The gold market has sold off $20 today, and my hunch is it has something to do with the Federal Reserve policy meeting that begins tomorrow and will conclude with a public announcement at 2:15 p.m. Wednesday. A big gold drop strongly hints at market expectations for a tough-minded Fed that will defend the dollar and move to contain rising inflation.
Nobody expects the central bank to raise its target rate this week — although frankly I wish it would. In effect, it would be taking back some of the excessive rate cuts made last winter. And I think those rate cuts have a lot to do with the high price of oil and the cheap dollar.
But the gold plunge today might be suggesting some tougher language from the FOMC policy statement on Wednesday. If, for example, the Fed language is biased against inflation, and perhaps even mentions the dollar, it would be a clear signal that rate hikes are coming sooner rather than later.
There’s been a big debate about this, with hawks versus doves arguing over how tough the Fed’s gonna be on inflation. Bernanke sounded very tough, but then Donald Kohn and others seemed to be leaking to the media that they wouldn’t be so tough. Today’s gold drop suggests that Bernanke is going to win the day and pave the way for a quarter-point rate hike either next month or in August. The futures market is pricing in several more rate hikes after that.
I continue to believe that fighting inflation and appreciating the dollar would be the best medicine for the economy, and in the short term would be strong medicine to reduce world energy prices, including gasoline at the pump. If Paul Volcker were running the Fed, speculation would be high today that the central bank would beat the market with a dramatic rate hike announced on Wednesday. Nobody today equates Bernanke with Volcker. And today’s stagflation is certainly a smaller dose than we had in the 1970s. But who knows? Maybe Gentle Ben will surprise us all with a Volckeresque action.
Monday, June 23, 2008
Monday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:OIL POLITICS, MAC'S $300 MILLION ENERGY PROPOSAL & MORE...The Dynamic Duo will be aboard once again this evening to debate the politics of oil and what steps need to be taken to alleviate high energy prices.
Joining us will be Robert Reich, former Clinton labor secretary/UCal Berkeley professor/author and Steve Moore, senior economics writer at The Wall Street Journal.
AN EYE ON THE STOCK MARKET, ECONOMY, OIL & FED...Our stock market and economic all-stars will weigh in with their perspective and debate all the latest news, trends and developments affecting investors.
On board:
*Dennis Gartman, economist and editor of the Gartman Letter
*Michael Ozanian, Forbes Magazine Senior Editor
*Shawn Tully, editor at large of Fortune magazine
*Vince Farrell, managing director, Scotsman Capital
Also...James Hackett, president & CEO of Anadarko Petroleum will be joining us with some of his insight on the energy issue.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Friday, June 20, 2008
Understanding “Speculators”
The stock market plunged 170 points this morning and oil jumped over $3, allegedly based on a New York Times story that Israel is carrying out military exercises as a rehearsal to bombing Iran. But actually, the Times story, written by the very able war correspondent Michael R. Gordon, is talking about Israeli training exercises from early June, not now. It’s a rehash story with some new details. And it does in fact confirm the market rumors of June 5 and 6 that Israel was planning an Iranian attack to stop the rogue state’s nuclear-weapons program.
Recall that oil jumped almost $15 on Thursday, June 5, and Friday, June 6, largely in response to Middle East war worries. In fact, on Friday, June 6, stocks plunged 400 points as oil jumped $11 to close at its peak price of $140 a barrel. It was this oil spike that helped trigger various Washington and presidential-campaign attacks on so-called oil “speculators.” But what the heck? Anybody with half a brain operating in the oil markets who thought there was going to be an Israeli-Iranian war would be buying spot and futures contracts — which is exactly what happened.
So far as I know, there is no new news coming out of Israel. Today’s Times story is a look backwards.
But I want to make a separate point. Oil-market traders react rationally to new information. Instead of blaming them, senators McCain and Lieberman might want to visit with some traders on some of the big Wall Street trading floors to better understand the relationship between global news and price discovery.
There’s something more here. Democrats reading from their talking points are completely opposed to Bush and McCain proposals to open up new oil drilling offshore and onshore. The Democratic argument — which I heard again last night on my show from Robert Reich — is that it will take ten years to lift new oil, which will never help today’s price problem. Obama says exactly the same thing, as do Harry Reid, Nancy Pelosi, and all the rest. But they’re forgetting the role of oil traders.
Oil futures markets have contracts that run out five years and beyond. If these traders — or “speculators” — believe new oil supplies are on the way in the future, they will sell those out-year contracts. And before long market arbitragers will backward-ize those price drops toward the spot market, bringing prices down there as well.
In other words, trader/speculators can be very handy instruments of energy (and economic) policies. If demand exceeds supply they are buyers. But a prospective future supply increase makes them sellers. In a free market prices move both ways. And if Sen. McCain would take the time to learn this he could respond accordingly to Obama’s silly criticism that we shouldn’t drill because it will “take too long.”
This is all part of the key point that McCain can turn record energy prices to his political advantage, as polls now show 65 percent, or two-thirds, of the public favors drilling. But to do this the whole GOP must understand the role of oil traders and their speculations.
Recall that oil jumped almost $15 on Thursday, June 5, and Friday, June 6, largely in response to Middle East war worries. In fact, on Friday, June 6, stocks plunged 400 points as oil jumped $11 to close at its peak price of $140 a barrel. It was this oil spike that helped trigger various Washington and presidential-campaign attacks on so-called oil “speculators.” But what the heck? Anybody with half a brain operating in the oil markets who thought there was going to be an Israeli-Iranian war would be buying spot and futures contracts — which is exactly what happened.
So far as I know, there is no new news coming out of Israel. Today’s Times story is a look backwards.
But I want to make a separate point. Oil-market traders react rationally to new information. Instead of blaming them, senators McCain and Lieberman might want to visit with some traders on some of the big Wall Street trading floors to better understand the relationship between global news and price discovery.
There’s something more here. Democrats reading from their talking points are completely opposed to Bush and McCain proposals to open up new oil drilling offshore and onshore. The Democratic argument — which I heard again last night on my show from Robert Reich — is that it will take ten years to lift new oil, which will never help today’s price problem. Obama says exactly the same thing, as do Harry Reid, Nancy Pelosi, and all the rest. But they’re forgetting the role of oil traders.
Oil futures markets have contracts that run out five years and beyond. If these traders — or “speculators” — believe new oil supplies are on the way in the future, they will sell those out-year contracts. And before long market arbitragers will backward-ize those price drops toward the spot market, bringing prices down there as well.
In other words, trader/speculators can be very handy instruments of energy (and economic) policies. If demand exceeds supply they are buyers. But a prospective future supply increase makes them sellers. In a free market prices move both ways. And if Sen. McCain would take the time to learn this he could respond accordingly to Obama’s silly criticism that we shouldn’t drill because it will “take too long.”
This is all part of the key point that McCain can turn record energy prices to his political advantage, as polls now show 65 percent, or two-thirds, of the public favors drilling. But to do this the whole GOP must understand the role of oil traders and their speculations.
Friday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE FED, STOCK MARKET & ECONOMY...Our stock market and economic all-stars will discuss and debate all the latest news, trends and developments affecting investors including today's 200-plus point market sell-off.
On board:
*Joe Battipaglia, market strategist, Stifel Nicolaus
*Art Laffer, economist and chairman of Laffer Associates
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Brian Wesbury, chief economist at First Trust Advisors
OIL, DEFENSE & THE MARKETS...Our panel of experts will weigh in with their perspective on some of the key economic and national security issues facing investors and the nation.
On board:
*Ken Timmerman, executive director of the Foundation for Democracy in Iran & author of "Countdown to Crisis: the Coming Nuclear Showdown with Iran."
*Stefan Abrams, Bryden-Abrams Investment Management managing partner
*Joe Battipaglia, market strategist, Stifel Nicolaus
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
OIL & ENERGY INTERVIEW...Marcel Coutu, CEO of Canadian Oil Sands Trust will be aboard to discuss his company's efforts and the role oil sands can play in the quest for greater energy independence.
DEBATE: THE HOUSING BILL...The Dynamic Duo is back. Squaring off on the controversial housing bill this evening will be former Clinton labor secretary & UCal Berkeley professor/author Robert Reich and The Wall Street Journal's Steve Moore.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Thursday, June 19, 2008
Drill, Drill, Drill: My Interview with Diamond Offshore Drilling CEO Larry Dickerson
The following is an unofficial transcript of my interview last night with Larry Dickerson. Mr. Dickerson is the CEO of Diamond Offshore Drilling.
Kudlow: Alright, more on drill, drill, drill. The question is how deep? How much? How green? Here’s Larry Dickerson, CEO of Houston based Diamond Offshore Drilling. Larry, great to see you. Just to put a quick picture up on the full screen, your stock has been off the charts in the last three or four years. I got you up 500 percent. Your profits are growing near 70 percent per year, with 30 percent annual growth in sales. Welcome to the show. Now I want to ask you. Okay, we had on CNBC one of those cute looking greenies, tree huggers were on, and they were debating somebody about this drilling business. And they say, ‘Okay, you drill offshore, outer continental shelf, you’re gonna wreck the beaches of the coastal states. You’re gonna ruin the tourist trade and destroy their economies.’ What’s your response?
Dickerson: Well Larry, there hasn’t been any significant – even insignificant that I can think of – oil spill from U.S. waters in over thirty years. We have an excellent environmental record. The amount of redundancy testing and government regulation put in place I think all but eliminate that as a possibility.
Kudlow: So they’re basically just mau-mauing the business, the drillers. They’re mau-mauing the oil companies. They’re mau-mauing the American people, right?
Dickerson: Well, I suppose there’s some logic to that. But at the end of the day, there’s the issue of supply and there’s the issue of jobs. People are paying $4 dollars a gallon for gasoline and we can recycle significant parts of that back to the economy in jobs – high paying blue-collar jobs and white collar jobs. We can recycle that through taxes. As Secretary Kempthorne said, a lot of that could go back to the states and help them with their budget problems.
Kudlow: How far offshore can you go? You’re a deep-water driller aren’t you?
Dickerson: Yeah, our deepest rigs can go 10,000 feet of water.
Kudlow: How many miles out?
Dickerson: Oh, we’ll go right out to 200. It really depends on the water depth, of how far it is. In some parts of the world it’s pretty shallow.
Kudlow: What’s out there Larry? There estimates of 86 billion barrels out there. Is that true?
Dickerson: Well, we really don’t know. All we’ve really significantly explored or really looked at with seismic is in the central and western parts of the U.S. Gulf of Mexico. I suppose that estimate is as good as any. But until we get out and work off the eastern Gulf and work up and down the Atlantic Coast and California’s been shut in for many years, I just don’t think we’ll know. But the history has been that there’s always been more than the initial estimates indicate.
Kudlow: If Congress gave you the green light tomorrow – which they won’t – but if they gave you a green light to drill offshore, how long would it take you to start lifting oil?
Dickerson: Unfortunately that is going to be some period of time. Demand is such all over the world that we’ve been taking rigs out of the U.S. Gulf. There’s probably 30 percent less rigs at work today than there was even three years ago. And the rigs that we have are booked up quite a bit in advance. So we’d have to do that. But while we were building new rigs, or relocating rigs here, our oil company customers would be doing the seismic and would be getting ready for that. So I would guess that it would be, by the time they got the studies and all that, drill bits wouldn’t be going into the ground for a couple years. And then maybe another couple years after that.
Kudlow: So four or five years?
Dickerson: Yeah probably.
Kudlow: So wouldn’t the futures traders who are much maligned, wouldn’t they pick that up right away? They see you going out there, they see you mobilizing. Wouldn’t the traders start lowering the futures prices? Those futures markets go out, heck, they go out ten years.
Dickerson: Well it certainly couldn’t hurt. But it’s going to require a number of efforts all across the board. We’re not ruling anything out. But to take this action [against drilling], which is not followed in any other part of the world, and to take it off the table, just doesn’t make any sense to me.
Kudlow: Well no other country is so dominated by greenies, and mau-maued by greenies. But let me just ask you Larry, is there a twitter, is there a buzz about the McCain statement and the Bush statement? What are your colleagues saying in the drilling business?
Dickerson: Well I think we’re encouraged. But I mean, we’ve been down this for twenty years of ups and downs. But certainly this is a significant step forward. And as far as we’re concerned, you’ve indicated what our stock price and our income have done, primarily off some limited Gulf of Mexico, but off the rest of the world. So we’re going to do okay. But we would like to see jobs remain in America. We’d like to help this country out on this issue.
