I will spare the details of how this came about but I was interviewed for almost an hour yesterday on a English speaking radio program originated in Europe.The context was the Obama win and what it means for the US and global markets.
The interviewer was very well prepared. He had snippets of information and news accounts from all over and so I think he had a good sense for the world's sentiment toward the US.
One thing going in is that based on what I read, see and from people I talk to (including the interviewer), the global slant on the US', and now the world's, financial mess is squarely George Bush's fault. I think we get closer to the truth by looking at things like the Community Reinvestment Act (CRA) and 1% interest rates as providing fuel which then dominoed (not a real word apparently) over several years to the final result. It seems to me that Bush and his team were guilty of not recognizing what was happening and not starting to take any action until it was too late and of course it may turn out that the path they have set on will turn out to be the wrong path. I am not letting them off the hook in terms of incompetence but I don't think 100% blame is right either but it seems many folks abroad do.
With that context it was clear during the course of the interview that people in Europe are thrilled with the Obama win, expect great things from the Obama administration and cannot wait for him to get into office and get started.
They have very little regard for Bush. One of the questions was about Bush being perceived as a joke here and leaving office in disgrace. I don't think people in the US view it that way, I talked about how horrid the approval rating is and clearly his legacy is probably going to be one of the worst.
Before going on the air I was asked if I was excited about the Obama win and it came up again during the interview, the interviewer said I did not seem that excited and he wondered why. I said that the amount of changed hoped for will likely exceed the amount of change that actually occurs.
I do think Obama has a chance to get more done than McCain (I am not sure it will be the right things). I said that I hoped he listens to to advisers and comes to the center a bit relative to what he was saying a few months ago on the campaign (he may have started doing this already). I expressed concern about not moving to the center as transitioning from however far we are to the right any more toward the left could be bumpy.
Also McCain was rediculed for picking Palin, "how could she ever run the country?" Based on the extent to which the economy has fallen off a cliff McCain never had a shot. In the current sort of circumstance the incumbent party is in big, big trouble. In a way, he had to pull a stunt and it probably did what was hoped for for the first few days.
As many others have said we need to quickly get a sense of what Obama's economic team will look like and get a sense of what his reality is with regard to what he hoped to do versus what he can do.
36 comments:
My view from the U.S. Bush is a joke and his administration has left a deep scar on America and it is disgraceful.
The generally accepted view from Europe (we hate Bush, we hate the US, the US should be more like Europe, etc.) I think is false. The European media is just like the US media, they have their liberal view and would like the world to beleive everyone has the same view. In talking to people in Europe, there is a large portion of the population that respect Bush and what the US stands for. Many people there understand that Obama could do more harm than good, but you will never hear that from the media.
I am a lifelong Republican and as much as I hate to say it, we (Rep) got what we deserved in this election.
As Americans, we should support our new President and give him a chance. Who knows, he may surprise us just as Bush the big spender surprised us.
In the meantime, we need to retrench and find new leadership. Glad the bums were thrown out!
I find it humorous that people primarily blame Bush for the financial melt down. Just another example of the left and the media just hating him. Not saying he should not shoulder some of the blame, but democrats pushing CRA as part of their liberal social agenda and the federal reserve pumping up the bubble with low rates was certainly just as guilty.
kind of a running joke through the interview was my prefacing every answer with "that's a complicated question."
That's quite a feather in your cap, being interviewed on an EU station, and congratulations are definitely in order. I see bond yields are dropping and many commentators don't seem to be able to explain that as governments everywhere will increasingly have to tap the markets. Could you comment on that? Willy
Roger, what a riduclous statement. Of course he will not be abl to do EVERYTHING people dream of.
but if he even does 1 single positive thing then he has got Bush beat.
Seem everybody in US finance is brain washed by reaganomics, probably because your entire education and idea of capitalism is reaganomics.
Well capitalism was stronger before reagan's print money, borrow, spend, and destroy the middle class "free market" policy.
De-regultation means re-regulate so a few insider get all the money.
