Another Helping of Stimulus

The White House says that there will be no second stimulus, but of course there will be much more. The latest stimulus plan that came in is a twist on the plan from the first iteration. Now, the unemployed in all states get extra weeks of benefits.

• The unemployed in states with 8.5% or higher unemployment will receive 20 extra weeks of benefits
• The unemployed in states with less than 8.5% unemployment will receive 14 extra weeks.

In addition to that stimulus program there are others that right now seem guaranteed to be enacted.

• The $8,000 first-time homebuyers' tax credit will be extended.
• Government is giving money to states to fund mortgages for low income households.

• The 65.0% subsidy for COBRA will go through (right now it expires at end of the year).

In fact, one of the more peculiar sectors Thursday was the homebuilders, which rocked on speculation there will be an extension of the first-time buyers tax credit. Who knows...maybe this time around it will not discriminate against people making a certain amount of money. Homebuilders are hoping for $15,000; that isn't going to happen, however.

In addition to more stimuli (by any other name) the Fed is grappling with when to raise rates and by how much. On Thursday night Ben Bernanke tried to walk that middle ground and reassure the he has the guts to raise rates - after the Fed sees improvement. For some it was a relief to hear the Fed chief acknowledge that at some point rates have to move higher to control inflation. Of course this is a jawboning tactic as there is no clear sign rates will be hiked for the foreseeable future. Still, the speech popped the dollar against the Yen in overnight trading.

Hail to the Chief

President Barack Obama was awarded the Nobel Peace Prize Fridat morning. We didn't get the Olympics but Europeans showed their love for our President who won for efforts to strengthen international diplomacy and cooperation between peoples. I've written before my opinion on Nobel prizes, which have become too much about politics. It's too early for President Obama to win an award for changing the world. Even reporters were shocked when the news was announced; President Obama wasn't even considered one of the finalists by many in the media.

Economic Data

The US trade deficit was -$30.7 billion in September from -$32.0 billion August coming in below the consensus number of -$33.0 billion. While it would seem counterintuitive to think we wanted this number to be at consensus or a larger deficit reaction from equities says that's exactly the case. Imports were down and that reflects punk demand which in turns underscores the fact that consumers are still counting their pennies- literally not figuratively.

Written by Charles Payne, CEO and Principal Analyst of Wall Street Strategies (wstreet.com) providing independent stock market research to over 30,000 subscribers, in more than 60 countries. Mr. Payne is a regular contributor to the Fox Business and Fox News Networks. For more information about Mr. Payne, please refer to the company’s website www.wstreet.com.

Comments

[Dave Wrixon:]

As long as Uncle Sam keeps squandering money Bernanke will have no option but to print more.

Oct 11 06:33 AM

[W.E. Heasley:]

“….The latest stimulus plan that came in is a twist on the plan from the first iteration. Now, the unemployed in all states get extra weeks of benefits.


The unemployed in states with 8.5% or higher unemployment will receive 20 extra weeks of benefits
The unemployed in states with less than 8.5% unemployment will receive 14 extra weeks.

In addition to that stimulus program there are others that right now seem guaranteed to be enacted.

The $8,000 first-time homebuyers' tax credit will be extended.
Government is giving money to states to fund mortgages for low income households.

The 65.0% subsidy for COBRA will go through (right now it expires at end of the year).”


One can quickly conclude these items are merely an extension of what the White House has already done and those policies leave you with a real unemployment rate north of 16%. In other words, more lipstick applied to The Spruce Goose of all stimulus plans will improve nothing.

Longer unemployment benefits will allow unemployed human resources to wait 14 or 20 more weeks for job creation? There is no job creation. The extension of the $8,000 home buyer credit, given buyer apprehension caused by the uncertainty created by 16% real unemployment will boost sales? Subsidizing Cobra Benefits will create jobs? Further, all these costly items are financed through a swelling deficit.