Kudlow: Alright, more on drill, drill, drill. The question is how deep? How much? How green? Here’s Larry Dickerson, CEO of Houston based Diamond Offshore Drilling. Larry, great to see you. Just to put a quick picture up on the full screen, your stock has been off the charts in the last three or four years. I got you up 500 percent. Your profits are growing near 70 percent per year, with 30 percent annual growth in sales. Welcome to the show. Now I want to ask you. Okay, we had on CNBC one of those cute looking greenies, tree huggers were on, and they were debating somebody about this drilling business. And they say, ‘Okay, you drill offshore, outer continental shelf, you’re gonna wreck the beaches of the coastal states. You’re gonna ruin the tourist trade and destroy their economies.’ What’s your response?
Dickerson: Well Larry, there hasn’t been any significant – even insignificant that I can think of – oil spill from U.S. waters in over thirty years. We have an excellent environmental record. The amount of redundancy testing and government regulation put in place I think all but eliminate that as a possibility.
Kudlow: So they’re basically just mau-mauing the business, the drillers. They’re mau-mauing the oil companies. They’re mau-mauing the American people, right?
Dickerson: Well, I suppose there’s some logic to that. But at the end of the day, there’s the issue of supply and there’s the issue of jobs. People are paying $4 dollars a gallon for gasoline and we can recycle significant parts of that back to the economy in jobs – high paying blue-collar jobs and white collar jobs. We can recycle that through taxes. As Secretary Kempthorne said, a lot of that could go back to the states and help them with their budget problems.
Kudlow: How far offshore can you go? You’re a deep-water driller aren’t you?
Dickerson: Yeah, our deepest rigs can go 10,000 feet of water.
Kudlow: How many miles out?
Dickerson: Oh, we’ll go right out to 200. It really depends on the water depth, of how far it is. In some parts of the world it’s pretty shallow.
Kudlow: What’s out there Larry? There estimates of 86 billion barrels out there. Is that true?
Dickerson: Well, we really don’t know. All we’ve really significantly explored or really looked at with seismic is in the central and western parts of the U.S. Gulf of Mexico. I suppose that estimate is as good as any. But until we get out and work off the eastern Gulf and work up and down the Atlantic Coast and California’s been shut in for many years, I just don’t think we’ll know. But the history has been that there’s always been more than the initial estimates indicate.
Kudlow: If Congress gave you the green light tomorrow – which they won’t – but if they gave you a green light to drill offshore, how long would it take you to start lifting oil?
Dickerson: Unfortunately that is going to be some period of time. Demand is such all over the world that we’ve been taking rigs out of the U.S. Gulf. There’s probably 30 percent less rigs at work today than there was even three years ago. And the rigs that we have are booked up quite a bit in advance. So we’d have to do that. But while we were building new rigs, or relocating rigs here, our oil company customers would be doing the seismic and would be getting ready for that. So I would guess that it would be, by the time they got the studies and all that, drill bits wouldn’t be going into the ground for a couple years. And then maybe another couple years after that.
Kudlow: So four or five years?
Dickerson: Yeah probably.
Kudlow: So wouldn’t the futures traders who are much maligned, wouldn’t they pick that up right away? They see you going out there, they see you mobilizing. Wouldn’t the traders start lowering the futures prices? Those futures markets go out, heck, they go out ten years.
Dickerson: Well it certainly couldn’t hurt. But it’s going to require a number of efforts all across the board. We’re not ruling anything out. But to take this action [against drilling], which is not followed in any other part of the world, and to take it off the table, just doesn’t make any sense to me.
Kudlow: Well no other country is so dominated by greenies, and mau-maued by greenies. But let me just ask you Larry, is there a twitter, is there a buzz about the McCain statement and the Bush statement? What are your colleagues saying in the drilling business?
Dickerson: Well I think we’re encouraged. But I mean, we’ve been down this for twenty years of ups and downs. But certainly this is a significant step forward. And as far as we’re concerned, you’ve indicated what our stock price and our income have done, primarily off some limited Gulf of Mexico, but off the rest of the world. So we’re going to do okay. But we would like to see jobs remain in America. We’d like to help this country out on this issue.
Thursday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:MAKING SENSE OF THE MARKETS, ECONOMY, OIL & MORE...Our stock market all-stars will weigh in with their perspective on all the latest news, issues and developments affecting investors.
On board:
*Ken Langone, Home Depot co-founder
*Dan Yergin, Cambridge Energy Research Chairman
*Jack Gage, Forbes magazine associate editor
*Andy Busch, global FX strategist, BMO Capital Markets
*Mark Skousen, financial economist, author, editor of the financial advice newsletter Forecasts & Strategies
Also..CNBC ace reporter Charlie Gasparino will be aboard with all his latest insight.
NUCLEAR ENERGY...Gary Rainwater, Ameren CEO, will be joining us with a look at nuclear energy's controversial role in U.S. energy policy.
OIL POLITICS...Duking it out on all things energy will be former Clinton labor secretary and Cal Berkely professor/author Robert Reich and Forbes's Jack Gage.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Wednesday, June 18, 2008
Mac’s Oil-Drilling Flip-Flop Is a Good First Step
Warts and all, John McCain’s flip-flop on offshore drilling is a very welcome development. When circumstances change, political leaders should change their policies. And $4 at the pump and $140 in the open market is certainly enough changing circumstances to warrant McCain’s constructive shift on offshore drilling. Regrettably, McCain still talks about the “pristine” ANWR patch. But he’s just not gonna move on that.
Obama, meanwhile, is repeating the tired old Democratic response that there’s no way offshore drilling will lower prices now. But he is wrong. And McCain has an opening here if he’d only stop his silly attacks on “reckless speculators.”
The Arizona senator doesn’t know anything about speculators or investors or commodity trading or any of that stuff. The reality is, should Congress overturn its offshore-drilling moratorium, those very same speculators are gonna start selling crude-oil futures contracts and price declines will filter backwards from the longer-term contracts to the cash market. In other words, what can be bought will be sold. If drilling expectations change on the hope that future oil supplies will rise, prices will adjust lower and it will happen fast.
This is what Obama doesn’t understand. It’s also what McCain doesn’t understand. Price changes are pulled forward in response to shifting oil-supply policies. Ironically, one of McCain’s senior economic advisors, Kevin Hassett of the AEI think-tank, has just written a column on this very subject. So I don’t know who McCain is talking to, but he ought to talk to Kevin Hassett, who is a very smart guy.
Regarding the investigation of commodity futures undertaken by the CFTC, acting chairman Walter Lukken has said they have not found a smoking gun. And this whole exercise in investigating traders reminds me of the nonsensical investigations of so-called price gouging, which for decades have come to nothing.
In addition, McCain should get off this “obscene profits” song about oil-company earnings. Obscene profits are the near cousin of the windfall profits tax. Once again that puts McCain on the liberal-Democratic side of the issue. What you don’t want is to deter oil drillers and producers from going into new fields offshore and onshore if Congress lets them.
One reason for all this is economic growth and jobs. A Wharton Econometrics study (hat tip to Mark Perry at Carpe Diem) shows that total employment at full production in ANWR would come to 735,000 new jobs created across the country, not just in Alaska. So not only would offshore drilling and ANWR and other domestic sources of energy reduce prices, they would also be huge job creators to spur the economy. This is something McCain should push.
Finally, President Bush made a very strong statement today to lift the moratorium on domestic and offshore production. In his statement he emphasized the oil-shale fields in the Green River Basin of Colorado, Utah, and Wyoming. There is the equivalent of 800 billion barrels of recoverable oil in this area, more than three-times larger than the proven oil reserves of Saudi Arabia.
Now get this: Bush charged that in last year’s budget bill Democrats inserted a provision blocking oil-shale leasing on federal lands. That’s unbelievable. McCain should pick up on that point, too. That oil shale could create another million jobs, bringing oil prices back down to about $75 a barrel and pushing gas pump prices way down as well.
Onshore, offshore, oil shale. The mantra here is drill, drill, drill. Oil, jobs, and the economy may determine this year’s election. Sen. McCain has made a very good start but he has much more work to do.
Obama, meanwhile, is repeating the tired old Democratic response that there’s no way offshore drilling will lower prices now. But he is wrong. And McCain has an opening here if he’d only stop his silly attacks on “reckless speculators.”
The Arizona senator doesn’t know anything about speculators or investors or commodity trading or any of that stuff. The reality is, should Congress overturn its offshore-drilling moratorium, those very same speculators are gonna start selling crude-oil futures contracts and price declines will filter backwards from the longer-term contracts to the cash market. In other words, what can be bought will be sold. If drilling expectations change on the hope that future oil supplies will rise, prices will adjust lower and it will happen fast.
This is what Obama doesn’t understand. It’s also what McCain doesn’t understand. Price changes are pulled forward in response to shifting oil-supply policies. Ironically, one of McCain’s senior economic advisors, Kevin Hassett of the AEI think-tank, has just written a column on this very subject. So I don’t know who McCain is talking to, but he ought to talk to Kevin Hassett, who is a very smart guy.
Regarding the investigation of commodity futures undertaken by the CFTC, acting chairman Walter Lukken has said they have not found a smoking gun. And this whole exercise in investigating traders reminds me of the nonsensical investigations of so-called price gouging, which for decades have come to nothing.
In addition, McCain should get off this “obscene profits” song about oil-company earnings. Obscene profits are the near cousin of the windfall profits tax. Once again that puts McCain on the liberal-Democratic side of the issue. What you don’t want is to deter oil drillers and producers from going into new fields offshore and onshore if Congress lets them.
One reason for all this is economic growth and jobs. A Wharton Econometrics study (hat tip to Mark Perry at Carpe Diem) shows that total employment at full production in ANWR would come to 735,000 new jobs created across the country, not just in Alaska. So not only would offshore drilling and ANWR and other domestic sources of energy reduce prices, they would also be huge job creators to spur the economy. This is something McCain should push.
Finally, President Bush made a very strong statement today to lift the moratorium on domestic and offshore production. In his statement he emphasized the oil-shale fields in the Green River Basin of Colorado, Utah, and Wyoming. There is the equivalent of 800 billion barrels of recoverable oil in this area, more than three-times larger than the proven oil reserves of Saudi Arabia.
Now get this: Bush charged that in last year’s budget bill Democrats inserted a provision blocking oil-shale leasing on federal lands. That’s unbelievable. McCain should pick up on that point, too. That oil shale could create another million jobs, bringing oil prices back down to about $75 a barrel and pushing gas pump prices way down as well.
Onshore, offshore, oil shale. The mantra here is drill, drill, drill. Oil, jobs, and the economy may determine this year’s election. Sen. McCain has made a very good start but he has much more work to do.
A Real Energy Policy
Take a look at what my former boss had to say on this subject over twenty-five years ago. Now this is what I call a good-looking energy policy.“America must get to work producing more energy. The Republican program for solving economic problems is based on growth and productivity.
Large amounts of oil and natural gas lay beneath our land and off our shores, untouched, because the present administration seems to believe the American people would rather see more regulation, more taxes and more controls than more energy.
Coal offers great potential. So does nuclear energy produced under rigorous safety standards. It could supply electricity for thousands of industries and millions of jobs and homes. It must not be thwarted by a tiny minority opposed to economic growth which often finds friendly ears in regulatory agencies for its obstructionist campaigns.
Make no mistake. We will not permit the safety of our people or our environment heritage to be jeopardized, but we are going to reaffirm that the economic prosperity of our people is a fundamental part of our environment.”
-From Ronald Reagan’s Acceptance Speech at the 1980 Republican Convention, July 17 1980.
Tuesday, June 17, 2008
Tuesday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:MAKING SENSE OF THE MARKETS & THE FED...Our stock market and economic all-stars will discuss and debate all the latest news and developments facing investors.
On board:
*Ken Heebner, co-founder of Capital Growth Management
*Wayne Angell, former Federal Reserve Governor
*Quentin Hardy, Forbes Silicon Valley bureau chief
*Dennis Kneale, CNBC media & technology editor
DRILL! DRILL! DRILL!...Tom Fry, president of the National Ocean Industries Association (NOIA), the only trade association representing all facets of the offshore energy exploration and production business, will join us with his thoughts and perspective.
DEBATE: MCCAIN'S ENERGY PLAN...Squaring off this evening are Dan Tarullo, economic adviser to Barack Obama and Nancy Pfotenhauer, domestic policy adviser to Senator John McCain.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Monday, June 16, 2008
The Dollar and Bernanke’s Reputation
Robert Novak’s column today argues that Wall Street speculation over Fed rate hikes “appears to be dead wrong.” Novak says Fed head Ben Bernanke is more worried about spiking oil prices causing recession than he is about inflation.
If Novak is right, the central bank is going to suffer a big credibility loss by not acting. Perhaps on word of Novak’s column, gold jumped $16 this morning to $889. The greenback itself fell.
In the May report released last week, U.S. CPI jumped six-tenths of 1 percent to 4.1 percent over the past year. It has been running around 4 percent for the past six months. Food and energy are the big drivers, with gas prices at the pump rising 21 percent annually over the past three months and food prices by 6 percent.
