Ugh! I've been making this point for years!!

Must-read piece in today's NY Times, covering the blown opportunity for us to invest in our infrastructure during these past years when interest rates have been near zero.

I wrote about this topic here, here, here, here and here.

As we've known for quite some time now, bridges, roads, airports, public buildings, etc., are in woeful need of repair and fixing. Such projects will not go away magically – at some point, infrastructure needs to get fixed otherwise it poses dangerous consequences and risks.

 

Since post-2008, the years of near zero percent interest rates has been the optimal time to undertake such infrastructure projects. Funding has never been cheaper thanks to the extremely low rates AND it would’ve put millions of people to work at a time when unemployment was high and the economy needed stimulus. It was the proverbial no-brainer.

 

But nope. During the post-2008 period, we had to hear about the “runaway” federal deficit and how we should be “tightening our belts” and cutting back. We heard repeatedly that the last thing we should be doing is spending (investing) taxpayer money.

 

Never mind that post-2008 was the exact time when you should spend and invest, to stimulate the economy and get things rolling again. Especially with rates so low! You’re supposed to cut back spending during good times, not bad, it’s Economics 101.

 

Also, never mind that studies show for every $1 invested in infrastructure projects, GDP rises by $2 (the multiplier effect at work). And never mind that another study shows for every five years a project is delayed, its total cost doubles, i.e. better to fix things now and not delay.

 

But all for naught.

 

And who’s been against this sensible thinking over the years? Guess….

$478B Infrastructure Bill Blocked by Senate GOP

Senate GOP Blocks Obama's $60 Billion Infrastructure Plan

Senators who oppose infrastructure spending are putting the rich’s interests first

What Will We Hear Tonight?

In the last Republican debate, we heard primarily four things discussed:

1. Iran
2. Planned Parenthood
3. Immigration
4. ISIS

Four topics I didn't hear mentioned:

1. Global warming
2. Economy
3. Deficit
4. Government corruption & scandals

Interesting. You'd think Planned Parenthood was the modern day Al-Qaeda. Please. 

Meanwhile climate change / global warming is an enormous threat, the economy has been doing fine post-GW/Cheney, the federal deficit has been shrinking to zero, and Obama's two terms thus far have been corruption/scandal-free, something that certainly does not get enough media attention.

Yes, what will be the sky-is-falling topics tonight, I wonder.

Biden Says No, Clear Sailing For Hillary? When Does Bernie Drop Out? Who Should Be Hillary's VP?

Yesterday VP Joe Biden announced he's not going to run for president. Does this mean clear sailing for Hillary? I would have to assume yes.

Another question: when does Bernie drop out? I have to think eventually -- but not yet. Bernie has something like $40 million in his coffers, presumably more than enough to keep his campaign going for at least a few more months.

It's nearly common knowledge that Bernie's run has been more about conveying his message and his positions than actually winning the White House. That said Bernie has certainly accomplished his mission of dragging the Democratic Party and Hillary to the left. It's been heartening to see that his appearances have been standing-room-only events.

Who knows, maybe he's done enough to plainly show the popularity for progressive, populist positions that Hillary will ask Elizabeth Warren to be her VP. Is the country ready for a woman president much less a dual female ticket? I can't see Hillary being so bold as to go with another woman on the ticket. I'm sure the feeling would be that she would alienate too many male voters. Also, Warren is from Massachusetts, a state Hillary already has locked up.

It's interesting, even if Hillary were to pick Warren, at some point it was thought that Warren would herself want to run for president. However, she's currently 66 years old and if she were to be Hillary's VP, and assuming Hillary wins and runs again for re-election, Warren would be 74 years old by the time she gets her shot at the White House. 74 is arguably too old. It appears Elizabeth Warren missed her chance.

Why not just go with Bernie for Hillary's VP? I can think of several reasons not to pick Bernie: 1) he's too old (74), 2) worse, he looks and acts too old (appearances are meaningful in TV era... note in debate he often cupped his hand around his ear as if hard of hearing, not good... and see Larry David's take on SNL), 3) unfortunately many voters are not ready for an Independent devout socialist on the ticket, and 4) Bernie is from Vermont, a state Hillary will win with or without Bernie on the ticket and it's not a key state (few Electoral votes). Look, I love Bernie, don't get me wrong, but let's be practical.

So who's left? O'Malley? Really? Obama won Maryland easily in 2012, assuming Hillary will do the same, what else does O'Malley bring to the ticket that complements Hillary (beside sperm)? Is there anyone else out there yet to make him/herself known?

