Baseball91's Weblog

July 17, 2009

Summer Recess


The outlook on future economic behavior: One in five people in California who desire full time work are not now working. That rate reached 23.5 percent Oregon this spring,, 21.5 percent in both Michigan and Rhode Island, and 20.3 percent in California according to a New York Times analysis of state-by-state data. The rate was just under 20 percent this spring in Tennessee and Nevada.

Mortimer Zuckerman, the chairman and editor-in-chief of U.S. News & World Report wrote today in the Wall Street Journal: “Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook. How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? State budgets are drowning in red ink as jobless claims and Medicaid bills climb. Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. As paychecks shrink and disappear, consumers are more hesitant to spend. The combination of a weak job picture and a severe credit crunch means that people won’t be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending. Businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.”

I would not be buying stocks with this kind of economic forecast. The next 12 months are going to be the hardest in 70 years. And in my view, Congress and the president have the same insight into how to resolve pending current affairs as FEMA did during Hurricane Katrina.

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