Obama marks that start of a new era and you seem to be stuck in the past?
Did Bush kill Cock Robin also? He did what he thought was right and I won't vilify him for that. As far as interest rates, are the anonymous commentators forgetting about the Fed?
I too am a Republican and I will not minimize the fanatics of the Pelosi's and Reed's of this congress.
I think Obama is in over his head and like Bush, he's going to do what he thinks is right.
May God help us but I don't know why He would since the state wants nothing to do with him.
There, that felt good.
Willy, I doubt I have any real insight there. Fear pushes rates lower while deteriorating fundies push them higher. for now, fear is winning.
As an independent, it appears that Bush surrounded himself with all "like-thinkers". Virtually every one of his appointments had the same thought process and background thinking. Other nations caught on to this near the beginning of Bush's reign. If Obama surrounds himself with the best in the field, we will be light-years ahead as a nation. (that said, he has the most difficult task of any president that I can remember).
Reagan and Bush have not gutted the "middle class", they have done it to themselves with choices they made in their lives. The bottom line is you need an education if you want to finically suceed in this world. I have friends that thought they were the cat's meow when they landed a job with an auto manufacturer out of high school. "Who needs college." The world is a competitive place. There are skilled people over seas that will work just as hard for less pay. That is the reason those jobs are not as plentiful in America, not because of some Reagan or Bush policy. America has gotten soft and many of the new economies are much more hungry that we are.
Appointing Rahm Emmanuel as Chief or staff isn't exactly an omen of moderation or a "reaching across the aisle".
I've heard a lot of wishful thinking in the past 48 hours but it seems to me nothing more that an exercise in see/hear no evil. Obama, Pelosi, and Reid are on the far, far left the U.S. political spectrum. The moveon.org and KOS whack jobs aren't going to let them turn into fiscal moderates in the next six months.
As for Bush, I'm really getting sick of hearing the 'repudiation of Bush is the repudiation of conservatism' meme. Bush and the Republican leadership are NOT fiscal conservatives. They did not practice fiscal conservatism (beyond cutting taxes), they didn't reduce the size of government, and they didn't curb the growth of entitlement programs.
I'm also getting sick of listening to the MSM and Obama supporters float the idea that Obama will do a better job of reducing deficits. HOW? Look at what this guy has proposed: More government spending, a tax cut for 95% of Americans, a economic stimulus package, and the frequent use of the most tortured word of this century: investment. When you hear an politician use the word investment, hide your wallet.
As a middle class baby boomer who has lived below his means and saved diligently, I am compelled to blame the fat cats to some degree but I blame my generation to a much higher degree for the situation as we are truly the most greedy, self-absorbed generation of all time. It's embarassing.
To all those whiners about the destruction of the middle class I ask this, how many of those middle class have a house way too big for their needs, leased SUV's, giant LCD TV's, a cell phone with the works for everyone in the household, cable TV with movie tiers, and on and on and on?
We did this to ourselves with the blessing of our government starting with Clinton's "everyone should aspire the American dream of home ownership" and continued by Bush and an accomodating Fed that kept interest rates at stupidly low rates, banks willing to lend at 125% of value with nothing down, interest only loans, etc, etc.
Greed, greed, greed. Welcome to the opposite side of greed folks.
It's a good thing we don't get all the government we pay for...
Will Rogers
to anon 8:08
Well said.
my wife and i came back from two weeks in italy on election day. at least two of the people at the front desk of our hotel commented about their excitement for obama; we also heard a couple of other comments while there. right or wrong, the excitement extends beyond the european msm.