Oil is up $3 this morning to $138. In Europe, the May CPI came in at 3.7 percent, with ECB head Jean-Claude Trichet signaling another rate hike.
Bernanke recently said the Fed would “strongly resist” inflationary pressures. And he has talked openly about defending the dollar. President Bush and Treasury man Paulson have made similar sounds, including at this weekend’s G8 meetings.
Bond-market futures are pricing in a 100-basis-point rise in the Fed’s target rate over the next seven months. For the August meeting there is a 70 percent probability of a one-quarter-point rate hike. By this January the target rate is predicted to reach 3 percent. Currently it is 2 percent.
In the open market for Treasuries, the 2-year note is now yielding about 3 percent. Last March, it was only 1.35 percent. Many traders use the 2-year note as a proxy for the fed funds rate. The huge increase in the 2-year rate is signaling a stronger U.S. economy, somewhat higher inflation, and a series of fed rate hikes.
If market expectations are foiled by a passive Fed that fails to deliver on its promise of a stronger greenback and its much-touted pledge to hold down inflation, it is likely the dollar will tank once again and drive up oil prices to new record-high levels.
Mr. Bernanke surprised almost everyone with his tough statements on the dollar and inflation. But if Novak is right, and there is no Fed follow through, both the dollar and Bernanke’s reputation are really going to sink.
My thought? I believe the Fed should raise its target rate one-quarter of a point at its meeting next week. It would be the shot heard around the world. The greenback would surge, oil and gold would collapse, and a lot of investment liquidity would come into the U.S. economy.
Let’s see what happens.
If Novak is right, the central bank is going to suffer a big credibility loss by not acting. Perhaps on word of Novak’s column, gold jumped $16 this morning to $889. The greenback itself fell.
In the May report released last week, U.S. CPI jumped six-tenths of 1 percent to 4.1 percent over the past year. It has been running around 4 percent for the past six months. Food and energy are the big drivers, with gas prices at the pump rising 21 percent annually over the past three months and food prices by 6 percent.
Oil is up $3 this morning to $138. In Europe, the May CPI came in at 3.7 percent, with ECB head Jean-Claude Trichet signaling another rate hike.
Bernanke recently said the Fed would “strongly resist” inflationary pressures. And he has talked openly about defending the dollar. President Bush and Treasury man Paulson have made similar sounds, including at this weekend’s G8 meetings.
Bond-market futures are pricing in a 100-basis-point rise in the Fed’s target rate over the next seven months. For the August meeting there is a 70 percent probability of a one-quarter-point rate hike. By this January the target rate is predicted to reach 3 percent. Currently it is 2 percent.
In the open market for Treasuries, the 2-year note is now yielding about 3 percent. Last March, it was only 1.35 percent. Many traders use the 2-year note as a proxy for the fed funds rate. The huge increase in the 2-year rate is signaling a stronger U.S. economy, somewhat higher inflation, and a series of fed rate hikes.
If market expectations are foiled by a passive Fed that fails to deliver on its promise of a stronger greenback and its much-touted pledge to hold down inflation, it is likely the dollar will tank once again and drive up oil prices to new record-high levels.
Mr. Bernanke surprised almost everyone with his tough statements on the dollar and inflation. But if Novak is right, and there is no Fed follow through, both the dollar and Bernanke’s reputation are really going to sink.
My thought? I believe the Fed should raise its target rate one-quarter of a point at its meeting next week. It would be the shot heard around the world. The greenback would surge, oil and gold would collapse, and a lot of investment liquidity would come into the U.S. economy.
Let’s see what happens.
Monday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE STOCK MARKET, ECONOMY, OIL & MORE...Our stock market all-stars will discuss and debate all the latest news, trends and developments affecting investors.
On board:
*Don Luskin, chief investment officer, Trend Macro
*Gary Shilling, president of A. Gary Shilling & Co.
*Dr. Bob Froehlich, chief investment strategist, DWS Scudder
*Rich Karlgaard, publisher of Forbes magazine
Also...Energy expert Chris Edmonds, managing principal of FIG Partners Energy Research & Capital Group, will be aboard with his latest thoughts and ideas.
A LOOK AT THE POLLS & POLITICS OF OIL...Pollsters Scott Rasmussen from Rasmussen Reports and Frank Newport, editor-in-chief of Gallup, will join us with all the latest polls and perspective.
ROBIN HOOD RETURNS?...Squaring off on Obama's Social Security plan will be Jared Bernstein, senior economist at the Economic Policy Institute and Dan Clifton, head of policy research for Strategas Research Partners.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Friday, June 13, 2008
The Ambiguous Economics of John McCain
Who can figure out what Sen. John McCain really stands for on the economy?
In recent days the Republican standard bearer gave a really strong supply-side taxpayer-friendly speech, hitting all the right notes. Undoubtedly his best economic statement of the campaign to date. And then, yesterday, he appears to embrace King Dollar in his New York town hall meeting. Here’s the money quote: “We have to talk up the dollar, obviously, and I’m glad that Bernanke did the other day, and take certain short-term steps to try and strengthen the dollar.”
This is good. Very good. I’ve been worried that Obama, listening to Paul Volker, would get to King Dollar before McCain. But it looks like Big Mac, listening to Steve Forbes and Jack Kemp, is getting there first. So now we have McCain arguing for lower tax rates and a strong greenback, which is the ultimate supply-side Reaganesque message. Doesn’t get any better. In fact, from here, it only gets worse.
In that town hall meting yesterday, McCain also teed off on oil companies and so-called financial-market speculators. From today’s New York Sun, McCain endorsed a federal probe into speculation in the oil market: “I believe there needs to be a thorough and complete investigation of speculators to find out whether speculation has been going on and, if so, how much it has affected the price of a barrel of oil.” Well, this puts Big Mac in cahoots with Obama and the liberal Democrats who are calling for the same thing.
I don’t know if Mr. McCain realizes that in the last six months or so there has been a run on the dollar. That’s been a key driver of higher oil prices, along with various supply bottlenecks around the world. A strong dollar would cure this without having to blame “speculators” who actually enhance markets by adding liquidity. And anyway, so-called speculators are also investors — including, by the way, large state pension funds that represent tens of millions of cops, firefighters, teachers, and others. Free-market capitalism includes all investors, private and public. There are long-term investors and short-term momentum traders, and those momentum guys can turn markets on a dime. If they see a strong dollar, they’ll sell oil (and gold).
Then Mr. McCain lashes out at oil companies: “I am very angry, frankly, at the oil companies. Not only because of the obscene profits they’ve made, but at their failure to invest in alternative energy to help us eliminate our dependence on foreign oil.”
Well, Senator, my response is drill, drill, drill. Why aren’t you working to deregulate offshore drilling, ANWR drilling, and oil-shale drilling? By some estimates there are nearly two trillion barrels of oil to be lifted. And American oil companies can do it better than anyone in the world. Not only would so-called speculators take a look at this new drilling, they would start selling oil futures contracts immediately and pretty soon the spot-market price would come down.
And by the way, the drill-drill-drill strategy would create hundreds of thousands of high-paying jobs. Think of it. Plus, the oil companies are already paying a bloody fortune in record taxes to the federal Treasury. This is all free-market capitalism. Why not let it work, senator?
McCain is scoring poorly with the investor class because of his economic ambiguities. As we know, the investor class is one of the highest-turnout blocks each election, comprising two of nearly every three votes cast. It should be a natural core GOP constituency. But wait a minute, look at this: The latest numbers from the highly respected IBD/TIPP poll show McCain with a slim 44 percent to 41 percent lead over Obama in June. Last April, McCain was ahead 49 to 41 percent. He should win this investor poll by at least 15 percentage points, given the anti-investor and anti-business sentiment loudly proclaimed by Obama. However, if investors are on the fence about this election, it could spell trouble for Senator Mac.
In recent days the Republican standard bearer gave a really strong supply-side taxpayer-friendly speech, hitting all the right notes. Undoubtedly his best economic statement of the campaign to date. And then, yesterday, he appears to embrace King Dollar in his New York town hall meeting. Here’s the money quote: “We have to talk up the dollar, obviously, and I’m glad that Bernanke did the other day, and take certain short-term steps to try and strengthen the dollar.”
This is good. Very good. I’ve been worried that Obama, listening to Paul Volker, would get to King Dollar before McCain. But it looks like Big Mac, listening to Steve Forbes and Jack Kemp, is getting there first. So now we have McCain arguing for lower tax rates and a strong greenback, which is the ultimate supply-side Reaganesque message. Doesn’t get any better. In fact, from here, it only gets worse.
In that town hall meting yesterday, McCain also teed off on oil companies and so-called financial-market speculators. From today’s New York Sun, McCain endorsed a federal probe into speculation in the oil market: “I believe there needs to be a thorough and complete investigation of speculators to find out whether speculation has been going on and, if so, how much it has affected the price of a barrel of oil.” Well, this puts Big Mac in cahoots with Obama and the liberal Democrats who are calling for the same thing.
I don’t know if Mr. McCain realizes that in the last six months or so there has been a run on the dollar. That’s been a key driver of higher oil prices, along with various supply bottlenecks around the world. A strong dollar would cure this without having to blame “speculators” who actually enhance markets by adding liquidity. And anyway, so-called speculators are also investors — including, by the way, large state pension funds that represent tens of millions of cops, firefighters, teachers, and others. Free-market capitalism includes all investors, private and public. There are long-term investors and short-term momentum traders, and those momentum guys can turn markets on a dime. If they see a strong dollar, they’ll sell oil (and gold).
Then Mr. McCain lashes out at oil companies: “I am very angry, frankly, at the oil companies. Not only because of the obscene profits they’ve made, but at their failure to invest in alternative energy to help us eliminate our dependence on foreign oil.”
Well, Senator, my response is drill, drill, drill. Why aren’t you working to deregulate offshore drilling, ANWR drilling, and oil-shale drilling? By some estimates there are nearly two trillion barrels of oil to be lifted. And American oil companies can do it better than anyone in the world. Not only would so-called speculators take a look at this new drilling, they would start selling oil futures contracts immediately and pretty soon the spot-market price would come down.
And by the way, the drill-drill-drill strategy would create hundreds of thousands of high-paying jobs. Think of it. Plus, the oil companies are already paying a bloody fortune in record taxes to the federal Treasury. This is all free-market capitalism. Why not let it work, senator?
McCain is scoring poorly with the investor class because of his economic ambiguities. As we know, the investor class is one of the highest-turnout blocks each election, comprising two of nearly every three votes cast. It should be a natural core GOP constituency. But wait a minute, look at this: The latest numbers from the highly respected IBD/TIPP poll show McCain with a slim 44 percent to 41 percent lead over Obama in June. Last April, McCain was ahead 49 to 41 percent. He should win this investor poll by at least 15 percentage points, given the anti-investor and anti-business sentiment loudly proclaimed by Obama. However, if investors are on the fence about this election, it could spell trouble for Senator Mac.
Friday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE STOCK MARKET & ECONOMY...Our stock market all-stars will discuss and debate all the latest news, trends, and developments affecting investors.
On board:
* Doug Kass, president, Seabreeze Partners Management
* Steve Moore, senior economics writer, Wall Street Journal
* Vince Farrell, managing director of Scotsman Capital
* Stefan Abrams, Bryden-Abrams Investment Management managing partner
Also on board...Economists Joe LaVorgna, chief US economist at Deutsche Bank and Brian Wesbury, chief economist at First Trust Advisors - both will debate the latest economic news.
LOOKING AHEAD: THE G7 MEETING ...Bob Hormats, Goldman Sachs International vice-chairman, will join us with his thoughts on what to be on the lookout for when finance ministers and central bank chiefs from the G7 nations gather in Japan for their two-day meeting.
The market panel will participate in the discussion.
A LOOK AT THE POLLS...Pollster Scott Rasmussen from Rasmussen Reports will fill us in on the latest polling data.
MONEY POLITICS...Our Washington to Wall Street panel of experts will duke it out over all the latest money politics election issues including what to make of Sen. McCain's economic positions.
*"Jimmy P"Pethokoukis, senior writer, U.S. News & World Report
*Steve Moore, senior economics writer, Wall Street Journal
*Lawrence O'Donnell, political commentator, former West Wing writer/producer
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Thursday, June 12, 2008
Inflation Is Real. Bernanke’s Right. Kohn’s All Wet.
Driven up by the cheap dollar, U.S. import prices surged nearly 18 percent above year-ago levels, according to a new report out today. Even removing all energy-related fuels, the surge is still 6 percent. As recently as late 2006, total import inflation was zero. And the core rate was one-half of 1 percent in early 2006. So inflation is getting worse and we may see these price hikes filter into tomorrow’s consumer price report.
