Jon Taplin's Blog

McCain & The Far Right

From Rush to Hugh Hewitt to Terry Jeffreys to The National Review, the Far Right is going crazy all over cable TV about their marginalization, as McCain moves closer to locking up the nomination. Somehow they can’t get it in their heads that even their own party is moving away from both their ideas and their hyper-partisanship. I am reminded of Yeat’s famous lines that best described the Far Right and the era they spawned in the last 20 years. Thankfully that era of fear is now ending

Things fall apart; the center cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Business;Arkansas Style

Two articles on the Clinton’s business dealings this morning are worth looking at. They both depict a culture of “means justify the ends” morality. The first from ABC News was on Hillary’s passivity on the WalMart Board when it came to the Arkansas company’s anti-union stance. The second, from the New York Times, details Bill’s willingness to cozy up to dictators, to help a major contributor to his charitable organization. That both Bill and his donor, Frank Giustra, both initially denied to The Times that a meeting with Kazakhstan officials had taken place at Bill’s home in New York is rather remarkable.

Both Mr. Clinton and Mr. Giustra at first denied that any such meeting occurred. Mr. Giustra also denied ever arranging for Kazakh officials to meet with Mr. Clinton. Wednesday, after The Times told them that others said a meeting, in Mr. Clinton’s home, had in fact taken place, both men acknowledged it.

This all reminds me of some time I spent in Arkansas in 1970 when I was the tour manager for The Band. Levon Helm, the singer and drummer was from Springdale, Arkansas and was close friends with Don Tyson, the chicken king. Don used to fly a bunch of his Arkansas buddies to Band concerts in his private jet. One night, after the concert, when everybody was pretty loose, the good old boys started bragging about how they had recently made a couple of million dollars in a week “cornering” the egg futures market with some friends in Springdale. Years later when Hillary Clinton had to explain how she had made $100,000 in a week with her first trade in the futures market, she said that Springdale futures trader, Robert “Red” Bone and James Blair, Tyson’s lawyer had advanced her the credit to make the trade. Obviously, Don Tyson wanted to stay on the good side of Arkansas’ governor Clinton, so he wouldn’t have to clean up all the chicken shit he was dumping in to Arkansas rivers. They were so brazen, even a federal search warrant didn’t slow them down.

According to EPA and U.S. Department of Justice officials, Tyson continued to illegally dump wastewater after the search warrants were executed, prompting an EPA senior trial attorney to remark that: “Having done this work for nearly 20 years, I don’t recall any case where violations continued after the execution of two search warrants. That’s stunning.”

TV Ad Money

The Obama campaign raised more than $32 million in the month of January! The largest fundraising day was right after the New Hampshire defeat. The Clinton campaign will not say how much it raised this month.  Obama’s campaign themes actually can be put forth very effectively in a 60 second TV spot. My guess is this weekend we will see a lot of Obama TV.

Transparency & The Credit Crash

The miserable performance of financial stocks will continue for some time because of a continuing lack of transparency. Neither the Fed, the SEC or the Comptroller of the Currency has any idea of how much worthless mortgage securities are sitting in the portfolios of Banks and Hedge Funds. As the Wall Street Journal reportedtoday, “Fueling the concerns, Standard & Poor’s predicted yesterday that the carnage might spread to a wider range of financial institutions, with total losses potentially exceeding $265 billion.”

What is really making the market nervous is that the Monoline bond insurers like MBIA and Ambac, who stand behind these billions of losses, are in serious financial jeopardy. Yesterday a prominent Hedge Fund short seller of these companies, William Ackman, issued a report on the two big Monoline insurers:

Mr. Ackman, who runs a New York hedge fund called Pershing Square and has bet against the insurers’ shares, issued a report late in the afternoon predicting that two of the companies, MBIA and the Ambac Financial Group, might lose $24 billion on complex mortgage investments they have guaranteed. Such a hole might threaten their survival and touch off a chain reaction of losses at some of Wall Street’s biggest banks, as well as raise borrowing costs for states and municipalities.

Obviously Mr. Ackman is not a neutral observer in this matter, as he stands to make millions if the two insurers crash. The chain reaction to such a crash would redefine Warren Buffet’s warning of a “mega-catastrophic risk”brought about by the unwinding of the derivatives market. What is puzzling is that Mr. Ackman, who claims that his figures of problems are conservative, could pull together a report that the New York Insurance Commission or any of the above named Federal regulators have been unable to supply to the market. One can only reach one of two conclusions. Either the regulators know something they think will panic the market and don’t want to talk or they are too lazy to find out.

