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Lunch With Robert Reich
The other day had me sharing a cold, congealed chicken salad for lunch with Bill Clinton’s Secretary of Labor, Robert Reich, at San Francisco’s posh Fairmont Hotel. We covered a wide range of market impacting topics, which I have summarized below. A Rhodes Scholar who dated Hillary Clinton at Yale, ran for governor of Massachusetts, and authored 12 books, Bob is never without an original thought, nor a stranger to controversy. Today he didn’t disappoint.
Bob says that easy money is creating new bubbles around the world, especially in China (FXI) and commodities, that will only end in tears. The Middle Kingdom is the first country where inflation may break out to the upside.
There is also a new form of protectionism that has emerged under the guise of competitive currency devaluations, where counties printing paper money are racing to the bottom. This will eventually force a revaluation of the Chinese Yuan (CYB), and there’s nothing the Chinese can do to stop it.
A US GDP that is 71% dependent on consumer spending is unsustainable, since they can no longer afford it, can’t get credit, no longer have a personal ATM in the form of home equity loans, are worried about losing their jobs, suffer under a huge debt burden, and are now unexpectedly having to save more for their retirement since their houses have dropped in value by half.
Scott Brown’s surprise win for the Massachusetts senate seat will only cause uncertainty in Washington to explode, not exactly a stock market friendly development. Brown is really “a sheep in wolves’ clothing,” as he is ideologically distant from the right wing that is currently running the Republican party, voted for Massachusetts’s state health care plan, and didn’t dare to use the word “Republican” in his campaign.
The Obama administration committed a major error by devoting one third of its massive $870 billion stimulus program to tax cuts, which in this environment, will get saved, not spent. You might as well have buried the money in your back yard.
The TARP money, while succeeding in rescuing the financial system, only ended up in Treasury bills, and never made it to Main Street. This is what the public is irate about. The loopholes in the proposed financial regulations are big enough for bankers to drive their Ferraris through. The best way to revive the economy is to give money to the states directly, which, unable to run deficits, and can only cut spending and raise taxes. This will create a $350 billion drag on the economy during 2010-2011, in effect an “anti stimulus” that cancels out a third of the federal government’s reflationary efforts.
I took two of Bob’s economics classes at UC Berkeley, and know too well his wry humor, acid wit, and preference for backing up arguments with mountains of empirical data. Entering students are obliged to buy 400 pages of photocopied charts, tables, and other raw data about the labor market which they are expected to commit to memory by the end of the semester. These are not basket weaving classes.
Bob warned me not to take his investment advice, as he bought his home in Berkeley at the 2006 market top, just before it dropped in value by half. On top of that he has had to eat a 10% cut in his Berkeley professor’s salary forced on him by drastic state budget cutbacks. UC Berkeley is the crown jewel of public education, but the state has little choice but to starve it to death. This is not good for the long term future of the Golden State, which has to create the educated class to earn the wealth to pay the taxes.
The real kicker of the lunch was Bob’s forecast that unemployment will remain stubbornly high at 9% a year from now. This is going to be a big problem for Obama in November. The jobs that have been exported to China or replaced by machines aren’t coming back. Because of the arcane way in which the surveys are conducted, someone who isn’t looking for work isn’t counted. But when the economy starts to improve, when they do start to look they are newly counted as jobless, causing the politically sensitive figure to shoot up.
To avoid this trap, it is better to look at the Payroll Survey released on the first Friday of each month, which gives a much more accurate read on the economy. Even still, with the average work week at a record low of 33 hours, employers will make their existing staff work longer hours before they hire anyone new.
As we parted company, Bob left me on an upbeat note. “The good news is that the Great Recession of 2008-2009 is over. That’s because it’s now 2010.”
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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I believe the colloquial term is "slush fund".
That $187 Billion is probably spent and waiting for a predetermined use. Shore up FDIC and Cal,Fla, etc. Chump change if they're trying to inflate out of this. Who is auditing that account anyway? Ways and Means, Finance?