So let’s give a couple of cheers to Fed head Ben Bernanke, who has belatedly woken up to the inflationary perils of the cheap dollar. Recently Bernanke pledged to “strongly resist” any decline in public confidence over stable prices. Essentially he has put a floor underneath the dollar. He may even take back the last quarter-point rate cut in July, raising the Fed’s target rate to 2.25 percent. And today’s strong retail sales report, with upward revisions to April and March, confirm Bernanke’s view that the economy is likely getting better, not worse.
Now here’s the rub. Incredibly, Bernanke’s number two, Donald Kohn, gave a speech in Boston contradicting the Fed chairman. Relying on a Phillips-curve tradeoff between inflation and unemployment used by liberal economists who disagree with Milton Friedman’s principle that inflation is a monetary phenomenon, Kohn tells a Boston audience that “appropriate monetary policy following a jump in the price of oil will allow, on a temporary basis, both some increase in unemployment and some increase in price inflation.” And then he goes on to say that too much attention to inflation will cause unemployment to go too high.
In other words, right out of the Jimmy Carter 1970’s stagflationary playbook, a little more inflation is always okay if it creates a little less unemployment.
This flawed thinking decimated the 1970’s economy and drove both inflation and unemployment sky high. Kohn not only undercut his own boss Bernanke, he also undermined efforts by President Bush and Treasury man Henry Paulson to restore confidence in the U.S. greenback at the G8 meeting about to begin.
Although Kohn was originally appointed to the Fed by President George W. Bush, one has to wonder if Kohn isn’t thinking about an Obama presidency, and perhaps even damaging today’s economy to make Republicans look worse and Obama’s pessimistic economic view look better.
So let’s give a couple of cheers to Fed head Ben Bernanke, who has belatedly woken up to the inflationary perils of the cheap dollar. Recently Bernanke pledged to “strongly resist” any decline in public confidence over stable prices. Essentially he has put a floor underneath the dollar. He may even take back the last quarter-point rate cut in July, raising the Fed’s target rate to 2.25 percent. And today’s strong retail sales report, with upward revisions to April and March, confirm Bernanke’s view that the economy is likely getting better, not worse.
Now here’s the rub. Incredibly, Bernanke’s number two, Donald Kohn, gave a speech in Boston contradicting the Fed chairman. Relying on a Phillips-curve tradeoff between inflation and unemployment used by liberal economists who disagree with Milton Friedman’s principle that inflation is a monetary phenomenon, Kohn tells a Boston audience that “appropriate monetary policy following a jump in the price of oil will allow, on a temporary basis, both some increase in unemployment and some increase in price inflation.” And then he goes on to say that too much attention to inflation will cause unemployment to go too high.
In other words, right out of the Jimmy Carter 1970’s stagflationary playbook, a little more inflation is always okay if it creates a little less unemployment.
This flawed thinking decimated the 1970’s economy and drove both inflation and unemployment sky high. Kohn not only undercut his own boss Bernanke, he also undermined efforts by President Bush and Treasury man Henry Paulson to restore confidence in the U.S. greenback at the G8 meeting about to begin.
Although Kohn was originally appointed to the Fed by President George W. Bush, one has to wonder if Kohn isn’t thinking about an Obama presidency, and perhaps even damaging today’s economy to make Republicans look worse and Obama’s pessimistic economic view look better.
Thursday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE MARKETS & ECONOMY...Our stock market and economic all-stars will discuss and debate all the latest news, trends, and developments affecting investors.
On board:
*Art Laffer, economist and chairman of Laffer Associates
*Gary Shilling, president of A. Gary Shilling & Co.
*Andy Busch, global FX strategist, BMO Capital Markets
*Jared Bernstein, senior economist, Economic Policy Institute
*Jerry Bowyer, chief economist, BenchMark Financial Network
Also...New York Times M&A reporter Andrew Ross Sorkin will be aboard to dicuss all the latest news regarding Lehman and Yahoo/Microsoft.
WHY NOT COAL?...Arch Coal chairman and CEO Steven Leer will join us with his thoughts and perspective on this critically important and controversial national resource.
OIL DEBATE: WHY AREN'T WE DRILLING HERE AT HOME?...Joining us from Washington to debate this controversial political and economic topic are Sen. Bernard Sanders (I-VT) and Sen. John Barrasso (R-WY).
OBAMA'S ECONOMIC ADVISOR RUFFLES UNION FEATHERS...We'll discuss how Obama's appointment yesterday of Jason Furman as his top economic aide is agitating labor union leaders. On to discuss are economists Jared Bernstein and Jerry Bowyer.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Plosser is Right on the Money
Is there a July Fed action coming to take back a one-quarter rate cut? I think so. That would put up the target to 2.25%. It would be a shot heard round the world, strengthening the dollar and attracting new liquidity and capital flows into the US economy. Bullish for containing inflation, keeping down the unindexed capital gains tax and helping stocks and the economy to recover. Plosser is right on the money.
And then: Drill, drill, drill.
From CNBC.com:
Fed's Plosser: Rates Will Have to Rise to Curb Inflation
The Federal Reserve's leading inflation hawk told CNBC that interest rates will have to rise soon in order to keep a lid on rising prices."We need to take steps to ensure that inflation does not get out of control," Philadelphia Fed President Charles Plosser said in a live interview. "It is certainly clear that rates will have to rise. The question is when."
Plosser comments are the latest in a series of speeches by Fed officials about the dangers of inflation, though the messages have been somewhat mixed.
On Wednesday, Fed Vice Chairman Donald Kohn hinted that the central bank is inclined to leave rates steady despite rising inflation worries among US consumers.
Kohn said that when the economy is hit with an oil price shock as it has been this year, the "appropriate" Fed policy will permit -- temporarily -- both higher inflation and higher unemployment.
And on Monday, Fed Chairman Ben Bernanke said the centeral bank would work to restrain consumer expectations of higher prices, hinting that the Fed may be inclined to boost rates if inflation worsens.
The Fed is hoping tough talk on inflation will do the job of moderating recent price increases, giving it room to avoid raising interest rates as the economy remains fragile.
Plosser, however, stressed that the Fed may need to act soon against inflation.
"We can't control the price of oil directly, but we can control the underlying inflation pressures for the economy," he said.
Plosser also said he and his central bank colleagues must work to lessen the effects of the crisis in the financial system as well as inflation.
"I think they're both real threats, and I think we have to manage both of them," he said.
Plosser said the Fed has taken aggressive steps to counter both problems, but he urged continued vigilance, saying the base of inflation is broadening, and the Fed is in a unique position to act.
Plosser feels the Fed mishandled inflation in the 1970s by acting too late, allowing a relative price shock in oil to translate into higher inflation.
Plosser endorsed Fed efforts to tackle the credit crunch -- such as opening the discount window -- with some reservations.
"I think the Fed has been very creative and aggressive in trying to contain the crisis in the financial markets and the turmoil, and we've done some very interesting, innovative things," he said. "Those decisions and choices we've made have cost some benefits. They contain some risk and challenges."
He also expressed reservations about government efforts to stimulate the economy through tax-rebate checks.
"I am not counting on that having substantial impact on the economy going forward," he said.
Wednesday, June 11, 2008
McCain Is Exactly Wrong on Energy
Sen. John McCain delivered a nearly pluperfect supply-side tax-cut plan yesterday, one that is worthy of conservative support, and frankly a real eye-opener showing just how good he can be. I wrote about it in my latest column.
But then he goes on NBC’s Today Show this morning and gets the whole energy story wrong. Oh my gosh.
When asked about gas prices at the pump, and whether they could go any lower, Sen. McCain said he didn’t think so because “You’ve got a finite supply, basically, and a cartel controlling it.”
This is exactly wrong. There is no finite supply, or if there is we are 100 years away from it. I don’t know who has put this thought into the senator’s mind, but it is a bad thought in terms of energy and a bad thought in terms of the politics of this campaign.
Look, we have the Bakken fields, the outer continental shelf and all the offshore drilling opportunities, ANWR, and so forth. There’s probably over a trillion barrels worth of reserves out there. And Republicans in the Senate are trying to move a deregulated drilling bill through the process. McCain should be backing this and talking about it.
Democrats are out there pushing cap-and-trade, which would jack up gasoline and oil energy prices, damage the economy, and create a massive central-planning exercise. The Democratic Congress has done nothing to alleviate the oil shortage. They’re captured by the greenies. They should be blamed.
This is a real turnaround issue for the Republicans and Mr. McCain. But McCain’s not going there.
Incidentally, in the Today Show interview, the senator takes a whack at oil-company profits, suggesting they should return some of these profits to consumers. And he would consider voting for a windfall profits tax. And then he used the phrase “obscene profits.” Make that two oh my goshes.
But then he goes on NBC’s Today Show this morning and gets the whole energy story wrong. Oh my gosh.
When asked about gas prices at the pump, and whether they could go any lower, Sen. McCain said he didn’t think so because “You’ve got a finite supply, basically, and a cartel controlling it.”
This is exactly wrong. There is no finite supply, or if there is we are 100 years away from it. I don’t know who has put this thought into the senator’s mind, but it is a bad thought in terms of energy and a bad thought in terms of the politics of this campaign.
Look, we have the Bakken fields, the outer continental shelf and all the offshore drilling opportunities, ANWR, and so forth. There’s probably over a trillion barrels worth of reserves out there. And Republicans in the Senate are trying to move a deregulated drilling bill through the process. McCain should be backing this and talking about it.
Democrats are out there pushing cap-and-trade, which would jack up gasoline and oil energy prices, damage the economy, and create a massive central-planning exercise. The Democratic Congress has done nothing to alleviate the oil shortage. They’re captured by the greenies. They should be blamed.
This is a real turnaround issue for the Republicans and Mr. McCain. But McCain’s not going there.
Incidentally, in the Today Show interview, the senator takes a whack at oil-company profits, suggesting they should return some of these profits to consumers. And he would consider voting for a windfall profits tax. And then he used the phrase “obscene profits.” Make that two oh my goshes.
Big Mac: The Taxpayer-Friendly Candidate
McCain has called himself a foot soldier in the Reagan revolution. His tax speech clinches it.
Sen. John McCain moved decisively to the supply-side Tuesday in a strong speech to the National Small Business Summit in Washington, D.C. For investors, small-business owner-operators, and the vast majority of middle-class Americans who go to work every day and are concerned about Sen. McCain’s tax vision, this speech is good news. Big Mac is the taxpayer-friendly candidate.
The Republican candidate for president embraced low-tax-rate incentives to grow the economy, promising a combination of pro-growth tax reform and simplification along with significant spending restraint. He has called himself a foot soldier in the Reagan revolution. This tax speech clinches it.
McCain pledged to keep taxes low for families and employers, putting himself squarely in Ronald Reagan’s camp and offering to extend the long prosperity wave started by the Gipper over twenty-five years ago. In contrast, McCain charged Obama — who gave his economic speech on Monday — with proposing the single-biggest tax hike in the entire post-WWII period.
McCain asserted that “no matter which of us wins in November, there will be change in Washington. The question is what kind of change?” Obama says a McCain victory will hand Bush a third term. McCain says an Obama victory gives Jimmy Carter a second term.
I think McCain gets it right.
Getting down to specifics, McCain said he will maintain the low income and investment tax rates put in place by President Bush. He singled out the need to keep the capital-gains tax rate at a low 15 percent, so that businesses will have the investment necessary to expand jobs, productivity, and real wages.
Completely unlike Obama, McCain is saying you can’t have capitalism without capital. And he recognizes that investors must have high after-tax returns in order to take risks and fuel entrepreneurial activity. On this point, think high-risk energy technologies for clean coal, natural gas, oil shale, and nuclear and cellulosic power.
McCain repeated his plan to reduce the corporate tax rate to 25 percent from 35 percent. This could be his single-most-important tax reform. Not only will it enhance America’s global competitiveness, since we have the second highest corporate tax among large countries. But a number of studies show that roughly 70 percent of the benefits from a lower corporate tax will flow to the workforce in the form of higher real wages and more jobs.
McCain also pledged to keep the estate tax low to reward family businesses. Overall, he would seek a flatter and simpler tax system, probably modeled on Rep. Paul Ryan’s idea of two rates of 25 and 15 percent. McCain also discussed several middle-class tax cuts, such as doubling the child tax exemption and phasing out the alternative minimum tax. For businesses, McCain added a first-year cash-expensing provision for the write-off of new equipment and technology.
McCain coupled all this with a pledge to veto earmarks and pork-barrel spending. He held out as an example the outrageous $300 billion farm bill that drew Obama’s vote. McCain would go after corporate welfare and freeze discretionary spending outside of the military. And he made an especially strong case for the free-trade policies that have been so important to U.S. economic growth.
The McCain-Obama contrast couldn’t be more stark. Obama wants to use the tax system to redistribute income and wealth, not to grow the economy. He constantly talks about rewarding work over wealth. This is pure class warfare.