Of course, with tongue firmly in cheek, my choice would be for Hillary to pick her hubby. Bill's eight years were some of the best this country has ever experienced (sans the Monica crap), why not go for a repeat? Alas, reuniting in the White House a couple that shares the last name of Clinton could be too much for many people. That last name has sadly become extremely polarizing in many circles.

OK, then who? Julian Castro? Hmm....

"Mark my words, it's just around the corner, you'll see!"

In his latest blog posting, Paul Krugman unfortunately continues to bang his head against the wall. Despite the years of evidence to the contrary, Krugman cites another example of a "serious thinker" prescribing a policy cure based on reasoning that is both flawed and, based on recent history, wrong.

It's more of what we've been hearing for many years now: that QE is undoubtedly inflationary and the Fed needs to preemptively raise interest rates to get ahead of looming runaway inflation. How many times have you heard a right-wing, Keynesian-hating friend utter the words, "Mark my words, it's just around the corner, you'll see!" I can't tell you how many times I've heard this said, that hyper-inflation is upon us (Weimar Republic!) and although we may not see it yet, it will appear fast and furious from out of nowhere -- as if it was an evil force in a horror movie. Is this any way to conduct policy, not based on evidence but rather fear of the boogeyman?

Krugman includes a chart showing what we've been accustomed to seeing: inflation below 2% for nearly the entire post-2008 period. But you don't need to rely on just one CPI chart, as many naysayers often argue key items (bread, eggs, gas, home prices, etc.) are being excluded from the proverbial basket and thus distorting the "true" picture. Never mind that various different versions of a representative basket of goods has typically depicted the same result: very modest inflation.

I've always liked to keep an eye on data from the Billion Prices Project@MIT as another check on inflation. The BPP collects prices on a daily basis from hundreds of online retailers and then calculates inflation statistics, comparing them to the reported CPI. If inflation was a "cooked" number from our government, not to be trusted, I would expect to see some significant deviation between the BPP index and the CPI. However that hasn't been the case as the BPP index and CPI have tracked quite closely over time. So much for that conspiracy theory.

Still not convinced? OK, then I submit this chart:

It's the 5-year breakeven inflation rate, which is the difference between the 5-year Treasury yield (nominal) and the 5-year TIPS yield (real). In short, as described on the St. Louis Fed's web site, it "implies what market participants expect inflation to be in the next 5 years, on average." 

The key aspect of this chart to keep in mind is it reflects the views of "market participants," i.e. investors. It is backed by many billions of actual $$$. I believe as a general rule of thumb that "market participants" are not stupid or easily fooled and thus they would not be projecting sub-2% inflation five years from now if the "non-goosed" CPI (inflation rate) was arguably much higher. 

Again, as with the BPP, the 5-year breakeven chart helps put to rest the conspiracy theories that the "official" reported inflation rate is a cooked figure and artificially understated. On the contrary, it appears inflation has been quite low for years and if anything, based on the FRED chart above, expected inflation has been trending lower since 2006! To borrow from the legendary Wendy's TV commercial, I ask, "Where's the inflation?!"

Well, it's coming, very soon, you'll see.... Mark my words.... Yeesh.

The Federal Deficit & Presidents

Hmm, I detect a pattern here:

The deficit tends to shrink (expand) with a Democrat (Republican) in the White House.

Is it any wonder Republicans complain about the deficit when a Democrat is president? Their guy eventually exits, no doubt leaving a huge deficit, and it's now safe for Republicans to complain about said deficit. Of course, such a budget imbalance is never a problem when their guy is president, and recall Dick Cheney once uttered, "deficits don't matter." True dat, they only matter when a Democrat is running things.

The Wisconsin Experiment

Yesterday one of my favorite bloggers, Kevin Drum, highlighted a post by Menzie Chinn at Econbrowser. It appears the "Kansas experiment" launched and spearheaded by Governor Brownback has been an unmitigated failure. Menzie compares the economic coincident index of Kansas and the U.S. and clearly shows that the state has trailed the economic trajectory of the overall country. Recall that Brownback's right-wing, free-market policies were supposed to catapult the Kansas economy into high-growth mode as it was finally unshackled from leftist regulations and obstructions. Yawn.

But it occurred to me, Scott Walker entered office in January 2011, the same time as Brownback, how did Wisconsin's economy fare when viewing this same data?

