Yesterday, President Obama held a quick press gathering to update the American people on the progress of the debt ceiling negotiations. Obama talked about "common ground," but also said there are serious obstacles. It got me to thinking what's really needed is common sense, and if that happens to be the same spot as common ground, then so be it.
If common sense isn't a place where both parties could cull out enough political points, then someone has to bite the bullet. At least the tone of the rhetoric has cooled, even as many on the Left cheered the belittling press conference over the weekend. (What better way to celebrate the nation's birthday than acknowledging the flaws from the Commander in Chief, suggesting our children will eat tainted lunches unless corporations lose certain tax treatment -- all because the tone was rough and tough?)
There is nothing more common sense than at some point our legacy, laws, and honor will be not be enough to stop the scales of prosperity from tipping and dramatically changing our way of life. For all we know, we might have reached that point already. This is not a revenue issue by any means; this is about spending. This is about paying off political cronies and chasing ideological dreams on the hard-earned money of people and businesses. It's not enough to take money, but the sources of those funds must be denigrated in the process.
So I'm not sure where the common ground is, although old school Republicans, too in love with the office/power, do not want a repeat of the last time the government shut down. Ironically, shutting down the government might be the only thing that gets President Obama reelected. Yet if a deal was being hammered together based on the health of America, it would have its foundation rooted in common sense.
Right now, common sense means no tax hikes and not raising the debt ceiling. A month ago, the common ground would have been raising the debt ceiling in return for spending cuts. Somehow Republicans dropped the ball, and now it seems common ground will include tax hikes. I think Republicans are also making mistakes around the country by making abortion rules and voter ID part of common ground. The ID thing is going to come back to haunt the party for years to come with Asian, Hispanic, and African-American voters. The party may not feel it needs those groups now, but it's only a matter of time before not having them will mean certain defeat.
The intangible for this country is unity, and I don't see much of that from either side. With that in mind, ideology is important, but when it comes to the numbers it's all about common sense.
Speaking of Common Sense
The President's Council of Economic Advisers released its estimate of jobs saved or created through the Recovery Act. The tally was 2.4 million to 3.6 million jobs through the end of March 2011 after $666 billion was spent (talk about a dark omen!). As it turns out, each job, real and imagined, cost taxpayers $278,000 each. A White House spokesperson, obviously upset, said parts of the stimulus went into things like building factories, etc. But I would suspect any job that comes out of that would already be added as part of the phantom tally. Be that as it may, the plan was ill-timed, poorly executed, and should have never been rammed through in the first place.
Since the plan went into effect, unemployment has soared, and is currently 9.1% from 7.3%. The national debt has climbed to $14.7 trillion from $9.98 billion. Big businesses liked stimulus as it put money into their pockets; $100.0 billion flooded into Medicaid, and public sector union workers feasted. It was a failure. Anyone who wants to defend the $278,000 as funny math or wild speculation should begin with the notion that millions of jobs were saved and created even as the unemployment rate skyrocketed.
Yesterday, Moody's made it official, downgrading Portugal's debt to junk status. The PIIGS nations are looking wobbly, and it would seem to be a matter of time before emergency deals are being crafted for their bailouts. After watching the back and forth with Greece, some of these nations must be licking their chops. But they would be stained by the stigma of this period; even if the ECB accepts their paper in the future, it's going to be expensive.
What's happening along the coast of the Mediterranean is a junk bond trader's dream, but could be our nightmare. We can't be dummies.
The latest numbers are out on pay in California, and it's good to be a doctor in a prison hospital. The highest paid person on the state payrolls is the prison psychiatrist who made $838,706 in 2010. The prison doctor at High Desert State Prison pulled in $777,423, and the doc at Northern California Youth Center raked in $736,378. The chief risk officer for the State Cooperation Insurance Fund made $561,072, and the chief investment officer for the Public Employee Retirement System got $548,142. The top 10 workers made $6.2 million -- not bad for public servants.
Not to be outdone, the White House paid its 454 aides $37,121,463 last year. That's seven more staffers and $4 million more than during George W. Bush's last year in office. Shared sacrifice has a hollow ring to it when the federal government and broke states are tossing cash around like it grows on trees or could easily be replaced through higher taxes and fees. Hey, it can be easily replaced through higher taxes and fees. Let's get those rich bastards ... um, the ones in the private sector, that is.
Challenger, Gray & Christmas
Announced layoffs for the month of June climbed to 41,432, the second monthly increase, up 11.6% month to month and 5.3% year over year. You could say two months does not a trend make and the first six months are the lowest level since 2000, but it's very alarming this deep into a supposed post-recession period. Ironically, a lot of these are state government jobs where union concessions on pensions and pay could preserve jobs for newer employees. But no dice.
This is jobs week, and that means there should be one horrific session before Friday. Maybe today could be that session. Stocks were under pressure from the Moody's downgrade of Portugal, although I think Moody's comments on European banks failing stress tests might be more damning and more newsworthy. Be that as it may, China raised its rates for the third time this year as it's battling inflation tooth and nail. I continue to marvel at the determination of China not to succumb to near-term gains versus longer-term risks. But the market wants to see China running full speed ahead.
I'm not panicking at all, but feel good about the exit alerts yesterday; three big profits on the Hotline and five on the Swing Strategies. The one stock we took a loss on was downgraded this morning at Goldman Sachs (GS) (I kind of saw that coming), so we saved subscribers money on that, too.
Let's see how things shake out. I feel like the fix is in for Friday and last month's employment number will be revised higher as we beat the absurdly low consensus for June job creation.