Obama doesn’t seem to understand that our nation was founded on the principle of equality of opportunity, and that private enterprise, not government, is the main economic driver. Obama intensely dislikes businesses. He would repeal all the Bush tax cuts and raise the corporate tax.
Obama talks about the need for bottom-up economic growth. But this is a canard. He’s pure top-down when it comes to big-spending government programs.
Obama singled out the ownership society, calling it a “worn dogma.” In fact he misjudges modern America, which is dominated today by 100 million investors, 25 million small-business owners, nearly 70 million homeowners, and roughly 140 million people who go to work everyday in the corporate world.
Obama opposes free trade. And though he has tried to hedge his bet on this point, it will never sell in this YouTube election.
Earlier in the campaign, Obama became the candidate of 1970’s scarcity and limits when he asserted that “we can’t drive our SUVs and eat as much as we want and keep our homes on, you know, 72 degrees Fahrenheit at all times, and then just expect that every other country is going to say okay.”
Ironically, it’s Sen. McCain who is saying “Yes we can.” We can grow. We can prosper. We can be confident about the future. He’s saying that with the right economic policies, America’s outlook will know no bounds.
Sen. John McCain moved decisively to the supply-side Tuesday in a strong speech to the National Small Business Summit in Washington, D.C. For investors, small-business owner-operators, and the vast majority of middle-class Americans who go to work every day and are concerned about Sen. McCain’s tax vision, this speech is good news. Big Mac is the taxpayer-friendly candidate.
The Republican candidate for president embraced low-tax-rate incentives to grow the economy, promising a combination of pro-growth tax reform and simplification along with significant spending restraint. He has called himself a foot soldier in the Reagan revolution. This tax speech clinches it.
McCain pledged to keep taxes low for families and employers, putting himself squarely in Ronald Reagan’s camp and offering to extend the long prosperity wave started by the Gipper over twenty-five years ago. In contrast, McCain charged Obama — who gave his economic speech on Monday — with proposing the single-biggest tax hike in the entire post-WWII period.
McCain asserted that “no matter which of us wins in November, there will be change in Washington. The question is what kind of change?” Obama says a McCain victory will hand Bush a third term. McCain says an Obama victory gives Jimmy Carter a second term.
I think McCain gets it right.
Getting down to specifics, McCain said he will maintain the low income and investment tax rates put in place by President Bush. He singled out the need to keep the capital-gains tax rate at a low 15 percent, so that businesses will have the investment necessary to expand jobs, productivity, and real wages.
Completely unlike Obama, McCain is saying you can’t have capitalism without capital. And he recognizes that investors must have high after-tax returns in order to take risks and fuel entrepreneurial activity. On this point, think high-risk energy technologies for clean coal, natural gas, oil shale, and nuclear and cellulosic power.
McCain repeated his plan to reduce the corporate tax rate to 25 percent from 35 percent. This could be his single-most-important tax reform. Not only will it enhance America’s global competitiveness, since we have the second highest corporate tax among large countries. But a number of studies show that roughly 70 percent of the benefits from a lower corporate tax will flow to the workforce in the form of higher real wages and more jobs.
McCain also pledged to keep the estate tax low to reward family businesses. Overall, he would seek a flatter and simpler tax system, probably modeled on Rep. Paul Ryan’s idea of two rates of 25 and 15 percent. McCain also discussed several middle-class tax cuts, such as doubling the child tax exemption and phasing out the alternative minimum tax. For businesses, McCain added a first-year cash-expensing provision for the write-off of new equipment and technology.
McCain coupled all this with a pledge to veto earmarks and pork-barrel spending. He held out as an example the outrageous $300 billion farm bill that drew Obama’s vote. McCain would go after corporate welfare and freeze discretionary spending outside of the military. And he made an especially strong case for the free-trade policies that have been so important to U.S. economic growth.
The McCain-Obama contrast couldn’t be more stark. Obama wants to use the tax system to redistribute income and wealth, not to grow the economy. He constantly talks about rewarding work over wealth. This is pure class warfare.
Obama doesn’t seem to understand that our nation was founded on the principle of equality of opportunity, and that private enterprise, not government, is the main economic driver. Obama intensely dislikes businesses. He would repeal all the Bush tax cuts and raise the corporate tax.
Obama talks about the need for bottom-up economic growth. But this is a canard. He’s pure top-down when it comes to big-spending government programs.
Obama singled out the ownership society, calling it a “worn dogma.” In fact he misjudges modern America, which is dominated today by 100 million investors, 25 million small-business owners, nearly 70 million homeowners, and roughly 140 million people who go to work everyday in the corporate world.
Obama opposes free trade. And though he has tried to hedge his bet on this point, it will never sell in this YouTube election.
Earlier in the campaign, Obama became the candidate of 1970’s scarcity and limits when he asserted that “we can’t drive our SUVs and eat as much as we want and keep our homes on, you know, 72 degrees Fahrenheit at all times, and then just expect that every other country is going to say okay.”
Ironically, it’s Sen. McCain who is saying “Yes we can.” We can grow. We can prosper. We can be confident about the future. He’s saying that with the right economic policies, America’s outlook will know no bounds.
Tuesday, June 10, 2008
Tuesday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE STOCK MARKET & ECONOMY...Our stock market and economic all-stars will discuss and debate all the latest news, trends, and developments affecting investors.
On board:
*Jerry Bowyer, chief economist, Benchmark Financial
*Joe Battipaglia, market strategist, Stifel Nicolaus
*Jack Gage, Forbes magazine associate editor
*Vince Farrell, managing director, Scotsman Capital
OIL & FOOD PRICES...Our market experts will offer their thoughts and perspective on energy and commodity prices.
On board:
*Shawn Tully, editor at large of Fortune magazine
*Kevin Kerr, president of Kerrtrade.com & editor of MarketWatch's Global Resources
The market panel will also join in the food & energy discussion.
YOUR MONEY, YOUR VOTE...We'll take a look at all the latest McCain/Obama election matchup news and developments with CNBC aces Maria Bartiromo and John Harwood who will be hosting tonight's CNBC election special at 8pm.
THE ECONOMY: MCCAIN VS. OBAMA...Dan Tarullo, economic adviser to Barack Obama will square off against McCain chief economic advisor Douglas Holtz-Eakin on all the key economic issues.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Monday, June 09, 2008
Voters Say 'Drill'
Neither candidate gets it.
The recent spike in oil prices and unemployment is dramatically changing this presidential campaign -- virtually overnight. The near $20 jump in oil to $140 a barrel, the unexpected half-point increase in the jobless rate to 5.5 percent (the biggest monthly increase in twenty years), and the resulting 400-point plunge in stocks has created a new campaign issue right before our eyes.
Public worry number one is now oil, jobs, and the economy, with the inflationary woes of the U.S. dollar right underneath. The candidate who can connect with these issues will win in November. But so far neither Obama nor McCain are dealing with the new political reality.
In fact, it’s all about oil right now. The price has doubled over the past year while the economy has slumped.
But here’s an eye opener. Recent polling data from Gallup show the percentage of voters blaming oil companies for skyrocketing gasoline prices has dropped from 34 percent to 20 percent over the past year. At the same time, support for more drilling in U.S. coastal and wilderness areas has increased to 57 percent from 41 percent.
And the candidates remain blind to these shifts.
Obama continues to lambaste oil companies while congressional Democrats push for cap-and-trade. They’re missing the point, big time. The public wants more energy and more fuel to cut high prices and spur economic growth. But the costly cap-and-trade plan would produce less fuel and less growth. It would only raise gas pump prices while mounting a Gosplan-type taxing, spending, and regulating program that would be the moral equivalent of Hillarycare on nationalized medicine.
Sen. McCain has an opening here. Yet he, like Obama, would have voted for cap-and-trade, which went down to defeat in last week’s Senate vote. And while Mr. McCain favors some off-shore production and has been strong on nuclear development, he is against drilling in ANWR Alaska.
Then there’s the oil nobody is talking about. The Bakken fields beneath North Dakota, Montana, and Canada hold an estimated 400 billion barrels of oil. In comparison, Saudi Arabia’s biggest field, Gahawar, has an estimated 55 billion barrels, while ANWR has an estimated 10.4 billion barrels.
Hat tip to Mark Perry at the Carpe Diem blog site for these figures. Perry also is reporting a Bureau of Land Management study showing 279 million acres under federal management where oil and gas could potentially be extracted. But more than half of this is totally off limits. Off-shore, where another 86 billion barrels lie in wait, is also restricted. Then there’s liquefied natural gas, oil shale, and the various coal-to-liquid carbon-capture and sequestration technologies that would be priced out of the market by cap-and-trade.
The U.S. is the Saudi Arabia of coal, but we can’t produce. We’re still the world’s third-largest oil producer, but we could be the Saudi Arabia of oil if our companies were free to drill. Oil CEOs like Rex Tillerson of ExxonMobil and David O’Reilly of Chevron keep saying this. But politicians aren’t heeding their message.
Israeli saber-rattling against Iran could have accounted for some of last week’s huge oil spike. And the unemployment story may not be as bad as the May jobs report suggests. An unexpected inflow of teenagers probably bloated the jobless figure by a couple tenths of 1 percent. And economist Jerry Bowyer points out that an unprecedented hike in the minimum wage may be derailing students looking for summer work. However, in a sign of future job improvement, the civilian labor force grew by nearly 600,000, meaning that more people looking for work could signal recovery. Weekly jobless claims are near 350,000, not the 500,000 of past recessions. Overall, at 5.5 percent, unemployment continues to be historically low.
But the economy is still in a slump, not a boom. And the fact remains that Americans are very worried about the economic outlook. This could be a recession election. And right now voter economic anxieties are all about oil, even more than the sub-prime housing credit problem.
Sen. McCain has a great pro-growth plan to slash corporate tax rates, a move that would be a strong tonic for jobs and wages. But he must bolster that plan with a new emphasis on deregulated energy markets that can produce a total portfolio of conventional and non-conventional energy, including major new drilling. He should couple that with a strong-dollar message to curb both energy and non-energy inflation, which is shrinking consumer paychecks and damaging corporate profits.
More oil, more jobs, better wages, and low inflation. That’s a winning GOP message this fall. But what if Sen. Obama gets there first? It’s unlikely, but not out of the question. Either way, voters will move to the candidate who connects with their worries. Right now those worries are up for grabs.
The recent spike in oil prices and unemployment is dramatically changing this presidential campaign -- virtually overnight. The near $20 jump in oil to $140 a barrel, the unexpected half-point increase in the jobless rate to 5.5 percent (the biggest monthly increase in twenty years), and the resulting 400-point plunge in stocks has created a new campaign issue right before our eyes.
Public worry number one is now oil, jobs, and the economy, with the inflationary woes of the U.S. dollar right underneath. The candidate who can connect with these issues will win in November. But so far neither Obama nor McCain are dealing with the new political reality.
In fact, it’s all about oil right now. The price has doubled over the past year while the economy has slumped.
But here’s an eye opener. Recent polling data from Gallup show the percentage of voters blaming oil companies for skyrocketing gasoline prices has dropped from 34 percent to 20 percent over the past year. At the same time, support for more drilling in U.S. coastal and wilderness areas has increased to 57 percent from 41 percent.
And the candidates remain blind to these shifts.
Obama continues to lambaste oil companies while congressional Democrats push for cap-and-trade. They’re missing the point, big time. The public wants more energy and more fuel to cut high prices and spur economic growth. But the costly cap-and-trade plan would produce less fuel and less growth. It would only raise gas pump prices while mounting a Gosplan-type taxing, spending, and regulating program that would be the moral equivalent of Hillarycare on nationalized medicine.
Sen. McCain has an opening here. Yet he, like Obama, would have voted for cap-and-trade, which went down to defeat in last week’s Senate vote. And while Mr. McCain favors some off-shore production and has been strong on nuclear development, he is against drilling in ANWR Alaska.
Then there’s the oil nobody is talking about. The Bakken fields beneath North Dakota, Montana, and Canada hold an estimated 400 billion barrels of oil. In comparison, Saudi Arabia’s biggest field, Gahawar, has an estimated 55 billion barrels, while ANWR has an estimated 10.4 billion barrels.
Hat tip to Mark Perry at the Carpe Diem blog site for these figures. Perry also is reporting a Bureau of Land Management study showing 279 million acres under federal management where oil and gas could potentially be extracted. But more than half of this is totally off limits. Off-shore, where another 86 billion barrels lie in wait, is also restricted. Then there’s liquefied natural gas, oil shale, and the various coal-to-liquid carbon-capture and sequestration technologies that would be priced out of the market by cap-and-trade.
The U.S. is the Saudi Arabia of coal, but we can’t produce. We’re still the world’s third-largest oil producer, but we could be the Saudi Arabia of oil if our companies were free to drill. Oil CEOs like Rex Tillerson of ExxonMobil and David O’Reilly of Chevron keep saying this. But politicians aren’t heeding their message.