as for blame for the economy, the msm has and will continue to blame bush. his admin deserves a lot of blame, particularly sec chairmen donaldson and cox for abandoning an sec rule and allowing the investment banks to lever up to 30 to 1. several other posters looked at this the way i do: the bush admin really practiced cronyism, not capitalism. bush ii betrayed the reagan free market approach as much as bush i betrayed it by raising taxes (after his pledge not to do so). both bushes will go down as weak and failed presidencies. at the same time, the cra and the democrats undermining ofheo's attempt to reduce the leverage at annie and freddie deserves a lot of blame as well. i think bush and virtually all of congress (including the senate and obama too) deserve some blame (despite what barry ritholz says--they ALL deserve criticism for this. i was appalled to see a recent video where maxine waters stated that 100% mortgages from fnm were wonderful, especially under the great leadership of franklin raines--no one can defend that statement. period.)
as for obama: i fear the worst but hope for the best. the worst might entail rampant socialism and the concomitant suspension of certain freedoms and liberties (while walking around the ruins of the roman forum, senate, and grave of julius ceasar on saturday it entered my paranoid mind that the beginning of the end of the roman empire really occurred when julius declared himself emperor--and god--and essentially suspended the republic and the position of the senate, after all power corrupts, absolute power corrupts absolutely and that became the moment of truth. augustus generally offered a benevolent dictatorship--something like what democrats offer in chicago--and as a lifelong resident of the chicago metro area, chicago does not offer democracy--it is a benevolent dictatorship. might the problems be severe enough to take an unusual step as julius ceasar did??) the best might entail a restoration of the financial "guardrails" that the bush admin removed, a gradual truce in the culture wars of victimology, (how can one argue any longer that vast classes of people are victims due to race when the number one guy is of that race?--this may have a lot to do with the excitement around the world as well as here), and a hope and direction for the generations succeeding us baby-boomers. unfortunately, i don't think that anyone really knows what obama really wants to do (that includes obama himself.) we'll just have to watch and see.
--gjg49
Obama has limited resources to form a government. He has his Chicago connections which gets him Rahm Emmanual as maybe his chief of staff and Bill Ayers for the homeland security slot.
After that, he has to recycle Clinton people. People are going to wonder if maybe Hillary won after all.
The Onion has a video titled "Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are." They nailed that one.
wow. this is good stuff!
Since the blog has turned political this morning, let me add my 2 cents worth. I am a life-long republican who has voted republican in every presidential election since 1972; with the exception of 1976, as I found neither candidate acceptable in 76 and at the time considered my intentional non-vote as a neither of the above vote. In retrospect, I should have voted for Ford
The 2008 elections are over, and the American people have thoroughly and appropriately punished George Bush for his unpopular war, failure to regulate Wall Street, the housing/financial crisis that emanated from encouragement of lending to unqualified borrowers (really, his non-action in doing something to mitigate the damage), and just too much deficit spending. While not a fan of John McCain; I acknowledge that he is a war hero, a conservative on some issues, and was the perhaps undeserving most visible recipient of the disdain for Bush. Other Republicans running this year were also undeserving recipients of the disdain. With the most untimely stock market collapse (mid-Sep through late-Oct) putting a distasteful exclamation point on the end of the Bush era, it is unlikely any Republican could have won the White House. What a financial/economic disaster! Oh, and I did vote for McCain as the lesser of the 2 evils.
Perhaps history will be kinder to Bush than the US electorate was, but I think historians will properly compare Bush to Presidents Hoover and Carter on his economic "achievements." No one knows how Iraq will ultimately turn out. If Obama engineers a successful US withdrawal from Iraq and a true, peaceful, and lasting democracy results in the middle of the Middle-East, perhaps some Democrat historians will grudgingly give some of the credit to Bush. Also, there has not been a second 9-11 attack; if that holds for another year, Bush should escape the blame for the attack which, just my opinion, will likely occur between now and the end of Obama's first (and hopefully, only) term. Ironically, the potential positive portions of the Bush legacy, democratic Iraq and successful determent of a second 9-11, depend on Obama; not an enviable position for Bush.
Oh, well. Life goes on. The first stock market session following the election was down over 5% and, last I looked, today is also down. As an institution which anticipates the future, these market moves appear to be sending a negative signal of confidence in the upcoming Obama era.
