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My opinion on energy and economy: a dime a dozen December 17, 2015

Posted by hslu in Economics, Energy, Global Affair, Oil.
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A friend in Dallas asked for my opinion about the current state of the energy and stock markets in light of market’s expectation of Feds’ decision to raise the federal funds rate by ¼ of a point. Since opinion is cheap and it didn’t cost me any to express mine, I offered the following a few days ago:

 

There are several time bombs which might make the market ill prepared for the consequence when one or two explode in our faces:

 

  1.    China slowing down resulted in big turmoil in all commodity markets. Many countries which depend on a booming commodity market for growth and spending; all OPEC nations, Canada, Australia and Russia, are facing an uncertain future. Economies will no doubt slow down in these countries. Nations’ wealth will suffer too. This is bad for the growth of world GDP. I am actually not worried about China because China’s economy needs to slow down and the Chinese government is doing something to slow it down. Transformation of Chinese economy has to be done otherwise China will be stuck in the middle class trap. No country in the world can grow at 6 or 7% per year, not to mention 9 to 12%, into infinity and I won’t be surprised if China eventually slows down to 3 to 4% level when China’s economy becomes large. The effect of a 3 or 4% growth with a larger economy will equal to that of a 5 or 6% growth out of a smaller economy. The rate of growth isn’t important. It is the net growth of economic activities that’s crucial in the future. Besides, inflation at a higher economic growth rate is more difficult to control. A growth rate slightly higher than the natural inflation rate, many at the Fed, ECB and BoJ are talking about 2%, would be idea.

 

  1.    The energy market is causing a lot of hemorrhage all over the world. I said it before and I will repeat it now: Saudi has done it multiple times in the past and Saudi can take it. Saudi’s national debt is only 10% of its GDP. All banks will rush to Saudi’s front door and ask Saudi to take their money because Saudi can pay the loan easily. Saudi has 250 billion barrels of oil reserve in the ground. Some say that Saudi can produce its oil at $5 per barrel. Frankly, Saudi is still making money hand over fist. They lowered the oil price to kill shale oil producers in the US. And Saudi is doing a very good job. Russia is taking lower oil price in stride as well. Yes, oil price is lower by a lot. But Russia’s oil export volume hasn’t changed.

 

Russia’s oil export in US dollar terms is lower. But Ruble has dropped by a large amount since the financial crisis. In the end, Russia doesn’t suffer that much in Ruble terms. Don’t forget, Russia can produce its oil at $15/bbl from existing wells. US shale oil companies’ cost is anywhere from $40 to $80 per barrel. There is simply no comparison here. The talk of US will eventually be the largest oil producer in the world a few months ago has disappeared as fast as spring snow on the ground: 曇花一現。Shale oil production in the US will never come back as fast as it did since 2005 and 2006 because Saudi is watching and bank will not lend.

 

You don’t need me to tell you how bad the stock prices are for almost all domestic shale oil producers. These oil producers have to borrow money at 8, 9, 10 or 12% to drill and drill in order to replace their lost productivity. These oil producers have hedged their oil price to a higher level in 2014. As a result, the financial report from these companies isn’t really bad in 2015. These hedges are finishing in the 4th QTR of 2015 and, with WTI settling at around $40/bbl, the financial reports of these companies will be terrible going into 2016 and beyond. The oil in the ground, which these companies used as collateral, becomes less valuable. If these companies don’t have extra credit line waiting in the wing, the loans may be called. With declining oil prices, this equals to death knell for these shale oil companies. Several companies are standing right in front of the gate to hell right now.

 

I have said that Saudi will not back down and they have doubled it down and removed the quota from OPEC production limit. Price will collapse as it is happening now. All oil companies, including ExxonMobil, Shell, Texaco, ConocoPhillips, Total, etc. will suffer mightily. All have cut their capital spending way back to offset the lower oil prices. The next step is to cut back their dividends followed by laying off people. What follow are mergers and take overs. Then there will be more layoffs to reduce redundancy. By that time, capital spending has cut back to the level that production will not be able to meet demand (low oil price is good for economy growth.) Saudi will cut its production to pop up oil price. Price will recover because of market force and Saudi’s action. Saudi will gradually reduce its production further to balance the demand and supply. Saudi accomplishes its objective: regaining market shares. Price will recover. Many shale oil companies will disappear, the new companies will take this slowly and the market will go back to normal. This will take four, five, six or ten years. We are only in the second year. There are a few more years to go yet but no one knows when. I have sold all my energy stocks because I didn’t like what I saw. I will wait for the scenarios to play out before I go back to bottom fishing for yields and future returns.