Israeli saber-rattling against Iran could have accounted for some of last week’s huge oil spike. And the unemployment story may not be as bad as the May jobs report suggests. An unexpected inflow of teenagers probably bloated the jobless figure by a couple tenths of 1 percent. And economist Jerry Bowyer points out that an unprecedented hike in the minimum wage may be derailing students looking for summer work. However, in a sign of future job improvement, the civilian labor force grew by nearly 600,000, meaning that more people looking for work could signal recovery. Weekly jobless claims are near 350,000, not the 500,000 of past recessions. Overall, at 5.5 percent, unemployment continues to be historically low.
But the economy is still in a slump, not a boom. And the fact remains that Americans are very worried about the economic outlook. This could be a recession election. And right now voter economic anxieties are all about oil, even more than the sub-prime housing credit problem.
Sen. McCain has a great pro-growth plan to slash corporate tax rates, a move that would be a strong tonic for jobs and wages. But he must bolster that plan with a new emphasis on deregulated energy markets that can produce a total portfolio of conventional and non-conventional energy, including major new drilling. He should couple that with a strong-dollar message to curb both energy and non-energy inflation, which is shrinking consumer paychecks and damaging corporate profits.
More oil, more jobs, better wages, and low inflation. That’s a winning GOP message this fall. But what if Sen. Obama gets there first? It’s unlikely, but not out of the question. Either way, voters will move to the candidate who connects with their worries. Right now those worries are up for grabs.
Oil/Dollar Updates
Skyrocketing oil and gas pump prices have become public enemy number one on the economics front, and politically priority number one out on the campaign trail. (Though neither Obama nor McCain have really connected with the public’s desire to drill and produce more oil as a way of getting gas prices down.)
Interestingly, President Bush’s remarks today, ahead of his European tour, were right on message. He said that the U.S. has an opportunity to increase oil supplies and take pressure off gasoline prices. He specifically singled out opening up ANWR and the continental shelf. He also emphasized a strong dollar. Although he did not change the rhetoric of a strong dollar being in the nation’s interest, he did mention how a strong dollar was in the interest of the global economy. And generally he just seemed to be drilling down on this very important King Dollar topic.
Noteworthy is Treasury-man Paulson’s CNBC interview where he did not rule out dollar intervention. Intervention won’t work in the long run. But it could have a positive shock value in the short term. Robert Rubin did this for President Clinton. If Paulson intervened now he could close down all those dollar shorts — a move that would help the greenback and undoubtedly contribute to lower oil prices on the open market.
Meanwhile Barack Obama put out his economic thoughts today, and had nothing to say about drilling for more oil or a stronger dollar. Obama railed on about tax breaks for big corporations and permanent occupation of Iraq. He also talked about a renewable energy policy that ends our addiction to foreign oil and brings relief from high fuel costs and builds a green economy that would create 5 million jobs. Nobody believes this. Then he went on to talk about rewarding wealth over work — in other words, more class warfare and redistributionism.
Oh, and did I forget to mention a windfall profits tax on Exxon? Yup. Still there in the Obama speech.
Interestingly, President Bush’s remarks today, ahead of his European tour, were right on message. He said that the U.S. has an opportunity to increase oil supplies and take pressure off gasoline prices. He specifically singled out opening up ANWR and the continental shelf. He also emphasized a strong dollar. Although he did not change the rhetoric of a strong dollar being in the nation’s interest, he did mention how a strong dollar was in the interest of the global economy. And generally he just seemed to be drilling down on this very important King Dollar topic.
Noteworthy is Treasury-man Paulson’s CNBC interview where he did not rule out dollar intervention. Intervention won’t work in the long run. But it could have a positive shock value in the short term. Robert Rubin did this for President Clinton. If Paulson intervened now he could close down all those dollar shorts — a move that would help the greenback and undoubtedly contribute to lower oil prices on the open market.
Meanwhile Barack Obama put out his economic thoughts today, and had nothing to say about drilling for more oil or a stronger dollar. Obama railed on about tax breaks for big corporations and permanent occupation of Iraq. He also talked about a renewable energy policy that ends our addiction to foreign oil and brings relief from high fuel costs and builds a green economy that would create 5 million jobs. Nobody believes this. Then he went on to talk about rewarding wealth over work — in other words, more class warfare and redistributionism.
Oh, and did I forget to mention a windfall profits tax on Exxon? Yup. Still there in the Obama speech.
Monday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE MARKETS, OIL & MORE...Our stock market all-stars will discuss and debate all the latest news, trends, and developments affecting investors.
On board:
*Dennis Gartman, economist and editor of the Gartman Letter
*Jeffrey Gundlach, chief investment officer, The TCW Group, Inc.
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Jason Trennert, chief investment strategist and managing partner at Strategas Research Partners
BANKS, HOUSING & THE CREDIT MARKETS...Tom Brown of Second Curve Capital and www.bankstocks.com will join the market panel with his take on all the latest developments.
MONEY POLITICS & THE POLLS...Frank Newport, editor-in-chief of the Gallup Poll, will deliver all the latest insight on what Americans are saying about high gasoline prices and the state of the economy.
OIL RECESSION ELECTION...Our money politics panel of experts will weigh in with their perspective on oil, the economy, and more as the general election battle between McCain and Obama heats up.
On board:
*Steve Moore, senior economics writer, Wall Street Journal
*Jared Bernstein, senior economist, Economic Policy Institute
*John Avlon, author of Independent Nation: How Centrists Can Change American Politics and former chief speechwriter for Rudy Giuliani
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Friday, June 06, 2008
Friday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE STOCK MARKET, OIL, ECONOMY & MORE...Our stock market panel will debate all the news, trends and developments affecting investors including today's big oil spike and stock market drop.
On board:
*Don Luskin, chief investment officer, Trend Macro
*Joe Battipaglia, market strategist, Stifel Nicolaus
*David Kotok, co-founder & CIO, Cumberland Advisors
*Vince Farrell, managing director, Scotsman Capital
Also...Chris Edmonds, managing principal of FIG Partners Energy Research & Capital Group, will offer his insight on the run-up in oil prices.
MORE ON THE MARKETS, ECONOMY & MONEY POLITICS...Our Washington to Wall Street all-stars will weigh in with their perspective on all the latest news and developments.
On board:
*Greg Valliere, Washington strategist, Stanford Policy Research
*Jerry Bowyer, chief economist, Benchmark Financial Network
*Brian Wesbury, chief economist, First Trust Advisors
*Mark Skousen, financial economist, author, editor of the financial advice newsletter Forecasts & Strategies
PRIMARY POLITICS...Pollster Scott Rasmussen of Rasmussen Reports will deliver fresh perspective on all the latest polling data.
LOOKING AHEAD AT THE GENERAL ELECTION...Our political guests will offer their insight and debate all the latest election news.
On board:
*Ben Ginsberg, partner and lobbyist for Patton Boggs LLP
*Julian Epstein, Democratic strategist
*Rich Masters, Democratic strategist
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Thursday, June 05, 2008
A Command Performance by McConnell
Republican Senate leader Mitch McConnell, on the show last night, illuminated his unyielding opposition to the cap-and-trade bill now being debated in the Senate. He hit all the right notes. Overtax. Overspend. Over-regulate. Central planning. Command-and-control of the U.S. economy. All in the name of a dubious global-warming theory. A bill that would wind up costing consumers and businesses a small fortune. A bill that would drive up electricity prices and gas prices at the pump, reducing American competitiveness and damaging the economy.
It was a very impressive presentation of the conservative opposition to this crazy bill.
Right now Sen. McConnell is trying to put forward a bunch of amendments that would be poison pills to Democratic leader Harry Reid — including a provision to allow large-scale off-shore drilling for oil and gas. I might add that Mr. McConnell was heavily armed with facts and figures for this most impressive presentation on the program. If there’s any tougher conservative in the Senate, I don’t know who that is.
We also talked some about the importance of 41 Republican votes to stymie Democratic plans in a number of areas. Of course, Mr. McConnell’s crystal ball for November is not perfect. But he made a strong case for electing Republicans to stop the threat of a three-house Democratic sweep.
He also talked about stopping the union agenda — which is very much a part of Obama’s campaign. Especially the card-check bill, which would end the secret ballot for union organizing in businesses. This bill was stopped once last year, but it will come up again if Obama wins.
I also asked McConnell how he would deal with John McCain’s support of cap-and-trade. McConnell said he had no idea if McCain supported the current Democratic bill. But he said his Republican members are opposed to this bill.
Steve Moore of the WSJ editorial board called in this morning to remind me that both Obama and McCain have critical cap-and-trade votes in front of them. I call it carbon politics. Think Kentucky. West Virginia. Pennsylvania. Ohio. These could be very important states in November.
John McCain has an out by citing India and China, countries that of course will not be subjected to a U.S. congressional bill. That dodges the bigger points about the flaws of cap-and-trade, but it could give McCain an excuse to vote nay.
Obama also comes from a coal state, so carbon politics are in play for him too. The fact that these coal states went for Hillary (not Illinois, of course) in the primaries doesn’t mean they’ll stay in the Democratic column come November. The public is totally against paying anything more in energy costs. And the Senate Democrats are making a huge mistake forcing this vote. I don’t think the stock market wants cap-and-trade either.
But circling back to McConnell, let me repeat: He is one smart savvy conservative leader. A very impressive man.
It was a very impressive presentation of the conservative opposition to this crazy bill.
Right now Sen. McConnell is trying to put forward a bunch of amendments that would be poison pills to Democratic leader Harry Reid — including a provision to allow large-scale off-shore drilling for oil and gas. I might add that Mr. McConnell was heavily armed with facts and figures for this most impressive presentation on the program. If there’s any tougher conservative in the Senate, I don’t know who that is.
We also talked some about the importance of 41 Republican votes to stymie Democratic plans in a number of areas. Of course, Mr. McConnell’s crystal ball for November is not perfect. But he made a strong case for electing Republicans to stop the threat of a three-house Democratic sweep.
He also talked about stopping the union agenda — which is very much a part of Obama’s campaign. Especially the card-check bill, which would end the secret ballot for union organizing in businesses. This bill was stopped once last year, but it will come up again if Obama wins.
I also asked McConnell how he would deal with John McCain’s support of cap-and-trade. McConnell said he had no idea if McCain supported the current Democratic bill. But he said his Republican members are opposed to this bill.
Steve Moore of the WSJ editorial board called in this morning to remind me that both Obama and McCain have critical cap-and-trade votes in front of them. I call it carbon politics. Think Kentucky. West Virginia. Pennsylvania. Ohio. These could be very important states in November.
John McCain has an out by citing India and China, countries that of course will not be subjected to a U.S. congressional bill. That dodges the bigger points about the flaws of cap-and-trade, but it could give McCain an excuse to vote nay.
Obama also comes from a coal state, so carbon politics are in play for him too. The fact that these coal states went for Hillary (not Illinois, of course) in the primaries doesn’t mean they’ll stay in the Democratic column come November. The public is totally against paying anything more in energy costs. And the Senate Democrats are making a huge mistake forcing this vote. I don’t think the stock market wants cap-and-trade either.
But circling back to McConnell, let me repeat: He is one smart savvy conservative leader. A very impressive man.
Thursday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE MARKETS, DOLLAR, OIL, ECONOMY & MORE...Our stock market and economic all-stars will discuss and debate all the latest news, trends and developments affecting investors.
On board:
*Art Laffer, economist and chairman of Laffer Associates
*Mike Ozanian, Forbes Magazine Senior Editor
*Andy Busch, global FX strategist at BMO Capital Markets
*Stefan Abrams, Bryden-Abrams Investment Management managing partner
IS FOOD THE NEW GOLD?...(Click here to read today's New York Times story on this subject.) On to discuss are Brad Cole, president of Cole Partners Asset Management and Kevin Kerr, president of Kerrtrade.com & editor of MarketWatch's Global Resources.
The market panel will also weigh in on this topic.
DEBATE: THE CLIMATE CHANGE BILL...Squaring off this evening on this controversial bill will be Senator Bernie Sanders (I-VT) and Senator Kit Bond (R-MO).
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Worth Reading
McCain Should Pick Sarah Palin for VP – Jack Kelly in RealClearPolitics
At 44, Sarah Louise Heath Palin is both the youngest and the first female governor in Alaska's relatively brief history as a state. She's also the most popular governor in America, with an approval rating that has bounced around 90 percent.Click here to read.
This is due partly to her personal qualities. When she was leading her underdog Wasilla high school basketball team to the state championship in 1982, her teammates called her "Sarah Barracuda" because of her fierce competitiveness.
Two years later, when she won the "Miss Wasilla" beauty pageant, she was also voted "Miss Congeniality" by the other contestants.