While the above does not provide such evidence, I really am optimistic about the future of this great nation. We survived Carter and Clinton, and Bush. And, we will survive Obama, be it with a noticeable shift to the left; and, fellow republicans, that's reality. Finally, with all the good feelings now coming from Europe due to the US electorate's capitulation, I fully expect Obama to get some real and significant assistance from Europe; e.g., some things that cost real money. Two somethings come to mind quickly: meaningful assistance (combat troops, logistical support, etc.) in Afghanistan and picking up more of the cost of their own defense.
Sorry it's turned into a political blog today, Roger.
I'd like to pose a random question. IN theory, stocks won't do much in a recession.
In general terms, what do bonds do in a recession? I'm considering investments in corporate and municipal bonds that many people believe are underpriced right now. Do bonds bounce around like stocks do? Do people flock to bonds, therefore driving prices up?
It looks like most types of bonds do relatively well, with the exception of junk.
How ironic can you get. Everyone's worrying about Obama suspending freedoms and not acknowledging the extent to which Bush restricted personal rights. Everybody fears socialism when Bush nationalized banks. Everyone says the budget deficit is going to balloon, when Bush is to blame for that too. Are you guys blind?
As for some people liking Bush in Europe, here in Germany they are might scarce.
And the big elephant in room, as far as our ever increasing tax dollars(our investment in our nation, as levied by our government by the people)is the increasingly heavy entitlement programs(60%+ of national budget) set up for those who used to work, never worked, won't work, can't work, and as a result aren't presently contributing as much(if any)as they're taking out. Increasingly, the nonworking public is becoming a greater portion of our society, and will continue to vote for leaders who will continue to give them what they want; and will bite the hand that feeds them, if necessary, in order to get them what's their's from us: the working taxpayer. Sounds like a great investment strategy?
SD, so many people are saying to buy muni's that I am leery. i can't help but think a persistent distortion in the normal rlationship between treasuries and munis is warning of something yet to come.
Looks like you hit a nerve with this post Roger!
I will take a shot at Stephen's question about bonds in recession question. According to Harry Browne nothing does really well in a recession. However if inflation slows enough to scare people with deflation, then T-bonds could go up a lot.
If low interest rates and inflation prevail then bonds will do okay. But if interest rates rise, then you will be in trouble. Stocks and bonds can both have bear markets at the same time.
As we start to come out of the recession then corporate yield spreads will tighten which could give your proposed investment a boost.
I personally am putting most of my investing effort into the absolute return portion of my portfolio for this recessionary environment. I posted an idea I had on hedging high yield debt on another post of Roger's: http://randomroger.blogspot.com/2008/10/absolute-funds.html#comments
As for the other discussion topic: why would we ever want to be like Europe or the rest of the world? I don't have anything against the rest of the world but really? Microscopic economies, flacid productivity growth, spinelessness in the face of the dictators and aggressive regimes of the world, inconsequential militaries, foot-to-neck relationship with energy providers like Russia, lines for health care, capitulation to sharia law, negative population growth rates. Do I need to go on, Really? I don't want anything offered by the world including their political advice ;)
-Matt
Anon 9:50, not blind necessarily: Back in the days when conservatism was more honest it was okay to see some aspects of democracy or capitalism clearly, actively not like them and just say so.
Nowadays that's apparently not allowed so mutually incompatible ideas have to be believed at that same time; you've pointed out several contradictions and there are many more of course but what it will come down to is that it's really neither fair nor accurate to blame Republicans and their policies (even though they controlled all branches of government for six years), in fact it could easily be viewed as unpatriotic (they were defending our liberty while spying on us, its against our troops, the free-market way, etc.), but it is absolutely okay and indeed patriotic to blame Obama and the Democrats for anything including things they haven't done yet or may never even do.
That's the way it seems to work although I don't claim to understand it; frankly the cognitive dissonance involved seems pretty extreme but IOKIYAAR (it's okay if you are a republican) is the general rule regardless. Personally I blame our educational system for not fostering more critical thinking but that's just another opinion.