Answer: not much better than Kansas. Whereas the coincident index for Kansas increased by just 10.6% compared to 15.2% for the U.S., Wisconsin enjoyed a better 12.8% gain but still significantly below the national figure. It seems the Koch brothers' hand-picked stooge has been less than successful in energizing Wisconsin's economy -- what a shocker.

I also include data for New Jersey and California over this same time period. The 12.7% rise for NJ puts Christie as worse than Walker, something that could be a surprise if you believed Christie's blather during the debate. 

And as for that bastion of liberalism, California, the state of excessive restrictions, taxes and red tape, how did it fare? Just a whopping 21.1% increase in its coincident index, far ahead of the country's impressive 15.2% gain. Can't say I was surprised. Yawn.

HP & Carly

Carly Fiorina had a good debate. She's getting big kudos and accolades for her performance. Good for her. But I would remind, in some respects this sort of post-debate underdog glow is somewhat bittersweet as it often comes with the presumed expectation that the candidate was going to fare much worse and instead pleasantly surprised. Similar to when we applaud a racehorse that went off at 50-1 odds and came in third. Bravo, stellar effort, but in actuality the horse is likely still not very good.

Also, don't forget that Romney beat Obama in debate #1. Nuf said. Debate performances can be extremely temporal.

It's of course not lost on Carly that she's going to need an incisive answer to the inevitable question, "Why did you get fired from Hewlett Packard?" Her chosen defense from a recent interview:

Look, I led Hewlett Packard through a very tough time - the dot-com bust, post-9/11, the worst technology recession in 25 years.  And tough times, unfortunately, requires, sometimes, tough decisions. 

Two things to keep in mind when she tries to get away with this spin:

1) When it comes to stock price performance, there's absolute and relative. Absolute stock price performance measures simply what the stock price did over a period of time. Relative stock price performance compares the stock price versus a relevant index or benchmark.

2) Stocks tend to discount the future by about 6-9 months. In other words, if a stock plunges -20% today, it's doing so as a reflection of expectations for the company over the next 6-9 months.

That said let's take a look at the absolute and relative performance of HP's stock during the time Carly was CEO.

July 1999 - February 2005
Hewlett Packard stock: -54%
S&P 500: -15%
NASDAQ Composite: -27%

During Carly's reign, HP's stock declined by 54%, pretty awful. However, she has attempted to explain this dreadful performance away by reminding us that it was "a very tough time" with "the dot-com bust, post-9/11" (Really? She uses 9/11 as an excuse for her dismissal? Please.) and of course an economic recession. 

In this regard, the relative stock price performance is much more revealing. How did HP's stock price do compared to the S&P 500 and the technology-heavy NASDAQ Composite? Answer: not well. HP's stock underperformed the S&P 500 by a whopping 39% during this time and trailed the NASDAQ Composite by 27%. 

The moral: despite the dot-com bust, a recession and 9/11, the S&P 500 headed south by "just" -15% compared to HP's horrific -54% decline, and the arguably more appropriate NASDAQ Composite dropped by -27%, or just half of HP's percentage loss. Yes, the times then were dismal, but HP's stock still dramatically underperformed relevant benchmarks -- likely a very integral reason for Carly's forced departure.

According to HP's stock price performance, Carly did an exceptionally poor job at running the company. But what did HP's stock price suggest about the company's prospects once Carly exited the scene? I already mentioned that stock prices are discounting mechanisms with today's current stock price typically reflecting investor expectations for the next 6-9 months (approximation). My research shows that Carly left HP on February 8, 2005.

Six months after February 8, 2005        One year after February 8, 2005
Hewlett Packard: +21%                         Hewlett Packard: +59%
S&P 500: +2%                                       S&P 500: +5%
NASDAQ: +4%                                      NASDAQ: +9%

Interesting. After Carly's dismissal, HP's stock was a stellar performer, beating the S&P 500 by 19% and the NASDAQ by 17% in six months. A year later, HP's stock surpassed the S&P 500 by 54% and the NASDAQ by 50% -- wow! It's safe to conclude that investors believed Carly was a significant impediment to HP and the company had a much brighter future with her gone.

Please remember these figures the next time you hear Carly trying to spin her past into a success story. Did she get rich? Oh certainly, to make her go away, HP paid Carly an exit package of somewhere in the neighborhood of $20-$40 million, depending on which news story you want to believe. But was she a successful CEO? That's quite a different question and one that is much more relevant to her campaign narrative.

If this were a stock chart....

Wall Street folks would say the chart below displays a well-defined 100+ year uptrend with a recent bullish break-out. Buy!