Sarah Barracuda. Miss Congeniality. Fire and nice. A happily married mother of five who is still drop dead gorgeous. And smart to boot.
But it's mostly because she's been a crackerjack governor, a strong fiscal conservative and a ferocious fighter of corruption, especially in her own party . . .
Wednesday, June 04, 2008
Wednesday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE MARKETS, BERNANKE, ECONOMY & MORE...Our stock market all-stars will weigh in with their perspective on all the news, trends and developments affecting investors including inflation and the dollar.
On board:
*Don Luskin, chief investment officer at Trend Macro
*Jared Bernstein, senior economist, Economic Policy Institute
*Jimmy Pethokoukis, senior writer, U.S. News & World Report
*Herb Greenberg, principal at GreenbergMeritz Research & Analytics
Also...New York Times chief mergers & acquisitions reporter Andrew Ross Sorkin will be joining us with his take on Lehman Brothers and other related news.
DEBATE: PRIMARY POLITICS...Leon Panetta, former Clinton White House chief-of-staff will square off with the Wall Street Journal's Steve Moore on a number of issues including whether Hillary is positioning herself as Obama's vice president.
POSSIBLE MCCAIN VEEP?...Gov. Tim Pawlenty of Minnesota will join us for a one-on-one interview on a host of subjects including speculation that he's on McCain's veep short list.
GLOBAL WARMING BILL...Senate Minority Leader Mitch McConnell (R-KY) will be aboard to offer his thoughts on this controversial bill.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Stocks Still Don't Like Obama
Last night on Kudlow & Company we discussed the theory suggesting the stock market sold off a hundred points earlier in the day -- despite Fed head Ben Bernanke's bullish King Dollar statement -- because of the AP headline announcing Obama's impending nomination.
As the chart above clearly illustrates, the market nosedived mere moments after the AP story broke.
My friend Bill Griffeth also mentioned this interesting coincidence earlier today on CNBC's Power Lunch:
We couldn’t help but notice yesterday, around 1:25 pm ET, when the Associated Press came out and announced that it had done the math and figured that Obama truly had virtually clinched the nomination, it was at that precise moment, when the stock market started to fall. And the Dow, which had been slightly positive, virtually unchanged, suddenly had a 100-point decline…Is it possible that Wall Street is indeed rattled by [Obama’s] policies as it pertains to taxes? And, most especially, his desire to increase - almost double - the capital gains tax?
Sure makes you wonder, doesn't it?
Hard-Dollar Addendum
Whenever I create lists of friends and colleagues for anything I always forget a few important names. So let me amend yesterday’s Bernanke dollar blog with some supply-side friends who also have been calling for hard money for a long time.
Namely, my friend Steve Forbes, the editor and publisher of Forbes magazine. Steve has been indefatigable in writing editorial after editorial for years about the need for a hard dollar. Because of my senior memory, not only did I forget Steve in yesterday’s blog, but also the fact that he is a McCain economic advisor, having first counseled Rudy Giuliani earlier in the year. And that brings me to Jack Kemp, who is also a McCain advisor and who also has been tireless in his advocacy of a strong dollar.
Forgetting these two names is my bad. I apologize to them and I hope they and readers will forgive me.
And two more names: the tireless husband-and-wife team of Seth Lipsky, editor of the New York Sun, and his bride Amity Shlaes. In fact, the editorial page of the Sun is always reminding us of the declining gold value of the U.S. dollar, just in case we forget. Seth and Amity are of course graduates of the Robert Bartley Wall Street Journal hard-money school. (As, in effect, we all are.)
Ben Bernanke didn’t solve the dollar problem yesterday. But the Fed head’s speech was a very large and important first step toward recognizing that dollar neglect is associated with higher inflation. The greenback has been broken and needs to be fixed. Let’s see what happens from here.
Namely, my friend Steve Forbes, the editor and publisher of Forbes magazine. Steve has been indefatigable in writing editorial after editorial for years about the need for a hard dollar. Because of my senior memory, not only did I forget Steve in yesterday’s blog, but also the fact that he is a McCain economic advisor, having first counseled Rudy Giuliani earlier in the year. And that brings me to Jack Kemp, who is also a McCain advisor and who also has been tireless in his advocacy of a strong dollar.
Forgetting these two names is my bad. I apologize to them and I hope they and readers will forgive me.
And two more names: the tireless husband-and-wife team of Seth Lipsky, editor of the New York Sun, and his bride Amity Shlaes. In fact, the editorial page of the Sun is always reminding us of the declining gold value of the U.S. dollar, just in case we forget. Seth and Amity are of course graduates of the Robert Bartley Wall Street Journal hard-money school. (As, in effect, we all are.)
Ben Bernanke didn’t solve the dollar problem yesterday. But the Fed head’s speech was a very large and important first step toward recognizing that dollar neglect is associated with higher inflation. The greenback has been broken and needs to be fixed. Let’s see what happens from here.
Tuesday, June 03, 2008
Special Tuesday Night Primary Politics Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:PRIMARY POLITICS: HILLARY'S FINAL HOUR?...Joining us to discuss all the latest Hill-Bama and McCain election news and developments are Lanny Davis, former Special Counsel to President Clinton and Ben Ginsberg, partner and lobbyist for Patton Boggs LLP. We'll also feature minute-by-minute coverage of the final primary returns.
KING DOLLAR, THE MARKETS, ECONOMY & MORE...Our stock market all-stars will discuss and debate all the latest news, trends and developments affecting investors including Fed Chair Bernanke's strong dollar comments earlier today.
On board:
*Quentin Hardy, Forbes Silicon Valley bureau chief
*Jerry Bowyer, chief economist, Benchmark Financial Network
*Dennis Kneale, CNBC media & technology editor
*Vince Farrell, managing director, Scotsman Capital
OIL, ENERGY & MORE...Democratic Governor Brian Schweitzer from Montana will join the market panel in a discussion on energy and his belief that Montana is sitting on as much as 40 billion barrels of untapped oil.
POSSIBLE MCCAIN VEEP?...Gov. Tim Pawlenty of Minnesota will join us in a one-on-one interview on a host of subjects including speculation that he's on McCain's veep short list.
PRIMARY POLITICS DEBATE...Dick Armey, former GOP House Majority Leader and chairman of FreedomWorks will square off against David Mixner, author and political strategist.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Big News for King Dollar
Supply-siders have been warning of cheap-dollar inflation for quite some time. Think David Malpass, John Ryding, Brian Wesbury, Mike Darda, Don Luskin, John Tamny, Wayne Angell, Jerry Bowyer, and myself. I’ve even taken to calling the weak dollar the U.S. peso. There’s also Paul Gigot and Steve Moore over at the Wall Street Journal editorial page, both prominent leaders in the movement to resurrect King Dollar.
And today we received some great news on this front.
Fed head Ben Bernanke, finally figuring out that the weak dollar is driving up inflation, has signaled a major policy shift toward a strong dollar. In fact, Bernanke has not only acknowledged that the cheap dollar has caused “the unwelcome rise in import prices and consumer price inflation” -- as booming oil and commodity prices have leaked into U.S. inflation through the cheap dollar -- he may well have set a floor underneath the greenback. This is big news.
Now, isn’t it about time Sen. McCain made a beeline for a strong dollar? That’s my take. You can read about it here in my column for National Review Online.
And today we received some great news on this front.
Fed head Ben Bernanke, finally figuring out that the weak dollar is driving up inflation, has signaled a major policy shift toward a strong dollar. In fact, Bernanke has not only acknowledged that the cheap dollar has caused “the unwelcome rise in import prices and consumer price inflation” -- as booming oil and commodity prices have leaked into U.S. inflation through the cheap dollar -- he may well have set a floor underneath the greenback. This is big news.
Now, isn’t it about time Sen. McCain made a beeline for a strong dollar? That’s my take. You can read about it here in my column for National Review Online.
Monday, June 02, 2008
Monday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE MARKETS, ECONOMY, FINANCIAL DOWNGRADES & MORE...Our stock market all-stars will discuss and debate all the latest news, trends and developments affecting investors.
On board:
*Joe Battipaglia, market strategist at Stifel Nicolaus
*Rich Karlgaard, publisher of Forbes magazine
*Zachary Karabell, President of River Twice Research
*Fritz Meyer, senior investment officer with A I M Advisors
POLITICAL RUNDOWN...Our political panel will discuss and debate whether Hillary Clinton really is a better candidate than Obama, the ongoing internal Democratic divide, and we'll also take a look ahead at tomorrow's primaries.
On board:
*Lanny Davis, former Special Counsel to President Clinton
*Ben Ginsberg, partner and lobbyist for Patton Boggs LLP
*Keith Boykin, New York Times bestselling author and former Clinton White House aide
PRIMARY POLITICS...Pollster Scott Rasmussen from Rasmussen Reports will offer up all the latest election perspective.
WASHINGTON TO WALL STREET: RECESSION ELECTION, CAP & TRADE & MORE...The Dynamic Duo will be squaring off tonight. Battling it out are former Clinton labor secretary and author Robert Reich and The Wall Street Journal's Steve Moore.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Cap-and-Trade Craziness
From the Editors over at NRO:
It is difficult to believe that at a time when the U.S. economy is struggling to adjust to record-high energy prices, the Senate is debating a bill that would make prices even higher. If you want to know why a group of responsible politicians would support such an idea, look no further than an analysis of the revenues the federal government stands to gain from a cap-and-trade program. The EIA estimates that by 2030 the federal government will be auctioning 84 percent of the program’s carbon allowances, with total revenues of anywhere from $326 billion to $853 billion. If you think that money will go toward deficit-reduction, dream on.
Click here to continue reading.
As I asked in my latest column, why do we need a planned economy for energy or anything else? Why not a fully deregulated free market for energy where prices allocate production and consumption?
Why not allow higher oil prices to open the door to a full portfolio of energy resources, including offshore drilling, Alaska, nuclear power, oil shale, conversion of coal and natural gas to liquid fuel, and the development of so-called alternative-energy sources such as solar, wind, and various cellulosic investments (although this latter group may never contribute more than 10 percent to our energy needs)?
A true free-market approach wouldn’t pick winners and losers with heavy subsidies or penalties.
K&C Quotables
Some notable quotes from Friday night's Kudlow & Company:
The Smart Investor This is one of those times when you have to be very discriminating when you talk about the “economy.” Because the “economy” includes things that are in outright depression like housing, and it includes things that are in an outright boom like technology. For instance, high-tech industrial production is at all-time highs, and going at roaring growth rates, even as overall industrial production has flattened out a little bit in the slowdown. So, just as people say, ‘It’s not a stock market, it’s a market of stocks,’ it’s not an “economy.” It’s a portfolio of micro-economies. And the smart investor looks at these sectors, one at a time, and figures out the winners and the losers. [The smart investor] steps aside from some of this falsely macro analysis where you try to make one size fits all. We are in a diversified situation.
-Don Luskin, chief investment officer at Trend Macro
Washington’s Attack on Coal I think cap-and-trade is just crazy. Because most of the coal use increase in the world, about 97 percent, is outside the United States. So if we’re really concerned about climate change, it won’t matter what we do. And all these new rules effectively just increase carbon emissions around the world, they don’t do anything to truly decrease carbon emissions…We’re fortunate at Massey to benefit from the coal use around the world because we export a lot of coal. But as far as getting free of imported energy in this country, the policies are exactly the reverse of what they ought to be…It just doesn’t make any sense at all because the world is going to use coal. And if the U.S. doesn’t use it, we’re going to be disadvantaged.
-Don Blankenship, chairman/CEO of Massey Energy
Global Warming Hoax Manmade global warming is increasingly found to be a hoax, that it is not true. And our responses to this [hoax] through cap-and-trade is going to raise the price of energy. It’s going to make Americans less competitive. And then guess what’s going to happen? Congress is going to come in and try to correct a problem that it created. And the so-called solutions to the problems that they create will create other problems…Americans need to be aware that this whole global warming argument is a way for the government to come in and control our lives. That’s the whole agenda behind these environmentalists. They want government to have greater power to control our lives.
-Walt Williams, professor of economics at George Mason University
More on Mac Let’s remember that [John McCain is] the only candidate running for president who stood up and said the Farm Bill – which just passed – is an abomination. It’s an abomination because it subsidizes American agriculture at a time when, as you point out, food prices are at record highs. And it is also a bill laden with pork—absolutely laden with pork.
-Carly Fiorina, RNC Victory Chair, former CEO of Hewlett-Packard
The Smart Investor This is one of those times when you have to be very discriminating when you talk about the “economy.” Because the “economy” includes things that are in outright depression like housing, and it includes things that are in an outright boom like technology. For instance, high-tech industrial production is at all-time highs, and going at roaring growth rates, even as overall industrial production has flattened out a little bit in the slowdown. So, just as people say, ‘It’s not a stock market, it’s a market of stocks,’ it’s not an “economy.” It’s a portfolio of micro-economies. And the smart investor looks at these sectors, one at a time, and figures out the winners and the losers. [The smart investor] steps aside from some of this falsely macro analysis where you try to make one size fits all. We are in a diversified situation.
