2009Dec13 Week In Review
2009Dec13 Week In Review
December 13, 2009
WEEK IN REVIEW:
We really want to know. Is the economy improving or not?
The hullabaloo over the recent unemployment report indicates a positive turn until you factor in the data that was for a three day work week in government offices prior to Thanksgiving. Unemployment is a lagging indicator which will take a lot more time to turn around than any politician is willing to embrace.
The Sage of Omaha, Warren Buffet, spent a chunk of change buying the rest of the Burlington Northern Santa Fe railroad as his bet on an improving economy. It is true that rail shipments are less bad than they have been in recent years. Total shipments were severely derailed after the October 2008 melt down. They have continued this year roughly 20% below the 2006 and 2007 rates.
Carloads: In Nov. 2009, ↓ 8.2% from Nov. 2008 and ↓17.4% from Nov. 2007.
Intermodal: In Nov. 2009, ↓ 6.7% from Nov. 2008 and ↓ 14.1% from Nov. 2007
When examining the graphic data, it confirms the case for a new normal. Business is slowly turning positive. With industrial excess capacity at nearly 30%, unemployment is not likely to change significantly next year. Consumers are needed to create renewed demand. They are still missing.
Legislation was passed in the House this week to increase federal regulation of the financial markets which will be a game changer if the Senate walks the same pathway. Congress laid the foundation for the 2008 financial mess with legislation during President Carter’s term forcing banks to lend to marginal businesses.
In the 90s, tax payers became de facto guarantors of home loans through Fannie Mae and Freddie Mac lending increasingly to non-credit-worthy borrowers. Wall Street raised the capital that allowed governmental regulations to work. When the bubble burst, Congress refused to look in a mirror for responsible parties. Just as prior regulation had unintended consequences, this new round will be one more step to a socialized market and reap yet unknown consequences.
As a generation, Boomers have been distrustful of government ever since college when they objected to the regulation of marijuana and protested the Viet Nam war. After a few decades of improvement, our collective trust in government has returned to levels not seen since those days of protest.
Apparently, the Social Security department has decided to come forward in an attempt to reestablish trust with future beneficiaries. When you receive your annual benefit report, look for the green column disclosing the Ponzi scheme being used for our benefits.
In an effort to encourage increased retirement savings among the Y generation, the statement discloses that the Department expects to pay only 76% of the benefits illustrated! I am confused. Is it integrity to disclose that our government is doing what Bernie Madoff was jailed for doing? At least the Department is ‘fessing up to what we already knew to be true.
Does that raise my level of trust? Not so much!
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