 

  1.    The Fed is expected to raise the federal funds rate this week. Once the Fed starts to raise the short-term interest rate, it will rush the US and world economies and financial markets into a new era. I don’t think the Fed will stop at just one interest rate hike because the Fed wants some cushion room (i.e., a few rate hikes) to be able to fend off another financial crisis which may be lurking just around the corner. Let me ask you this: do you think Europe is ready to take a rate hike in the largest economy in the world? The answer is of course a resounding “NO.” Take a look of Taiwan. Taipei’s real estate market rose 3.46 times (something like this. Don’t quote me) over the last three years. Many other countries saw similar rises. In Taiwan, many if not all mortgages have floating rates because first time buyers couldn’t afford a much higher 30-year fixed rate. The negative impact of higher interest rates on the real estate market all over the world will be obvious. Many commodity dominated countries are in the same boat. They are ill prepared to take a higher interest rate.

 

  1. The high yield market, those with 6, 7, 8, 10% or higher interest rates, is collapsing under the weight of Fed’s interesting rate hike. Bankruptcies will happen. Takeover will accelerate. Junk bond market will implode. Many hedge funds have stopped clients’ withdraw of their investment funds in the junk bond market because as many wealthy and not so wealthy people try to get out of this narrower and narrower door, junk bond price will drop to an unspeakable level. The effects will be devastating. The energy companies account for about 15% of the junk bond market.

 

  1.    The US is facing a higher rate environment but central banks all over the world are printing money as fast as they can as if a competition for the first place is going on right now. US dollar will strengthen due to a perception of higher interest rate in the future. Many emerging countries’ currency will not be able to keep their values against the US dollar. If a country has borrowed too much US dollar denominated loans when interest rate was low, it may have trouble paying the loans back when rate is getting higher. Its currency will drop in value. Inflation will spike. Interest rate will follow. Economy will tank. Real estate market will collapse. Living standard will suffer. Country may bankrupt because no bank will lend to this poor country so that they can’t pay back their US dollar denominated loans. We might have another financial crisis as fast as we can write it down on a piece of paper.

 

  1.    Division of rich and poor has reached unprecedented level in many countries in the world. The risk of civil unrest, like those happened in Taiwan and Hong Kong, may be a common scene soon. The result is capital flight, stagnation of local economy, depreciation of currency and inefficient government.

 

  1. Then, we have rising geopolitical unrest to deal with. The market has more or less ignored the geopolitical risk since Hillary and Obama abandoned Qadhafi which led to his death, the revival of al Qaeda, eventual birth of ISIS, terrorist incidents all over the world and millions of Syrian immigrants evading certain deaths to Europe, England and other western countries. No one knows what’s going to happen next. Many dictatorship countries in the Middle Eastern might be in danger of losing their strong hold of their countries. If this happens, it will certainly be qualified as a black swan event for sure. The market will crush and gold price will soar.

 

Now, Google 1994 bond and stock markets and you’ll see the bond market was under a lot of pressure from Feds’ rate hike and the stock market suffered some loss too. Other research pointed out that the first-rate hike hasn’t been a major market mover and market usually will recover from the initial shock. But, I rather wait on the side line and look for opportunities when the market presents itself.

 

I do not know when it will happen but I will be watching. I will stay away from high yield bond market now. The next run of stock buying will be energy stocks with good dividend yields because oil price will for sure closer to the bottom than to the top. Once the round of dividend cutting is over and once the oil price is staying at the bottom of the U long enough, the next move on oil will be up.