Katrina got 62 billion back in 2005( when 62 billion was big) and last week they had 5 left. And the pumps have not been redesigned to work. Superdome cost 185 mill to repair. Levee 3.1 Bill and not fixed. I'll bet we never truly know how it was spent.
Some body was saying give it back to us. That has never and will never will happen. Inflationionion Bitchez.
CNBC today let housing prices fall and find value = price. That won't happen. That would take balls.
Katrina was always about urban appeasement, payoff money, so to speak.
I'm surprised we haven't learned yet that at least a million dollars went to some oligarch's pet or infant child.
The only way a person could reasonably believe that TARP 'worked' is if they are hopelessly captured. If it did, then that must mean we can put Fannie and Freddie into runoff, shut down all the emergency Fed window four-letter acronyms, and drop the failed housing price supports.
Yes, plainly, because otherwise *economics professorships* might be endangered, oh my! In fact, what I think is that economics professors need some firsthand experience with the effects of globalization. Why, for instance, couldn't a PhD in Hyderabad teach that useless subject just as well via distance learning, for a fraction of Rubin's cost?
What has to happen is that state payrolls have to shrink by half. Giving money to the states merely allows the graft to occur hidden from sight.
Take his beloved UC Berkeley. Did you know that it has one staff member on its payroll for each student? The ratio for other state schools is more like 6:1 or 7:1. Just drop the bullshit and CALL it a jobs program. Just don't pretend it's productive or useful.
Zack.
You said a mouth full there..................
Article local paper yesterday, Ft.Wth, Tx.
Grab your ankles....................and they wonder why their Pension Funds are screwed?.
Retired Cops 54yrs old, 90k a yr Pension, w/$300k cash out.
Retired Firemen,51yrs old, 75k+ a yr, Pension, w/ $136k cash out.
(these numbers are off the top of my head, I really think I AM LOW in their figures posted).
While these were exceptions, MANY exist close to the same.
These guy's are YOUNG middle age, can go get a second career, and double up!.
But the killer is, the Pensions(not counting the cash outs), are FOR LIFE.
No way a City (even Ft Wth,Tx), can keep this up..........no way.
And we have people here, bitching about SS>MC, at $1200/1500/00 a month.
Sadly, the above is the NORM...............the Private City Pension Funding......
Also,for these Cops, and Firemen,IF they think they will continue to recieve MORE salary in Pension form, than they made when ON the job,their dreaming.
These numbers were made based on the assumption that the Pension Fund rate of investment returns would be at least 7%, but planned at a tad over 8%!.
Link:
http://www.star-telegram.com/2010/09/04/2445012/fort-worth-pension-bubbl...
Check out NY Metro area pensions. I am farming now. Given up on the system. But I did work in it for quite a while for you venom spewing bitches that are going to jump on my shit. I don't care. In fact I may feed you a meal some day as you flee your oppressors.
I'm right behind you... It's really tough negotiating two worlds (old one and the new one). Food, shelter and water, the future's pretty clear (and always has been)...
if he's any smart whats poing in leacturing/working for gov.. run money..
...
To avoid this trap, it is better to look at the Payroll Survey released on the first Friday of each month, which gives a much more accurate read on the economy. ..
..
only real (aka money involved ) labor indicators are
#1SSFT contributions.. cause each/every working guy pays
(see Bruce Kasting blog)
#2 unmpl benefits... each who doesnt work get one.. at least first 6-12 months...
rest of .. MSM/wall street/ Whitehouse/ruling class bullishit propaganda
pick one..
alx
I me work sideways apple stupid fuck waffle fist lubricant dope blog hopeless happy fuck face.
I couldn't have said it any better! Thanks! :-)
another stupid one..
...
Bob says that easy money is creating new bubbles around the world, especially in China (FXI) and commodities, that will only end in tears. The Middle Kingdom is the first country where inflation may break out to the upside
....
#Bob warned me not to take his investment advice, as he bought his home in Berkeley at the 20
so,, did author even try to understand what he posted ??
alx
I have a fealing he can afford the loss...