Obama Administration

Tim Geithner's public "servant" tenure has not been without its blemishes: from his deplorable run as the (figure)head of the New York Fed (from 2003 until 2009), when the entire financial system literally imploded under his watch, to his epic failing up as Hank Paulson's replacement as treasury Secretary of the United States, despite his legendary inability to navigate the Minotaurian labyrinth that is the TurboTax income tax flowchart, the Dartmouth alum has had his share of run ins with adversity (and adversity won). Of course, Geithner's tenure in charge of the Treasury in the past 4 years has been somewhat mollified by the fact that here too here was merely a figurehead, and the true entity that runs the US printing presses is none other than the JPM and Goldman Sachs co-chaired Treasury Borrowing Advisory Committee (for more on the TBAC read here and especially here as pertains to the former LTCM trader and current head of JPM's CIO group), meaning that the US Treasury, just like the Fed, are merely branches of the one true power in US governance: Wall Street. Geithnerian figureheadedness aside, the one undeniable fact is that Tim Geithner's days as head of the Treasury are now numbered: he has made it quite clear that he will not accompany Obama (should the incumbent be reelected) into his second term. So what is a career "public servant" to do once the public no longer has any interest in retaining his services? Bloomberg's Deborah Solomon has some suggestions...

Yesterday we assessed the impact a second Obama term would have on the US economy and markets. Now let’s assess what impact a Romney Presidency would have on the US economy and financial markets.

The Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.

At a cost to the taxpayer of $317,435 per job

Since it would appear that QEternity has ostensibly failed in its main goal of pushing the stock market higher (and mortgage rates lower), the White House seems to be scrambling. Obama administration officials have concluded that the economy, while improved (apparently), is still fragile enough to warrant another bout of stimulus. The same old kitchen sink is being thrown at the problem as they are now resorting to the same fiscal stimulus that has also failed time and time again (as we noted here). As WaPo strawmans reports the White House is discussing the idea of a tax cut that it believes will lift American's take-home pay and boost a still-struggling economy (citing people familiar with the administration's thinking). This is Keynesian-based Einsteinian madness at its very best.

The Bear. Or the Bull. That is the question. With polls tightening, traders around the world are looking for that perfect hedge to be in the green regardless of who takes office in the coming presidential election in November.

What Could Possibly Go Wrong? aka Obama Activates Skynet

• Moody’s Cuts Ratings on Catalonia, Four Other Spanish Regions (Bloomberg)
• And the market top: Billionaire Ross Interested in Buying Spanish Bank Assets (Bloomberg)
• Japan Jojima denies govt seeks $250 bln BOJ asset buying boost (Reuters)
• China hints at move to strengthen Communist rule (Reuters)... well everyone else is doing it
• Euro-Area Bailout Fund Faces Challenge at EU’s Highest Court (Bloomberg)
• Obama, Romney now tied in presidential race: Reuters/Ipsos poll (Reuters)
• Former China Leader Jiang Resurfaces Before Political Transition (Bloomberg)
• Some in Congress look to $55 billion fiscal cliff 'fallback' (Reuters)
• CLOs stage comeback in US (FT)
• TXU Teeters as Firms Reap $528 Million Fees (Bloomberg)
• China’s Factories Losing Pricing Power in Earnings Threat (Bloomberg)

Whether you believe "your vote doesn't count" or taking productive time out of your day to be a part of selecting the next 'change' agent for the nation is worthwhile, Doug Casey - as ever - has strong views:

"a rational man, which is to say, an ethical man, would almost certainly not vote in this election, or in any other – at least above a local level, where you personally know most of both your neighbors and the candidates."

Don't expect anything that results from this US election to do any real, lasting good. And if, by some miracle, it did, the short-term implications would be very hard economic times. More important, however, is to have a healthy and useful psychological attitude. For that, you need to stop thinking politically, stop wasting time on elections, entitlements, and such nonsense. You've got to use all of your time and brain power to think economically.

Was it just us - or was that a bit of a snoozer? Some fascinating 'off-topic' debates that dragged us from Mali to Massachusetts 1st grade math scores, and from Bayonets to Obamacare. Some reasonable amount of agreement between the two on foreign policy punctuated by flip-flopper and weakling name-calling. Ironically, given our boxing-match meme - the counterpunches were incessant though Romney seemed to play defense more and Obama appeared to more urgently change the discussion (with little impact). Lots of braggadocio on naming multi-syllabic foreign towns and leaders. Obama won the drinking-game challenge by a long-way 53:34. Obama also won the 'time-spoken' challenge (by the narrowest margin of the 3 debates) 41:42 to 41:07. Obama's odds of an election win levitated modestly from the beginning (from around 59.5% to 61.5%). Of course, Wal-Mart got very, very quiet when the cheap China import bashing started, but luckily it too was based on generic 10 second attention span talking points, and led nowhere, so the Waltons can get back to doing what they do best. So far an Obama clean-sweep on our scientific study, which of course was highly irrelevant: all the truly important foreign issues (EU, China economic ascendancy, Japanese decline) were ignored. Why? The "Mr. Chairman will get to work" of course, showing once again who is truly in charge.

Schmitt ? Strauss ? University of Chicago ? Neocons, Obama  ? Banzai!!!

There is no indication that the Obama administration has even considered this eventuality. Indeed, I have not heard anyone on the left refer to Bernanke or the poison of his policies at any point in the last few months.

Real leaders don’t WHINE about their jobs. They don’t blame others for their mistakes. And they surround themselves with quality advisors to help them in making decisions.

If your predictions are wildly out-of-whack with reality, you need to change your approach. Jared Bernstein and Christy Romer Administration predictions have been an unmitigated disaster. Not only did the real figures not match up to the advertised ones, but they are also much worse than the baseline expectations. Romer and Bernstein appear to have both severely under-estimated the depth of the crisis, and over-estimated the effectiveness of the stimulus package. Obama might talk about spreading the wealth around, but the aggregate effect of the policies pursued during his administration have squarely benefited large corporations and the financial sector, and not the middle class or small business. Is reinflating financial bubbles and pumping up corporate profits Obama’s idea of recovery? The money isn’t trickling down, and small businesses and the middle class are more in debt than they were before the crisis started.

Confirming a move that will surprise exactly no one, the firm which is best known in the world for two things: i) arbitraging the gullibility of its clients, and ii) flipflopping faster than anyone when the narrative demands it, the WSJ reports that Goldman Sachs has mutated from Obama's biggest financial backer 4 years ago on Wall Street, to one of the most stingiest firms. "Employees at Goldman donated more than $1 million to Mr. Obama when he first ran for president. This election, they have given the president's campaign $136,000—less than Mr. Obama has collected from employees of the State Department. The employees have contributed nothing to the leading Democratic super PAC supporting his re-election. By contrast, Goldman employees have given Mr. Romney's campaign $900,000, plus another $900,000 to the super PAC founded to help him." In other words Goldman has just voted with their wallets, and the bottom line is "Strong Sell" with price target One Term.