My Crystal Ball for 2014 February 14, 2014

Posted by hslu in China, Economics, Euro, Global Affair, Health Insurance, jobs, Liberal Media, Military, Muslim, Obama, Obamacare, Oil, Politics.
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Crystal Ball for 2014

Part I – Economic Development

The title of my report to you in these early trading days of 2014 is totally misleading because my crystal ball, if there is ever one, is decisively cloudy. This is the first year I am actually sitting down and “THINK” about what has happened and what will likely happen in the coming months and quarters. Nonetheless, I am going to take a peek inside and pick out the threads which I can rely on to guide me through the new trading year and beyond.

The primary purpose of my report is to force me to think through and figure out causes and consequences relating to economic developments in the world and policies changes adapted by central banks and major nations in the world.

My reason for spending time to write this summary report is simply: I think it is important for me to get a big picture, top-down view of the world economy so that we can detect what the big, dominating trends are and, with that in mind, know how and what to invest.

Once the summary is done, I can use it to guide me through the treacherous path of investing in stock, bond and currency markets. Commodities such as crude oil, natural gas and gold are also influenced by the same major forces in the world. They will be looked at too.

My first task is to take a look of the US economy, actions taken by the Fed, likely fiscal policies and my prospective of the 2013 stock market. It makes sense to start with the US because its economy accounts for about 18% of the world GDP (used to be 25% before the rise of China and other emerging countries) and actions taken by the Fed set the tone for the entire world to watch, follow and react to.

I will then take a regional look starting from China, Japan, Europe, Middle East and other emerging markets. Frontier countries are also worth a cursory look because there could be outsized opportunities there.

United States – Economy, Taper, Bond, USD and the Equity Markets

The most important economy-related development last year was the beginning of taper which will lead to the eventual conclusion of QE. Of course, QE will be data dependent because the Fed has tirelessly told us so. That being said, the end of QE is coming and the timing of its exact termination date isn’t very important. What’s important is what the smart moneys, the hedge funds and big money managers, will do to position themselves ahead of the curve in the mean time.

Let’s examine this game changing development a bit. It is important in light of the Great Recession since 2008 which was caused none other than by the greed and fear of American’s capitalism, a system heavily preached to the world.

Interest Rate and Treasury Bonds

We know that the federal funds rate will remain at 0.25% until sometime 2015 because it is controlled by the Fed. It will remain at that level until the unemployment rate drops to 6.5% as long as the inflation rate is below 2.5%. That’s a given and that will take a while.

Long Bond and MBS purchases, dubbed QE, by the fed will decrease by $10 billion every month starting in January 2014 and the long rates will continue to rise. Case in point, the 10-year rate has hovered around 2.95% in recent months after making a record low of 1.43% in 2012. The long rate started to rise drastically after Fed’s announcement of an imminent tapering in May 2013. However, there is still room for the 10-year rate to rise and it is not unlikely that we’ll see it rise to a range of 3.5 or 4.0% by 2015. It is likely that Bond investors will see their principles drop and they will lose 3 to 5 years’ worth of interest income if they keep their Bond portfolio’s duration low.

The fact that Bernanke started tapering before his term expires on January 31, 2014 suggested that US economy, in the minds of the Fed’s FOMC voting members, begins to mend. GDP will rise and the economy will slowly generate more jobs in coming months.

US Economy

With the Fed on the defensive, the US economy is arguably entering into a more promising phase on a generic economical cycle chart. Take a look of the following illustration and I suspect that the US economy is somewhere between the early recovery and upswing stages.

The Fed, using traditional and other monetary tools at its disposal, has done a good job stimulating a portion of the US economy: risk assets, auto and housing markets. However, it is not without risks and un-intended consequences. This will be addressed later in a separate section. Extremely low interest rates since 2008 popped up the housing and auto markets; traditionally interest rate sensitive industries. Low interest rates also helped corporates’ balance sheet because massive amount of corporate debt was refinanced at low interest rates which helped their bottom line. That’s was part of the reasons why corporate top lines remained at low single digit level while earnings growth reached to about 4%. This incentive will be gone when rate rises. Risk assets such as stocks and commodities also went up because the Fed has forced everyone’s hand.

