefit or isn't strong enough to make a big difference in an individuals like, but could, collectively, cause a great deal of harm to revenue coming into the federal government. I think Verily explained quite well in this thread why tax cuts aren't effective stimulus, so there's no need for me to explain that here. Even if, for the sake of argument, we were to conclude that tax relief is somewhat effective if you do it right, other measures are still far more effective on the dollar. The main problem with tax cuts though, is that it's not a targeted relief measure, so it usually just goes to paying off a minuscule portion of an individual's debt or to some sort of useless entertainment source.

In any case, I'm ending up rambling now. There are a great deal of solutions that could help and past models to look to for advice on what to replicate today, but sufficed to say, the stimulus could very well fall flat on it's face and do little to nothing because alot of the money was either A ) Insufficient for the targeted projects to make an impact, or B ) Not targeted at all, often in the form of some sort of tax relief that goes to a useless source. Tax relief measures should have been stripped from the stimulus almost entirely and direct spending on the safety net and infrastructure projects beefed up to include the vast majority of a nearly 1.5 trillion stimulus bill. It's a shame. I remain cautiously optimistic that it will have some sort of impact, but I'm not seeing it so far, and I fear we may has wasted a ton of money because we didn't go nearly as far as, say, the New Deal projects went.

[opebo]

Marokai Blue has explained the stimulus very well above, and in detail.

I would just like to add a political point - the stimulus is extremely small and inadequate and will probably not 'work', due to right wing sabotage.  Alas, this sabotage came more from 'Democrats' than the poor-killer party, but there it is. 

Should have been 3 times as big and all direct aid to the poor & states.

[I spent the winter writing songs about getting better]

The dishonesty on the stimulus from GOP hacks is incredible. I'm reminded of the hacks arguing that poor economic figures in March was proof the stimulus didn't work, despite the fact that it Obama only signed it two weeks before March began.

[The Duke]

The dishonesty on the stimulus from GOP hacks is incredible. I'm reminded of the hacks arguing that poor economic figures in March was proof the stimulus didn't work, despite the fact that it Obama only signed it two weeks before March began.

The White House itself said the stimulus would be having an effect by now.

http://progressivepen.typepad.com/.a/6a00e551f57c818833010536f7273c970b-pi

This is a graph put out by the Obama economic team that shows their predictions for unemployment with and without a stimulus package and you can see very clearly that they did predict an effect would already have been had on unemployment.

You will also see that Obama's economic projections have already been proven catastrophically wrong and its only May.  His team predicted that with a stimulus bill, unemployment would not get higher than 8% during the recession.  We are already at 8.9% and rising.  It is they who had no clue what they were talking about, not the skeptics.

[opebo]

Obama's ... team ... had no clue what they were talking about, not the skeptics.

Actually neither knew what they were talking about.

But keep in mind that both were speaking not to reveal truths, but simply to sell political positions.  Obama's team was trying to get as good a stimulus as they could (well as good as their right-wing minds could conceive), and the skeptics were trying to make a case for tax cuts and other absurd nonsense.

[War on Want]

The dishonesty on the stimulus from GOP hacks is incredible. I'm reminded of the hacks arguing that poor economic figures in March was proof the stimulus didn't work, despite the fact that it Obama only signed it two weeks before March began.

The White House itself said the stimulus would be having an effect by now.

http://progressivepen.typepad.com/.a/6a00e551f57c818833010536f7273c970b-pi

This is a graph put out by the Obama economic team that shows their predictions for unemployment with and without a stimulus package and you can see very clearly that they did predict an effect would already have been had on unemployment.

You will also see that Obama's economic projections have already been proven catastrophically wrong and its only May.  His team predicted that with a stimulus bill, unemployment would not get higher than 8% during the recession.  We are already at 8.9% and rising.  It is they who had no clue what they were talking about, not the skeptics.

[Fmr. Pres. Duke]

This market, as it stands, is extremely overbought. We could see a short squeeze which could push the DOW over 9000 by June, but after July, I'm cashing out because I feel like we're in for another leg down before we assume a bull market. If we see anymore uncertainly in the banking sector, we're going to retest the lows on the DOW. The news coming out that the Stress Tests actually called for more capital than was reported isn't reassuring.

[The Duke]

The dishonesty on the stimulus from GOP hacks is incredible. I'm reminded of the hacks arguing that poor economic figures in March was proof the stimulus didn't work, despite the fact that it Obama only signed it two weeks before March began.

The White House itself said the stimulus would be having an effect by now.

http://progressivepen.typepad.com/.a/6a00e551f57c818833010536f7273c970b-pi

This is a graph put out by the Obama economic team that shows their predictions for unemployment with and without a stimulus package and you can see very clearly that they did predict an effect would already have been had on unemployment.

You will also see that Obama's economic projections have already been proven catastrophically wrong and its only May.  His team predicted that with a stimulus bill, unemployment would not get higher than 8% during the recession.  We are already at 8.9% and rising.  It is they who had no clue what they were talking about, not the skeptics.

That graph doesn't rebut anything I said.  The fact still stands that the Obama team's predictions were wildly wrong.  Are you seriously suggesting that unemployment will only fall .1% duing the rest of the year?

Silver talks about three recessions in the post you're alluding to (1974, 1980, and 1982).  Not a single one of those recessions is anything like the current one.  None of them were caused by a credit bubble bursting and bringing an asset bubble down with it.  Silver says the recession this one is most often compared to is 1982, which only seems like a point of comparison if you didn't graduate high school.

[Sam Spade]

The chart posted above would be interesting if the government didn't manipulate the numbers so much.

Basically, in comparison with last month, if you get rid of all the seasonal adjustment, birth-death stuff (and the Census jobs), there was basically little change from March.  You can argue things are stabilizing job-wise, but that's about it.

[Beet]

Well, Nate Silver's original charts basically showed that the 'second derivative' tends to go all over the place during recessions. He used 1981-82 as a cautionary example.

There was a huge divergence in the Establishment survey and the Household survey in this report. The Household survey-- which U-6 is based on-- actually claims 120,000 jobs were created in April (not that I believe that), however 683,000 joined the workforce, so the number of unemployment increased 563,000. The U-6, which includes discouraged workers and those forced to be part-time workers, increased 0.2 points from 15.6 to 15.8. That is a substantial deceleration from previous months, U-6 jumped 0.9 points in February and 0.8 points in March.

I remember political debates about the Establishment vs. Household surveys back in 2003 and 2004, when Republicans used the latter to argue the unemployment picture was better than it looked. This time, the difference is if anything even more substantial. Over the course of the recession, the Establishment survey shows 5.7 million jobs lost, while the Household survey shows only 3.7 million.