Summers, Romer, Goolsbee, and the Jared “King of Spin” Bernstein are clearly the Four Horsemen of the Economic Apocalypse. Even Howard Hughes knew when to stow away the Spruce Goose and go onto another plan.

Oct 11 08:17 AM

[Moon Kil Woong:]

A few comments. First it is funny to hear "On Thursday night Ben Bernanke tried to walk that middle ground and reassure the he has the guts to raise rates - after the Fed sees improvement." Does this mean he is admitting he is lying when he says there is improvement. Either there is and he should look at unwinding and recognizing the losses of his purchases since he can't sell QE stuff at the price they bought it, or isn't and he should stop stating how the recession is over and things are normalizing.

On the trade deficit, it has narrowed largely on less imports, which to some measure is good. What is not good is there is not significant pickup in overseas sales so we are not effectively exporting our economic woes. Furthermore, the dollar weakening to stimulate exports seems to be failing. I would assume it's due to asia pegging to the dollar and protectionism in the ROW. Countries aren't as dumb as they used to be save the US. Other countries aren't going to just let you weaken your currency over 10% suddenly just so you can dump on them.

By and large the only good news is the stock market is holding itself up and people haven't started fretting too much about what happens after the 60% of the rest of the stimulus runs out in 2010. Ask any doctor, once you are on life support it is not easy just to suddenly get off of it. The same applies to the economy. Everyone knows getting off it could kill us, but staying on it guarantees we will remain bedridden and have that much harder time recovering to full health. If you want to muddle along like the old Soviet Union continue to make a mockery of the housing industry which is socialized and refuse to accept the Federal Reserve and their member banks essentially have taken away most all real power from Congress. Democracy is just as disfigured as capitalism in this mess. The rapid decline of the dollar by the Federal Reserve is takings as well as taxation without representation.

Oct 11 09:37 AM

[Duvanie:]

Please learn how to use punctuation and how to speak English. Your comments might be very interesting if you do.


On Oct 11 09:37 AM Moon Kil Woong wrote:

> A few comments. First it is funny to hear "On Thursday night Ben
> Bernanke tried to walk that middle ground and reassure the he has
> the guts to raise rates - after the Fed sees improvement." Does this
> mean he is admitting he is lying when he says there is improvement.
> Either there is and he should look at unwinding and recognizing the
> losses of his purchases since he can't sell QE stuff at the price
> they bought it, or isn't and he should stop stating how the recession
> is over and things are normalizing.
>
> On the trade deficit, it has narrowed largely on less imports, which
> to some measure is good. What is not good is there is not significant
> pickup in overseas sales so we are not effectively exporting our
> economic woes. Furthermore, the dollar weakening to stimulate exports
> seems to be failing. I would assume it's due to asia pegging to the
> dollar and protectionism in the ROW. Countries aren't as dumb as
> they used to be save the US. Other countries aren't going to just
> let you weaken your currency over 10% suddenly just so you can dump
> on them.
>
> By and large the only good news is the stock market is holding itself
> up and people haven't started fretting too much about what happens
> after the 60% of the rest of the stimulus runs out in 2010. Ask any
> doctor, once you are on life support it is not easy just to suddenly
> get off of it. The same applies to the economy. Everyone knows getting
> off it could kill us, but staying on it guarantees we will remain
> bedridden and have that much harder time recovering to full health.
> If you want to muddle along like the old Soviet Union continue to
> make a mockery of the housing industry which is socialized and refuse
> to accept the Federal Reserve and their member banks essentially
> have taken away most all real power from Congress. Democracy is just
> as disfigured as capitalism in this mess. The rapid decline of the
> dollar by the Federal Reserve is takings as well as taxation without
> representation.

Oct 11 01:04 PM

[Jake2:]

"Mr. Payne is a regular contributor to the Fox Business and Fox News Networks."
Thus anything he says or writes is immediately suspect (in some camps).

Oct 12 12:05 AM