If everything goes according to plan, long term rates will creep up; yield curve will steepen while inflation remains in check. Bonds will face headwind going forward and capital rotation out of bond funds will, if not already, begin in earnest. Moderate GDP growth in the US is widely anticipated which will help corporates’ top line. As consumers become more confident on the economy, spending will increase and hiring will follow. Unemployment rate will drop.

US consumers, like American corporations, are in better shape now than before after massive de-leveraging since 2009. Housing market and home prices have returned and the equity market is at all time high. Both have made consumers, the ones with jobs at least, wealthier, more confident and more willing to spend. Given it some time for this process to work through the economy, it will grow the GDP and help reduce the unemployment rate. The following chart gives another look of the economy cycle and characteristics of each phase of a typical economic cycle.

Jobs, Jobs, Jobs

With a somewhat rosy prediction of the US economy, the job picture in the US however remains worrisome. New job creation for December 2013 was a disappointing 74,000 new jobs; well below the consensus of around 200,000, right after the Fed decided to taper. Jobless rate dipped to 6.7% from 7%; not because the economy is strong enough to generate new jobs at a brisk rate but because record amount of job seekers left the job market. Labor participation rate dropped to 62.8% matching that from the stagflation period of the early 1970’s. In reality, the real jobless rate, the U6 data, suggested that the true jobless rate is 13.1%, including the part-timer workers who wanted to work full time and those left the job market. An alarmingly high level for the richest nation in the world, don’t you think so?

The reasons for the low participation rates are many:

  1. Old workers; for instance, baby boomers who got laid off since 2008 Great Recession, are retiring early while some younger workers; couldn’t find a decent job because of skill mis-match, are going back to school to make them marketable in this day and age.
  2. Technology replacing low wage jobs. We have seen this everywhere: Home Depot, Supermarkets, Costco and others places. In these day and age, even cars don’t need drivers to drive. In a decade or two, all taxi driver jobs may disappear for good if this technology is widely accepted by auto makers and the public.
  3. Outsourcing and off-shoring jobs will continue as long as its benefits out-weight costs. Call centers, help-desks and other low paying jobs are disappearing fast in the US.
  4. Growth of foreign countries absorbed a healthy amount of high-paying jobs because these growing economies offer better prospects.

For a long time, the news media reported that 250,000 new jobs were needed to absorb the new job seekers entering the economy. That narrative has long been gone and anything close to 200,000 new jobs was greeted by excitements by the WH and liberal media. All told, there are around 20 million people who are out of work. It will require a long period of 350,000 new jobs per month just to bring jobless rate back down to 5.5% level. This will no doubt be a drag to the recovery of US economy.

US Dollar

The US dollar has depreciated against other major currencies in the world: Euro, British pound and Japanese yen, while QE was in progress. Yen began to weaken starting about a year ago when Japan’s new administration vowed to de-value Japanese yen through massive QE of their own, much more aggressive than the program adopted by Bernanke, in order to rescue Japanese economy from 20+ years of deflation. Now that Bernanke’s QE will come to an end, interest rate in the US will rise and the US dollar will slowly appreciate over time way before QE actually ends sometime in late 2014.

This was a major event for emerging countries ever since Bernanke hinted that tapering was about to begin on that fateful day in May, 2013. Massive amount of capitals was rushed out of the emerging markets’ bond and stock markets. Their currencies tanked. Many emerging markets did poorly because of Fed’s tapering and I believe the trend will continue albeit at a slower level because the so called smart money has already gone. Some die-hard individual investors will stay for the yield but will lose out on the currency devaluation and drop in stock values.

US Government and Fiscal Conditions

After ramming the not-so-affordable Obamacare over Republicans’ objection and shoveling it down Americans’ throats, US Congress is slowly returning back to a more compromising mood because 2014 mid-term election is coming. Obamacare did a lot of damage to Democrats and Republicans took blame for government shutdown whether it deserved to be blamed or not. 2014 mid-term election is only 11 months away and a new landscape will take shape starting in January 2015. Of course, the White House is still occupied by a Democrat until 2016 election. Unless, Republican can take over the Senate or Tea Party gains a commanding majority in the Congress, it will mostly be business as usual with token Republican oppositions from the lower house.

