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Clifford Neely
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Clifford Neely October Consultants, Inc. PO Box 59208 Potomac, MD 20859 301 738 3321 Career 1988 to present: Principal, October Consultants, Inc. October Consultants conducts economic analysis and market research for clients in the floor coverings and chemical industries. 1976 to 1988:... More
  • West Virginia Senate Race Is A Portent

    Shelley Moore Capito's run for the Senate seat from West Virginia is about more than giving Republicans an additional seat in the senate. It is even more than a dress rehearsal for the presidential election of 2016. It is the blueprint for Republican hegemony over the decades required to restore the nation.

    Shelley has big plans for coal and has no fear of the environmental lobby. West Virginians like the fact that increasing coal production is her top priority. Mitt Romney carried all 55 West Virginia counties in 2012. Don't be surprised if Shelley matches Mitt's victory margin in November.

    Coal means jobs for West Virginians, lots of high paying jobs (mine foremen can make $120,000 a year).

    Here is the real meaning of the 2014 West Virginia senate race: Shelley's stump speech will work in every state. All states need jobs and they all need lower cost energy.

    President Obama's energy policy aimed at "making electricity rates skyrocket" has become a vote changer in every county in the nation.

    Coal means that real median family incomes can start growing again and that the nation can pay down debt owed to other countries. Coal means that a lasting economic expansion can begin.

    Finally, coal means that the US no longer imports oil from countries that fund our enemies. Coal is our new military. It puts us in a 21st century economic war against terrorism that we will win.

    Jun 19 9:58 AM | Link | Comment!
  • December Payroll Number Handcuffs The Fed

    Payrolls only grew by 74,000 in December. It is a number that perplexed financial markets. The general response was to tread water until it becomes clearer as whether the December jobs number could mark the end of slowpoke recovery that began more than four years ago or is only an outlier.

    The fact that the Labor Department released the data in the first place suggests that this is a serious number. I am surprised that Labor didn't find some way to cushion its impact. After all, Labor isn't above fudging the data. It was Labor that came up with the idea of adjusting the work force by ignoring the "structurally unemployed" when calculating the unemployment rate. It isn't any great leap to reason they aren't above using other imaginative ways to interpret the job growth data. Of course, it's possible that Labor tried every kind of massage known to statistics to make the December jobs number look better and couldn't pull it off. If this is the case, the 74,000 preliminary figure could be revised down. This would lead to the conclusion that December was the month when U.S businesses took meaningful actions to offset the prospective higher costs of raising the minimum wage and implementing Obamacare.

    The December jobs number is so bad that I have started counting cars in mall parking lots to gauge store traffic. I realize that this is the worst kind of anecdotal economics. I don't like what I see but my sample is limited to a few malls close to my home and I don't retain any year-ago impressions for comparison. The indicator I will keep an eagle eye on to judge whether the economy is as dismal as the 74,000 jobs added reading indicates is the yield on the 10-year Treasury bond (the bond). Should the yield fall below 2.5% between now and the end of this month, chances are that the January payroll data will also disappoint.

    If the economy is really casting off jobs, it means the FRB has run out of options. Reducing monetary stimulus in any meaningful way isn't in the cards. It says that all of the fiscal and monetary stimulus lavished on the economy since June of 2009 has failed to engender a lasting business expansion. Our central bank is now locked into maximum stimulus and near zero interest rate policies with no prospects for a return to normal interest rates. The U.S. has to keep borrowing from other countries and selling assets.

    The December payroll number may be the first clear signal that this recovery may end badly. Sometimes it is hard to see the forest. The biggest collapse of the 20th Century came with no warning of any kind. One day, the USSR was the second most powerful nation in the world. The next day, the USSR was no more. For me, the December jobs number is a portent.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I am long gold mining stocks

    Jan 17 3:45 PM | Link | Comment!
  • Pick One Jack: Your House Or Health Insurance

    The widespread belief that the U.S. has infinite wealth is destroying the republic. Our addiction to debt started slowly in the 1930s but it didn't take very long for politicians to realize that U.S. resources were enormous. We have been buying guns and butter at will ever since.

    In the conviction that the country had unlimited resources, we happily paid for the New Deal, the Fair Deal, space exploration, the cold war, intermittent hot wars around the globe, $100/barrel oil, environmental clean up, and imports of manufactured goods that sent high paying jobs overseas.

    One will look in vain to find government projects over the past 75 years that were rejected on the basis of their price tag. The Second World War set the tone for the next three generations of Americans. The massive debt run up in WWII was the agent that lifted the country out of the Great Depression of the 1930s and placed the U.S. on the road to having the highest living standard the world had ever seen. Rather than fearing debt, we came to embrace it.

    These were the days when Harry Truman enthusiastically described the merits of deficit financing to a reporter. The days when Lyndon Johnson, crafting his Great Society legislation, called federal tax revenues an "endless cornucopia" that would not stop giving. We are certain that a major problem for Congresses over most of the years between the end of WWII and today was finding ways to spend all the money flowing into the Treasury.

    There were voices calling for moderation but they were seen as spoilsports since speculating big paid big returns. Dwight Eisenhower voiced concerns about the cost of the National Highway program but the public loved the expressways. No one took the naysayers seriously as spending always seemed to lift prosperity. Running for public office on the basis of cutting debt was a sure way to lose elections.

    But the largesse ran out, probably with Medicare part D. No one told President Obama that he would have to choose between green energy and Obamacare. That he couldn't have both programs and might even be lucky if he got one of them to last past his Presidency.

    Had Barack Obama been born 20 years earlier and wrested his party's nomination for President from Bill Clinton in 1992 instead of from Hillary Clinton in 2008, Obamacare might have survived. No doubt the U.S. still had the reserves to bring some form of health insurance to every citizen in the early 1990s.

    Today, the Federal government is bumping into the upper limit of how much it can borrow. Standard & Poor's cut the U.S. credit rating to AA+ in August 2011. Indeed, the government is sorely limited as to how much money it can ante up for Obamacare. But the big problem with Obamacare is that most of the funding from now on has to come from individuals and most Americans are flat broke.

    Unlike the government, individuals do not have unlimited resources. Most of us live from paycheck to paycheck. While the government can still print money; American families have no such freedom for manipulation. Family incomes have been declining in real terms since 2008. The fact that families have no discretionary income and no prospects for getting wages to grow faster than the rate of inflation over the foreseeable future is the real debt problem confronting Obamacare.

    The public's loss of purchasing power means that families are cutting spending in every expenditure category. In the second quarter of this year, 12.2 million single-family homes were still underwater. It is no time to raise healthcare costs even if the new healthcare plans are "better." Moreover, consumers are going to be strapped for cash for a long time. Too many people are still out of work for the average weekly earnings of American workers to start growing with any vigor again. Government energy policies do not favor job creation. Stagnant to declining take-home pay has meant that personal debt incurred prior to 2008 still has to be paid off.

    Consumers are in no position to take on more debt and the President won't be able to shift the public's liabilities for Obamacare to the government's balance sheet. For families, Obamacare is unaffordable care. Jack will opt to keep his house.

    Nov 18 9:46 AM | Link | Comment!
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