Reviving Brand America

I know this post is going to send some people around the bend, but here goes. I have come to the conclusion that the U.S. business establishment has decided that Barack Obama is the best person to revive “Brand America”. It is getting very hard to be an American company in much of the world (see above). When ever they are pissed off in Karachi, they burn down the KFC. George Bush’s War has made competing against European and Chinese manufacturers like wrestling with one arm tied behind your back. So like any smart CEO, the elite has decided we need a re-branding of America with a charismatic man of color at the front.  

Exhibit A is the New York Post’s endorsement of Obama this morning. I would take it as a given, that Rupert Murdoch saw this editorial before it was published. Exhibit B is MSNBC. I promise you, Chris Matthews and Keith Olbermann would not be given the free rein to criticize both Hillary and Republican hypocrisy, unless Jeff Immelt, CEO of GE had not given the OK. I obviously think this is a rational move on the part of American business–and I know its not like they all met at some private club to decide this. I just think this is the consensus vision, well outlined by Andrew Sullivan a couple of months ago.

Rush Goes Ballistic

This morning on the radio, Rush Limbaugh was fulminating about the disaster that was about to befall the Republican Party if John McCain is nominated.

I think that we’ll probably have to stop amnesty again. I think that you’ll get very frustrated. Like, Senator McCain will be going out of his way to make deals with Democrats, reaching out to them. That’s what’s launched him, in his mind, to where he is. He will reach out to the media. I think you’ll get more of the same. The death tax will be coming back. There will be any number of things that we’re on the verge of cleaning out and wiping up. We probably won’t get income tax cuts made permanent if Senator McCain is elected. Because, remember, he forms alliances with Democrats in the Senate, and that’s I think what he will do as president — and that’s going to frustrate you. It’s going to frustrate a lot of us, and there’s not going to be a whole lot we can do about it, other than behave as we did during the first amnesty bill and flood Washington with attention. You have to fight for it.

He went on to say that there are so many “unprincipled Republicans who would vote for Bozo The Clown if they thought he could beat Hillary Clinton”. Like many Democratic pundits and Bloggers, Rush assumes Hillary will be the nominee, thereby giving weak kneed Republicans a reason to back McCain.  Obama vs. McCain would certainly put the War vs. Peace theme back into the election. As I suggested a couple of days ago, Democratic pundits like Krugman who still think Limbaugh and Hannity have power, are not paying attention. It’s actually fun hearing Rush admit he can’t control events anymore.

The Fed can't satisfy

As I suggested this morning, there was nothing the Fed could do to satisfy Mr. Market.

Let the contest begin

John Edwards is dropping out as we had hoped he would. Now Hillary and Barack can contest on a clear field. Especially if the new kinder gentler Bill Clinton stays out of the fray. The next ten days could be transformational.

The Fed's Dilemma

The fourth quarter GDP was worse than the “experts” expected. This will not be a surprise to readers of this blog, but what is surprising is that these same experts had expected that the weak dollar would help us grow our way out of a recession through surging exports. It didn’t happen.

The report showed that the growth in American exports slowed markedly during the third quarter, to 3.9 percent, down from 19.1 percent in the previous three months. Some economists have suggested that sales abroad could ultimately spare the economy from recession, as United States companies exploit a weak dollar and stronger growth prospects on foreign shores. The latest report punched a hole in that theory.

As I have tried to point out, the Laissez-Faire economics that have ruled Washington since Ronald Reagan’s inauguration have led to a hollowing out of America’s manufacturing capacity. We don’t make stuff the rest of the world wants (aside from Boeing airplanes and Digital Entertainment) and so it doesn’t really matter how much the dollar falls, export growth will not make up for falling domestic consumer demand.

The Fed will probably cut rates this afternoon, but my sense is that what ever they do, the market will be disappointed and sell off. Continue reading ‘The Fed's Dilemma’

Recession & Stimulus Discussion

There is a very good discussion still continuing after five days about the Stimulus Plan. Some world class economists and some smart citizens are making for a refreshingly respectful conversation. I am continually amazed at the level of civility in the comments. Lets keep moving in this post partisan direction that Barack is talking about. I invite you into the discussion.