IAC many Europeans are quite aware of all this and, based on those I know at least, seem mainly to be looking forward to a bit more pragmatism and a bit less saber rattling as much as anything else.
As to the current debacle: Drop a butt of business cycle into a non-transparent bowl, add two cups of credit and housing cycle to the usual amount of greed but kick it up a notch with a fistful of easy money. Mix ingredients vigorously using highly leveraged instruments and make the refs leave the room so it can rise unmolested, then bake ...oops, almost forgot to mention, it might be explosive so better leave the room yourself.
Anon 8:08 - Right on!
God how I would love to see a political leader tell the American people the truth for a change: Take a look a yourselves; what you've spent, how little you've saved, the stupid financial decisions you've made, how you've treated your body (and you want someone else to help pay for your healthcare???)...
The Republicans, the Democrats, and especially the news media coddle the American people with lies about how hard they work and how they budget so much better than the government. The country isn't going to "change" until Americans get a good swift kick in the rear.
sorry for staying on politics Roger but this is such a great forum this morning.
to anon 9:50 in germany
there are many who feel we should repatriate. i'm one of them. we could save billions by not trying to be the cure-all for the world. let's start with closing our largest foreign military base. it's in germany.
wow. this is REALLY good stuff.
I see people placing blame on certain presidents some recent and some a bit farther back. They probably all deserve at least some blame. However, I think it is important emphasize the evil of the federal reserve. We can ever have a free market when the federal reserve is in the business of fixing interest rates. Who do these clowns think they are? The market should set interest rates. How can you ever have a sound economy when the federal reserve can inflate the money supply at will? You can't build a sound economy on weak currency. Does anyone realize that the federal reserve is a private bank owned by largely foriegn interest? The federal reserve pretty much does what ever it wants. Congress doesn't even have the power to audit the federal reserve. The United States is owned and maniuplated by this evil group of banksters. We should all gather up our pitch forks and torches and go chase this monster out of town.
When I was in Europe last year, many discussions ended with: the Bush administration is not capable of saying "I'm wrong, but what can I do to help". This was reinforced last night on the tube with Karl Rove.
As an aside...
I don't hear many talking about they are willing to give up to help get this country healthy again. I mainly hear complaints about what someone is going to do to them.
We will be wondering just what "Obamanation" the media and fooled voters put into power by 2012 - or earlier. His victory is an indictment of our public school system.
Roger
If you don't mind can tell me what was the name of the Radio Station and which country. I would like to listen to the interview.
Thanks
-David
I don't actually know all the details. The show is from southern Spain. The presenter's name is Craig James (hope I have the last name correct) and the name of the show was called Clarion. I'm not sure if they put broadcasts on the internet or not.
Anon 11:03
I have long been a champion of America repatriating and cleaning up its act on the home front (like building some decent infrastructure - it's shameful to see how rundown the country has become). I would also welcome America closing its bases over here in Germany because it would teach the Germans to take some responsibility.
But you seem out of it - do you think the idea of America leaving is going to scare people? What people are scared of is America - welcome to the 21st century!
I'm a regular reader of your blog and find it very useful for overall investment planning, as well as learning about different parts of the market that might otherwise not hit my radar screen.
But I was taken aback by your brief (negative) reference to Community Reinvestment Act (CRA).
My personal experience with CRA has been very positive: I worked with Habitat for Humanity for over 10 years, and the loans our chapter received from local banks (which helped meet their CRA requirements) allowed us to purchase land and materials for homes we then sold to homeowners (Habitat sells homes at cost to people currently living in substandard housing. In addition to the mortgage, the homeowner also "pays" with sweat equity, putting in a set requirement, generally around 300 hours, of labor assisting either in building of the home, or in other work assisting the chapter).
During my tenure there, we had NO homeowner default on their mortgage (this is very typical of Habitat for Humanity's experience nationwide).
Even Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco stated in a March, 2008 conference that
"There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term."
Probably a much too lengthy comment, but CRA is near and dear to my heart and wanted to put my two cents worth in!
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