Yet we continue to hear from many in the Wall Street camp, namely Republicans, that the chart above is a figment of our imagination, that a steady uptrend in temperature simply does not exist, that it's all a hoax.

Funny, these same people look for these charts all day to buy -- as long as it involves stock prices and not temperature.

Sexism vs. Racism in the U.S. -- A Valid Question for 2016

She was on her way to victory. I was supporting Hillary over Obama -- until the wheels came off her campaign.

Joshua Green lays it all out in the recent Bloomberg Businessweek. In his piece, Joshua tends to downplay the successes of Obama's campaign versus the screw-ups of HRC, i.e. Obama didn't win the nomination as much as Hillary lost it. Not sure I agree. If memory serves, Obama's 2008 campaign was pretty darn masterful, and it had to be since then it appeared Hillary had the momentum needed to become the nominee.

But as Green makes clear, she better have learned from her mistakes else there is the chance even a somewhat compromised Republican contender might be able to edge her out of a victory. Not to mention, if this time around she again does not take charge and put a stop to any internal turmoil arising within her campaign, what will that say to many about what her presidency might look like? Drama city? Frequent controversies resulting from in-fighting and power moves? Fortunately Obama's 6+ years in office has been downright boring in this regard, putting the mainstream media to sleep.

Admittedly, it will likely take a significant amount of petty, behind the scene backstabbings and all-around incompetence to sink the HRC ship in 2016. And the GOP is always playing from behind when gunning for the White House (see my reasons for this here and here). But judging from 2000 and 2004, I suppose anything can happen....

I thought it was also interesting to read in the piece that most Americans desire compromise in Washington and according to a Pew poll, "they believe by a 4-to-1 margin that women are better at working out compromise than men."

So Americans hate gridlock and want our political process to function more efficiently, and they favor women over men when it comes to achieving this goal. Seems like a huge advantage for HRC, no? One would think.

But are (male) Americans more sexist than they are racist? If yes, then obviously this would be a significant problem for Hillary. After all, could anyone have predicted that history would have been made with the first elected African-American president before the first elected female president? Would Hillary have also soundly beaten McCain in 2008? Or would Hillary being a woman have been perceived as more of a handicap than Obama being black, due to unfortunate realities and biases in the U.S.?

I don't have answers to these questions, but I do hope that in 2016 voters are able to look past gender as they were able to look past race or color in 2008. Let's hope we've grown-up that much as a country.

I'm back.... Sort of....

Hello again. I haven't posted anything to this blog since 2013. After the GW/Cheney reign of incompetence and horror, it's been 6+ years of massive clean-up, with Obama doing what he could to fix things (granted he could've done more, being too conciliatory with Republicans, shame shame), and doing so without scandals or drama. (Benghazi? Please).

Truth be told, I've been preoccupied with other things over the last few years. That's not to say there haven't been news events worthy of commentary, just nothing to get my blood boiling enough for me to post here. Also, I frankly became burnt out and needed a lengthy hiatus. Blogging can be quite time-consuming and exhausting, and I would guess for most bloggers, involving little to no compensation. It's generally work of passion that fills a need to convey thoughts, opinions, facts and web links (of course) to others, hopefully shedding light on issues and stirring up some much-needed discussion, and even outrage. After all, Republicans and wingnuts should not be the only ones who can get angry and pissed-off, while the Dems and liberals remain calm, understanding -- and flaccid. In fact, I would argue that many of the problems facing this country over the last X number of years have been allowed to fester due to this long-standing contrast, a fired-up, indignant right-wing GOP versus overly wet-noodle and yielding left-of-center Democrats. We can get angry and pissed too (!), using facts and reason as our weapons, which should always be more than enough to win any fight. (OK, "should" is the key word, but in this country, facts and reason are too often not enough to convince the brain-washed and ideological zombies).

Anyway, I'm back, sort of. With Obama gradually exiting and Hillary entering the scene, I've started to get that itch again to put the time into organizing my thoughts and hopefully write some blog entries that connect with people. I like to think I was able to effectively do that with the 2500+ blog entries I posted from 2004-2013, most being from the GW/Cheney era. As I've said, blogging takes time and commitment (unless one prefers to just prattle from the hip -- I don't). That said I will likely start slowly in returning to form, with posts being infrequent or sporadic, depending on the news events of the day. But as the 2016 election approaches, I'm certain there will be enough crap going down to get me annoyed and frustrated, requiring release via a blog entry. Stay tuned!