-Don Luskin, chief investment officer at Trend Macro
Washington’s Attack on Coal I think cap-and-trade is just crazy. Because most of the coal use increase in the world, about 97 percent, is outside the United States. So if we’re really concerned about climate change, it won’t matter what we do. And all these new rules effectively just increase carbon emissions around the world, they don’t do anything to truly decrease carbon emissions…We’re fortunate at Massey to benefit from the coal use around the world because we export a lot of coal. But as far as getting free of imported energy in this country, the policies are exactly the reverse of what they ought to be…It just doesn’t make any sense at all because the world is going to use coal. And if the U.S. doesn’t use it, we’re going to be disadvantaged.
-Don Blankenship, chairman/CEO of Massey Energy
Global Warming Hoax Manmade global warming is increasingly found to be a hoax, that it is not true. And our responses to this [hoax] through cap-and-trade is going to raise the price of energy. It’s going to make Americans less competitive. And then guess what’s going to happen? Congress is going to come in and try to correct a problem that it created. And the so-called solutions to the problems that they create will create other problems…Americans need to be aware that this whole global warming argument is a way for the government to come in and control our lives. That’s the whole agenda behind these environmentalists. They want government to have greater power to control our lives.
-Walt Williams, professor of economics at George Mason University
More on Mac Let’s remember that [John McCain is] the only candidate running for president who stood up and said the Farm Bill – which just passed – is an abomination. It’s an abomination because it subsidizes American agriculture at a time when, as you point out, food prices are at record highs. And it is also a bill laden with pork—absolutely laden with pork.
-Carly Fiorina, RNC Victory Chair, former CEO of Hewlett-Packard
Friday, May 30, 2008
Friday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE STOCK MARKET AND ECONOMY...Our stock market and economic all-stars will discuss and debate all the latest news, issues, trends and developments affecting investors.
On board:
*Don Luskin, chief investment officer at Trend Macro
*Michael Pento, Delta Global Advisors, senior market strategist
*Jerry Bowyer, chief economist at BenchMark Financial Network
*Jared Bernstein, senior economist, Economic Policy Institute
THE PUSH FOR CLEAN COAL...Our panel will weigh in with its perspective on the push for clean coal and the obstacles standing in its way.
On board:
*Don Blankenship, CEO of Massey Energy
*Jerry Bowyer, chief economist at BenchMark Financial Network
*Jared Bernstein, senior economist, Economic Policy Institute
*Walt Williams, economics professor at George Mason University
MCCAIN...Carly Fiorina, former CEO of Hewlett-Packard and economic adviser to John McCain will join us in a one-on-one discussion.
MONEY POLITICS...Squaring off on a host of Washington to Wall Street topics this evening will be Walt Williams, economics professor at George Mason University and Jared Bernstein, senior economist, Economic Policy Institute.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Thursday, May 29, 2008
Good News for Goldilocks
To recoin U.S. News blogger Jimmy Pethokoukis, “No Recession. No Bear Market. Bears Weep.” Today’s revised report on first-quarter GDP moved the number up to 0.9 percent at an annual rate versus a previous 0.6 percent. Year-over-year real GDP is 2.5 percent. Incidentally, brand new numbers on profits show a much-stronger-than-expected gain. Profits are the mother’s milk of stocks and the economy. So this is very positive.
Also noteworthy is a low 2.1 percent core inflation rate, with the headline rate coming in at 3.5 percent. Look for these numbers to rise as a consequence of the cheap dollar and the commodities boom in energy and elsewhere.
However, markets are smarter than GDP reports. And stocks are up over 100 today, continuing their gains of Tuesday and Wednesday. Even more significant, Treasury market rates are rising a lot, with the 10-year bond now all the way up to 4.11 percent. This is important because almost all the interest-rate gain comes from rising real rates, a signal of increased credit risk-taking and an end to the banking-crisis run for safety.
Rising real rates also foreshadow a stronger economy in the future. And they are adding support to the beleaguered U.S. dollar. So gold is plummeting and oil prices are retreating. This is exactly what goldilocks wants to see.
Instead of safe-harboring in commodities, investors are going back to stocks because the fundamental U.S. economic picture and the banking-credit picture are getting better. The combination of a rise in rates, a stabilizing dollar, and plunging commodities could be a tectonic sea change — and a very positive one at that.
Think of it this way: Investors now seem to want to loan money to job-creating businesses rather than Uncle Sam. Bravo for that.
Meanwhile, money-market futures are predicting Fed rate hikes next year and maybe beginning later this year. That would lend strength to the dollar. And that in turn would contain inflation. Anticipating this, the plunge in gold could well be a leading indicator of a big decline in oil. Now if only Treasury man Paulson would call for an appreciating dollar.
Of course, hovering over this good news is the threat of a three-house Democratic sweep in November. The mere thought of Barack Obama, Harry Reid, and Nancy Pelosi all at once is a potential suppressant for the economy’s improving animal spirits. But let’s cross that bridge when we get to it.
John McCain is running even with Obama, and that’s good. Hopefully Sen. McCain will talk tax cuts rather than cap-and-trade. That would be very good indeed.
Also noteworthy is a low 2.1 percent core inflation rate, with the headline rate coming in at 3.5 percent. Look for these numbers to rise as a consequence of the cheap dollar and the commodities boom in energy and elsewhere.
However, markets are smarter than GDP reports. And stocks are up over 100 today, continuing their gains of Tuesday and Wednesday. Even more significant, Treasury market rates are rising a lot, with the 10-year bond now all the way up to 4.11 percent. This is important because almost all the interest-rate gain comes from rising real rates, a signal of increased credit risk-taking and an end to the banking-crisis run for safety.
Rising real rates also foreshadow a stronger economy in the future. And they are adding support to the beleaguered U.S. dollar. So gold is plummeting and oil prices are retreating. This is exactly what goldilocks wants to see.
Instead of safe-harboring in commodities, investors are going back to stocks because the fundamental U.S. economic picture and the banking-credit picture are getting better. The combination of a rise in rates, a stabilizing dollar, and plunging commodities could be a tectonic sea change — and a very positive one at that.
Think of it this way: Investors now seem to want to loan money to job-creating businesses rather than Uncle Sam. Bravo for that.
Meanwhile, money-market futures are predicting Fed rate hikes next year and maybe beginning later this year. That would lend strength to the dollar. And that in turn would contain inflation. Anticipating this, the plunge in gold could well be a leading indicator of a big decline in oil. Now if only Treasury man Paulson would call for an appreciating dollar.
Of course, hovering over this good news is the threat of a three-house Democratic sweep in November. The mere thought of Barack Obama, Harry Reid, and Nancy Pelosi all at once is a potential suppressant for the economy’s improving animal spirits. But let’s cross that bridge when we get to it.
John McCain is running even with Obama, and that’s good. Hopefully Sen. McCain will talk tax cuts rather than cap-and-trade. That would be very good indeed.
Thursday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE STOCK MARKET, ECONOMY, OIL & MORE...Our stock market all-stars will weigh in with their perspective on all the latest news, trends and developments affecting investors.
On board:
*Jack Gage, Forbes magazine associate editor
*Vince Farrell, managing director, Scotsman Capital
*John Browne, senior market strategist at Euro Pacific Capital
ENERGY, THE COAL INDUSTRY & THE MARKETS...Brett Harvey, CEO of CONSOL Energy, will join us for a one-one-one interview then join our market panel for further discussion.
Also on board:
*Joe Battipaglia, market strategist at Stifel Nicolaus
*Andy Busch, global FX strategist at BMO Capital Markets
*Jack Gage, Forbes magazine associate editor
PRIMARY POLITICS...Frank Newport, editor-in-chief of the Gallup Poll, will deliver all the latest insight on the race for the White House as well as other election perspective.
WASHINGTON TO WALL STREET DEBATE...Squaring off this evening will be Ben Ginsberg, partner and lobbyist for Patton Boggs LLP and Democratic strategist Julian Epstein.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
The Global Flat Tax Revolution
Here's another great video from my friend and top tax reform expert Dan Mitchell over at the Cato Institute.
According to Dan:
According to Dan:
There’s good news and bad news in the world of tax policy. The good news is that a growing number of nations now have flat tax systems instead of so-called progressive tax schemes that punish people for contributing more to economic growth. The bad news is that the United States is conspicuously absent on the list of flat-tax jurisdictions. Defenders of the internal revenue code often argue that a flat tax is an impractical idea, but this new video demonstrates that the flat tax is working very well and spreading rapidly as nations compete to offer more attractive tax policy to the world’s investors and entrepreneurs.
Wednesday, May 28, 2008
Shorthanded Fed
Fed Governor Frederic Mishkin announced plans to step down from his post today after only two years in office. Of course, nobody knows exactly why. After all, these guys never talk—at least not until later (see Scott McClellan).
A couple of things on this: First, Mishkin was known as a strong advocate of inflation targeting. That’s noteworthy since the other former strong advocate of inflation targeting, namely Ben Bernanke, seems to have given up on that all-important concept. In fact, a recent JP Morgan analysis predicts 5 percent inflation this summer. Read it and weep. Whether Mishkin’s departure has anything to do with this is a matter of pure speculation. Is he bailing out? I don’t know.
Another sidebar to this story is the unwillingness of Senate Banking head Chris Dodd (D-CT) to move on White House nominations to two of the unfilled Fed seats. Mishkin’s resignation now leaves three unfilled seats on the Federal Reserve Board. That means just four governors remain—barely a quorum. Of course, Dodd is playing politics here, probably hoping for an Obama victory so he can get a bunch of Democrats on the all-important Fed board.
But what about the next seven months? What about the fact that it takes a bunch of months to process and confirm new members? What with the credit crunch, and sweeping changes to financial regulation, and the Fed’s current work-in-progress of lending money to non-bank broker-dealers? It’s not as though these guys don’t have any work to do. Playing shorthanded right now is not a good idea.
P.S. Today’s stronger than expected factory orders report suggests that business is relatively healthy and most decidedly not in recession. Of course, the oil factor remains a question mark. But right now, I can’t help but think of my pal Jimmy Pethokoukis’s line, “No Recession. No Bear Market. Bears Weep.”
A couple of things on this: First, Mishkin was known as a strong advocate of inflation targeting. That’s noteworthy since the other former strong advocate of inflation targeting, namely Ben Bernanke, seems to have given up on that all-important concept. In fact, a recent JP Morgan analysis predicts 5 percent inflation this summer. Read it and weep. Whether Mishkin’s departure has anything to do with this is a matter of pure speculation. Is he bailing out? I don’t know.
Another sidebar to this story is the unwillingness of Senate Banking head Chris Dodd (D-CT) to move on White House nominations to two of the unfilled Fed seats. Mishkin’s resignation now leaves three unfilled seats on the Federal Reserve Board. That means just four governors remain—barely a quorum. Of course, Dodd is playing politics here, probably hoping for an Obama victory so he can get a bunch of Democrats on the all-important Fed board.
But what about the next seven months? What about the fact that it takes a bunch of months to process and confirm new members? What with the credit crunch, and sweeping changes to financial regulation, and the Fed’s current work-in-progress of lending money to non-bank broker-dealers? It’s not as though these guys don’t have any work to do. Playing shorthanded right now is not a good idea.
P.S. Today’s stronger than expected factory orders report suggests that business is relatively healthy and most decidedly not in recession. Of course, the oil factor remains a question mark. But right now, I can’t help but think of my pal Jimmy Pethokoukis’s line, “No Recession. No Bear Market. Bears Weep.”
Wednesday Night Lineup
On CNBC's Kudlow & Company at 7pm ET tonight:THE MARKETS...Our all-star market panel will discuss and debate all the latest news, trends, and developments affecting investors.
On board:
*Ken Heebner, co-founder of Capital Growth Management
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Barry Ritholtz, CEO & director of equity research for Fusion IQ
THE ECONOMY, OIL & GDP...Joining us for a one-on-one exclusive interview from the White House North Lawn will be Council of Economic Advisers Chairman Ed Lazear.
Also on board:
*Joe LaVorgna, chief U.S. economist, Deutsche Bank
*Peter Morici, University of Maryland business professor and former chief economist of the U.S. International Trade Commission
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Barry Ritholtz, CEO & director of equity research for Fusion IQ
SCOTT MCCLELLAN'S TELL-ALL BOOK...CNBC chief Washington correspondent John Harwood will give us an update on all the latest.
Also...On to debate will be conservative syndicated columnist Ann Coulter and Keith Boykin, New York Times bestselling author and former Clinton White House aide.
Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.
Subscribe to:
Posts (Atom)