All along, the stock market took the legislature interruption in stride and 2013 saw 50 new records for the DOW despite the dysfunction of the US federal government.

In the mean time, another fiscal fight looming large is the pending debt ceiling fight next month. This remains to be one of a few tools conservative Republicans has to fight the Democrats with. Unfortunately for the country and for the 53% Americans who pay any federal taxes; especially the tax-paying, deduction-diminishing and no tax loophole to hide middle class, it may be too little too late. They will be squeezed while the real rich people will not even notice the higher tax bill. America under Obama, Pelosi and Reid has moved decisively to the left and has become a socialist and a more liberal country. Republican Party has lost the fight and it is slowly being marginalized by the much bigger Democrat Party. The Tax and spend government will continue for the foreseeable future. Eventually, the deficit and the debt will crush US economy and it will not be a pretty picture if we ever come to that unpleasant ending.

The Democrat-sponsored immigration bill, or the de facto Amnesty bill, has already passed the Senate and is being considered by the Congress. Even without the pending immigration bill, Blacks, Latinos and Asians have been overwhelmingly Democrat leaning over the years and this alarming and disturbing socialist trend will not be reversed for generations. Consider this: the 11 million un-documented foreigners, the real number is probably much bigger, will, under the law, eventually become American citizens. They each will bring four or five relatives to the US. These people will then bring another four or five into this country legally in due time. Do the math, you will find out the demography in the US will be altered in a quarter of a century or less by the addition of new Latinos in this country. According to a 2012 study, Latinos account for 17.2% of US population, or 55 million at last count. Pretty soon with Latino the fast growing ethnic group in the US, the America we used to know will be gone forever. These new citizens are usually less educated and will most likely rely on America’s generous social programs; SSI, food stamp, disability benefits, you name it, to support them, especially in the beginning. There is no question that the “Browning” or “Off-white” of the US population is fast happening, a potent backdrop of the America population landscape where American whites will lose their majority around 2043.

If you want more proof I’ll give you one: more off-white babies than white babies were born in the US last year. The trend will not be reversed. Don’t get me wrong, the whites, at 197.8 million still commands a super majority, but it will peak at 2040 and will enter a steady decline from that point. The reason is simple: baby boomers began to die in big numbers way before that time.

The Tea Party, typified by mostly conservative and middle-aged whites from the South, is alarmed but they are powerless to fight the unavoidable trend. They will only be marginalized in the end. Their influences on new legislatures and the reduction of the booming national debt will be minimal at best.

There is no doubt that the proverbial can of national debt got kicked once again down the road while Obamacare will add untold billions to the deficit and national debt in years to come. For some reason unknown to me, the financial market is in partial to the looming fiscal crisis. Someday someone will suffer the consequence but the debt will probably never be paid. The cause has been sowed and American’s next generations will suffer the inevitable consequence in due time. Because of this, many countries in the world are alarmed and some have started doing something about it. This will be addressed later.

The State of the US Economy

There is no question that the once mighty United States has changed to a serviced oriented country. It has buckled under the weight of globalization. Public education in the secondary level has lagged behind and skill gap is increasing at an alarming rate. Meanwhile, welfare costs will skyrocket to unthinkable level in coming years. The only bright spots seem to be in the technology space and renovations in medicine and medical instruments where America remains in the leadership positions. Defense industry; the killing weapons, fighter jets, air carriers and long range missiles, is still dominated by the US though.

Energy, especially crude oil and natural gas spaces, is another area where America is gaining compared to the sorry state it was just a few years ago. Domestic crude oil production from fracking of the shale reservoirs in many parts of the US has increases by about 1.8 million barrels per day. It of course reduces America’s dependence on foreign oil and reduces trade deficits. Some study put American’s oil production higher than Saudi’s by 2018 but I think the surge of domestic oil production will be short lived because the rapid decline, as high 40%, of oil production rate from this type of reservoirs. In short, America will not be able to achieve crude oil independence; not in the foreseeable future. A report by me on shale oil production was distributed to you sometime earlier. I have not changed my position yet and there are recent reports that supported my contention.

