Click the below link for synopses of the year’s most noteworthy business stories to date: GDP growth, immigration reform and border control, the job markets, income growth and inflation, the stock and bond markets, Visa’s IPO, the Federal Reserve and the Treasury Department, Bear Stearns, the oil and gold markets, the U.S.-Colombia free trade agreement, Microsoft-Yahoo, Delta-Northwest, and several landmark business law court decisions.
Here are the inflation-adjusted growth rates for the economy over the past 18 months:
+ 0.6% – Q1 08
+ 0.6% – Q4 07
+ 4.9% – Q3 07
+ 3.8% – Q2 07
+ 0.6% – Q1 07
+ 2.1% – Q4 06
Immigration Reform and Border Control
DHS exercised the power granted to it by the former GOP Congress and waived environmental laws to continue building the physical Southern border fence. DHS also exercised its eminent domain powers and took over large tracts of border land to continue building the fence. The government cut a deal with a few border counties to combine fence building with flood levee repairs and maintenance. The Feds also implemented and then almost immediately beefed up their “virtual fence” strategy in areas of the Southern border for which physical fencing is not practicable.
ICE has conducted several high-profile worksite enforcement raids and arrested dozens of business owners and senior managers on felony immigration charges. DOJ has been defending the Bush administration against a high-profile lawsuit by business groups opposed to the “no-match” component of its five-year-old and ongoing crackdown on illegal immigration and black market labor.
Various states — most notably Oklahoma — have experienced the inevitable effects of brass-knuckled state law immigration reforms: massive departures of illegal workers, shortages of unskilled labor, price hikes, and service interruptions. Local businesses and business cycles are adjusting.
The job markets thus far in 2008 have been weak but not unmanageable and certainly not as bad as Pravda-Media would have you believe.
120,000 – net gain in total employment (that includes 1099 and per diem jobs)
260,000 – net decline in total W-2 employment
Income Growth and Inflation
Incomes have continued to grow above and beyond the inflation rate.
4.03% – Growth in total incomes, 3/07 – 3/08
3.98% – Total consumer inflation, 3/07 – 3/08
Stocks and Bonds
As of May 7, 2008:
Dow Jones Industrial Average – (1.5%)
S&P 500 Index – (4%)
Nasdaq Composite Index – (6.5%)
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The stock markets were quite volatile early this year. In January, February and in early-March, there was extreme selling pressure throughout all the major indices. In large part that was based upon fear of an Obama presidency. The markets also have been struggling with fear of additional bank writedowns and high oil prices, among other headwinds.
So far it’s been another good year for U.S. Government debt. Money has flowed by the mega-billions into the safe havens of U.S. T-Bills and T-Notes.
Mortgage rates remain quite low. Believe it or not you still can procure over 90% financing from private wholesale lenders, not at all backed by Uncle Sam, at fully-amortized, 30-year fixed rates under 6.0 percent with no points. Provided, of course, you actually have a good credit history. Go figure.
Visa went public in the largest IPO in U.S. history.
Visa is a great company with a dominant position in a fast-growing industry. As is the case with all IPOs, however, Visa was priced too high and its offering was oversubscribed. The company’s share price is not anywhere near cheap enough to purchase.
Club Fed and Treasury
The Federal Reserve and the Treasury Department in 2008 have jumped the shark.
The Fed has cut short-term rates like mad. It also has “auctioned” off over 200 billion dollars in public money to big banks — even as those same banks have been raising tens of billions from private sources. It facilitated the de facto bailout of Bear Stearns’ stupefied management. All this after it raised rates like mad from 2004-2006, despite the fact inflation was not actually a problem back then.
The Treasury Department, for its part, put its stamp of approval on proposed new regulations of the banking and mortgage industries — so-called “reforms” which if enacted would cause a lot more harm than good.
The Fed and the Treasury Dept. both championed massive expansions of the federal government’s mortgage loan programs. The limits on FHA-insured loans were raised, as were the limits on loans that can be purchased by Freddie Mac and Fannie Mae. These are not good ideas. The less the government is involved with real estate lending the better. Moreover, too much liquidity inevitably portends too much inflation, which in turn portends too little growth and not enough employment.
Bear Stearns imploded and was purchased for cents on the dollar.
Bear was the most aggressive player in subprime mortgages during the height of the 2002-2007 real estate boom/bubble. The company was punished accordingly. JPMorganChase, however, which purchased Bear’s book of business, got a very cheap deal and over the long term will make out like a bandit.
Black Gold and Yellow Gold
Oil prices have remained quite inflated and in fact have achieved inflation-adjusted record highs.
At this stage — with a marked slowdown in U.S. growth — the continued bull market in oil mostly is a function of two items: (1) speculative and highly-leveraged short selling of the U.S. Dollar by anti-American financier and major Democrat donor George Soros, along with lemming-like currency traders on Wall St. (a lower Dollar = higher oil prices) and (2) speculative and highly-leveraged buying of oil futures by lemming-like commodities hedge funds.
Gold prices move inversely with the value of the Dollar. Gold also rises with inflation. Over the past couple of years the Dollar has been cheap and inflation has risen.
Gold also is a hedge against geopolitical unrest. We are, of course, in the midst of a global war against genocidal Islamic terrorism. Not that stupefied Democrats know or even care about the war, but that’s another issue for another time and place.
Gold prices, accordingly, have remained quite inflated, albeit well below their intra-year highs. The time to have purchased gold, however, was a decade ago, when its price was under $300 per troy ounce. Buy low, sell high. Not vice-versa.
U.S.-Colombia Free Trade Agreement
Multi-millionaire socialist Nancy Pelosi — for whom millions of conservatives cast de facto ballots in 2006, by not voting — decided to project her hatred of all things Bush by spearheading a drive by House leftists to re-write 30 years of trade practices.
After the president submitted for approval the U.S.-Colombia free trade package, the House along strict party lines changed its rules to quash the measure. That was despite the fact the package incorporated the left wing’s (misguided) demands regarding labor and environmental laws.
Microsoft offered a dumb amount of money to purchase Yahoo. Yahoo, demonstrating its own stupefication, held out for even more money and wound up scuttling the deal.
Microsoft dodged a bullet. Yahoo sowed the seeds of its own irrelevance.
Delta and Northwest announced an intention to merge. If that merger goes through it will create the world’s largest airline. It also will spur further consolidation in the industry.
The airline industry has been eviscerated by: (1) unionized workforces, (2) too much competition, (3) persistently-high prices for jet fuel.
Not until the industry is reduced, oh, say, to three major, international players, along with a couple of low-cost, point-to-point carriers, will it have any chance of thriving within U.S. borders over the long haul.
For the second year in a row the Republican majority on the U.S. Supreme Court has beaten down labor unions and Democrat plaintiffs’ lawyers like drums.
The Court drastically limited the scope of federal securities fraud lawsuits. The Court also granted de facto immunity from product liability lawsuits to medical device manufacturers and distributors.
The 2nd U.S. Circuit Court of Appeals threw out NYC’s shakedown lawsuit against the gun industry. That dismissal was based on the Protection of Lawful Commerce in Arms Act, a landmark tort reform law pushed by the Bush administration and enacted in 2005 by the former GOP Congress.
The Louisiana Supreme Court determined insurance coverage need not be provided under standard homeowners’ policies for flood damage caused by Katrina. That ruling by itself shifted hundreds of millions of dollars away from Democrat shakedown attorneys.