America has about 200 years of natural gas supply because of abundance of natural gas resources in shale reservoirs. A year or two ago, American companies were spending vast amount of capital to import LNG or NGL from foreign countries. All these projects have now been stopped. Current developments are aimed at eventually exporting American’s LNG to Asian countries where LNG or NGL sells for two or three times that in the US. The process will be slow because of risks involved in these capital intensive projects and likely competitions from other gas producing countries. There is also talk of bringing manufacture industries back to the US because of energy cost advantage from abundance of natural gas domestically. This may happen but it will take time because labor cost in the US is still too high and supporting industries are not available. Using natural gas for transportation purpose has been discussed but it remained to be a project on the drawing board simply because the necessary infrastructural is not and will not be ready for years if not decades. Since the prerequisite of a capital intensive project in a capitalist country, e.g., the US, is that it has to make money, this will stay in the planning stage for now. Any adoption by the private sector will be marginal at best which will not have major impact on natural gas demand or its price. Some coal-fired power plants will switch to natural gas but the increased demand will be marginal at best.

In summary, US economy is poised to recover for the following reasons:

  1. US Congress showed a tendency of compromise.
  2. Fiscal drag, e.g., sequester and 2% payroll tax hike in 2013, is gone.
  3. Consumers are wealthier with stock market near or at all time high and housing market has recovered at the expense of income and wealth inequality. Stock market, like it or not, is one of the early indicators of the economy.
  4. US companies will likely deployed cash reserves on their books; estimated at $1.5 trillion, as they become confident that things have turned around for the better.
  5. Banks may be in favor to lend now that yield curve has steepened. They will make more money as rates on the long end rise.
  6. Prices of crude oil and natural gas are coming down thanks to increasing domestic supplies, lower demands from China and India, and ease of geopolitical tension in the Middle East even though the world may someday find out that Iran has developed a formidable nuclear weapon capability. North Korea did it to the US and the same thing may happen at Iran too.
  7. Steady but modest job creation by the private sectors.
  8. Europe is mostly out of the danger zone and Japan may recover from its prolonged deflation state.
  9. Interest rates still remain at historically low level.

America’s Standing in the World

The leadership position of the United States has been eroded and challenged by other countries in the world: notably Iran, China and Russia. America’s handling of the Middle East situation, including Lybia, Egypt, Syria and Iran, has been criticized by such countries as Israel and Saudi Arabia; two unlikely allies. US’s foreign policy under Obama seems to revolve around a marginalized Israel while appealing to Muslim countries, I think this is a deliberated act by Obama who is much more liberal and less committed to Israel than any recent US President in recent decades. It seemed that Obama wanted to remove US from the Middle East and leave the problem for countries in that region to resolve themselves. The simple conclusion is that America has no workable solution to the mess there.

Unfortunately, Obama’s foreign policy is not working and the US is losing respect among the same Muslim countries Obama is trying to appease. The US invaded Iraq, rightly or wrongly, but got nothing in return; not even its vast crude oil resources. Ten years after the Iraq War, all US presence has been removed from Iraqi soil because Obama was eager to please the anti-war crowds in the liberal camp. But take a look at Iraq now: the country is mired in deadly suicide bombing on a regular basis. Al-Qaeda has regained two major cities in Iraq and the government is hard pressed to take them back. A request from America to keep some US soldiers in Afghanistan is pending in Kazai’s government but Kazai is delaying its approval even though its “congress” has approved the deal.

Iran is another matter by itself. The recent P5+1 meeting with Iran on its nuclear program could only be viewed as a total failure because Iran got to keep its nuclear purification capabilities, up to 25% purity, while some UN monitoring is agreed upon. In essence, the US has lost the sanction war and was forced to realize that a nuclear Iran is unstoppable.

Syria is where Obama’s foreign policy took a serious beating in public. The red line in the sand of “no chemical weapons” drawn by Obama was crossed many times by Syrian Army in its 2-year long civil war. Obama flipped and flopped but was powerless to do anything about it. British didn’t want to deal with it. NATO had no say in this matter. Obama didn’t know what to do so he passed the hot potato to the Congress but American people were overwhelmingly against the potential war. Fortunately Russian premier Putin came to the rescue and Obama was off the hook with two black eyes and an egg on his face. The presidency of the mighty America was tarnished in the eyes of the world and many Muslims. I would dare to say that something like this had never happened to any American president. Obama took it and he seems at ease with that outcome. I have to say “saving face” in the eyes of the world isn’t very high on Obama’s agenda. Nonetheless, the thorny issue disappeared and Obama was glad it was off the headline from evening news and Sunday talk shows.

What was the fall out of all these fiascos by the most powerful country in the world in the eyes of Muslims in the3 Middle East? Let’s take a look of what one influential Saudi Arabian princes, Turki al-Faisal, former Saudi intelligence chief, has to say. Prince Turki recently criticized Obama for weakness in the Middle East. Here are some of his recent comments:

“We’ve seen several red lines put forward by the President, which went along and became pinkish as time grew, and eventually ended up completely white. When that kind of assurance comes from a leader of a country like the United States, we expect him to stand by it. There is an issue of confidence.”

He added that when a country has strong allies, “you should be able to give them the assurance that what you say is going to be what you do.” These are rather strong words against a seating American president, aren’t they?

Other incidents, such as Snowden debacle which Putin played his hand well against American opposition and the hijack of Bolivian president’s airplane in Europe expose what America really was: 欺软怕硬.

Simply put, America under Obama has lost creditability and moral authority in the eyes of majority of American people and many countries in the world. American standing in the world has been damaged and it may not be able repaired for decades. It seems to me that a new world order is slowly evolving and America is no longer at the top. The political vacuum created by America’s deliberated exit from the leadership position on the world stage will stay empty for now.

Inside America, the picture isn’t much prettier either. NSA’s monitoring of electronic communications of US citizens, known terrorists and world leaders, such as German Chancellor Merkel, has raised doubts about American government’s intentions, invasion of citizen’s privacy, abuse of human rights and the legality of this massive surveillance program. IRS’s targeting of conservative groups in the US before the 2012 election also raise questions about a run-away WH abusing its power for political gains. The initial denial of Benghazi’s disaster as a terrorist attack by al Qaeda linked group and the stonewalling after the tragedy showed a WH cared more about hiding the fact that Al Qaeda was as strong as ever than letting the truth be known to the American people. The complete failure of Obamacare’s rollout and the lies Obama said before it became the law, such as insurance premium will be lower by $2,500 for a family, people can keep their insurance plan if they like it and people don’t have change doctors under the new law, showed an utterly incompetent federal government and how political leaders lie to their constituents. Americans have lost confidence on its government because of dysfunction of the Congress, Snowden, NSA, IRS’s targeting of selected groups for special investigations, cover-up on the organized attack on Benghazi where American ambassador and three others lost their lives, high unemployment rates, rising income gap and the disaster of Obamacare. Millions of people are still out of jobs and more than 40+ million people are on food stamps. Is It the beginning of a new chapter in America, a declining America?

Yet none of these had any material impact on the equity and housing markets because the Fed has provided a big and bottomless punchbowl to reward the riches who own most of the stocks and houses in the US. In short, the rich get richer and the poor get poorer. The wealth gap in the US is as wide as it has even been.

US Economy is growing but October 30, 2009

Posted by hslu in Economics.
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US Economy is growing but

 

The U.S. economy grew 3.5% in the third quarter of this year.

 

It was a great news but how much of that 3.5% were from the cash-for-clunker program and the $8,000 tax incentives to first time home buyers?

 

I am not sure people felt like it though because there were still 521,000 new jobless claims filed last week.

 

I guess the federal government has to borrow more money to keep the economy afloat because fewer people are buying these days.

 

I wonder what the fourth quarter will be like. Many economists predicted a 3 increase. We’ll see about that. Are you buying more gifts this year?Are you buying more expensive gifts this year?

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