When Federal Reserve Chairman Ben Bernanke speaks, Wall Street listens - and investors should beware. The Dow Jones Industrial Average (DJIA) has lost over 2,500 points on days he has spoken, including three of the worst point losses ever.
Today's drop in the Dow of 215 points is the 14th time out of the last 20 times the Dow has lost ground on a Bernanke has spoken over the past six months. Bernanke gave a speech at the Federal Reserve System Conference on Housing and Mortgage Markets in Washington today, where he continued to hammer the message the economy is in bad shape.
"The U.S. financial system has been in turmoil during the past 16 months," Bernanke said. "Credit conditions have tightened and asset values have declined, contributing substantially, in turn, to the weakening of economic activity."
"Talk about too big to fail," said managing editor of Time Richard Stengel on MSNBC's "Morning Joe" Dec. 4, who was on the program promoting the latest cover story for the magazine entitled, "The Case for Saving Detroit." Stengel:
"I find the fact that so many Americans are unsympathetic to Detroit to be kind of amazing," Stengel said:
We make the case that in fact the, you know, the Big Three have adapted in a lot of ways ... They haven't managed things well, they have too much capacity, but I mean, talk about being too big to fail in a way, right?
The fact is Americans don't understand what collateralized debt obligations are, yet they sort of said, ‘Okay, let's bailout all of these banks and AIG' and yet people feel like, ‘Hmm what about the big car manufacturers?
That was the warning from the mayor of Lansing, Mich., on CBS's "The Early Show" Dec. 2. "You know this is a sure prescription to go from recession to depression if you allow this auto industry, our manufacturing prowess, to fall by the wayside," Virg Bernero warned:
This industry is too important, not just to Lansing, Mich., but to the whole country. This is our manufacturing base. You know we were the arsenal of democracy. We've talked a lot about economic security, and that's number one, but what about national security? You know, we were the arsenal of democracy in World War II; it was the auto industry that helped turn us around. Can you imagine a country, I would ask, can you imagine America losing our manufacturing edge, not having that manufacturing prowess? That hurts our national security.
If you had any questions about how differently the economy will be covered with Barack Obama in the White House they were answered by George Stephanopoulos on Sunday when he credited the president-elect with causing the recent stock market rally as well as better than expected sales the day after Thanksgiving.
I kid you not.
During the panel discussion of the most recent installment of "This Week," Stephanopoulos said (video available here, relevant section at 11:05):
As the Christmas shopping season went into full swing in 2005, I sensed that journalists in general have a strong preference for using the term "holiday shopping" instead of "Christmas shopping" when covering business and commerce, but that when it came to people losing their jobs, they preferred to describe layoffs as relating to "Christmas."
My instincts have been proven correct, as you can see below from the results of three different sets of Google News searches in November and December in each of the last three years (links to last year's related posts are here, here, and here; 2006's are here, here, and here; 2005's are here, here, and here):
The Associated Press can't even get it right in a three-paragraph item about a White House ceremonial event.
In a story Monday afternoon about President Bush's meeting with two Nobel Prize-winning scientists and Nobel Economics winner Paul Krugman, the unbylined AP writer claimed that Krugman opposed the government's financial bailout. Evidence abounds that this is not only not the case, but that Krugman wants the bailouts to be bigger, and to involve more direct government ownership.
Here are the first and third paragraphs from the story (link probably will not work after about a week):
Three 2008 Nobel laureates from the United States lined up with President George W. Bush on Monday for an Oval Office photograph to mark their achievements.
..... The third laureate at the White House was Paul Krugman of New York, who won the Nobel Memorial Prize in Economic Sciences for his work on international trade patterns. Krugman, a frequent critic of the Bush administration who opposed the recent $700 billion financial bailout, is a Princeton University professor and New York Times columnist.
Since Krugman's supposed opposition may become folklore shortly, it's best to take a cruise through Krugman's blog posts to show that the claim is terribly outdated and currently flat-out wrong:
Update 11-25 8:20 AM: Morning Joe Makes SNL References -- see discussion at foot.
Call it "The Wild 'n Crazy Guy–Billionaire Style." Maria Bartiromo's interview of Saudi Prince Alwaleed, the largest shareholder of Citigroup, is literally a Saturday Night Live skit waiting—begging—to happen.
CNBC's Bartiromo conducted the interview by remote this afternoon. When the camera went to the prince in Riyadh, you might have expected to find him in a TV studio, or perhaps in his business office, maybe even in one of his palace rooms. But no, there he was sitting outdoors, apparently by his stables, with seated camels and sleek horses very visible in the background. And rather than being attired in business or traditional Saudi dress, the Prince was duded up with an open collar, tinted glasses and a scarf warding off the desert's cool night air. He could be seen occasionally fingering what appeared to be golden worry beads.
Fox Business Network anchor Alexis Glick is frustrated by the way the government's $700 billion financial bailout is being used, and suggested on "Money for Breakfast" Nov. 21 that it was contributing to market declines.
"I mean, look, we are now at levels at least on the S&P that we haven't been since 1997. You know, people are pretty unhappy with how the TARP fund is going," Glick said in an interview with NYSE Euronex CEO Duncan Niederauer. "I mean, it's got to be - I'm frustrated, I mean I don't know about you."
It's not the first time that Glick has taken issue with the misuse of TARP, the Troubled Asset Relief Program (TARP).
Practically rubbing his hands in glee, Time magazine's Joe Klein exulted yesterday over Michigan Rep. John Dingell (D) losing out to the more liberal Rep. Henry Waxman (D-Calif.) for control of the powerful House Energy and Commerce Committee.
Apparently Klein is happy that under Waxman the committee will succeed in decreasing both domestic energy and commerce with fresh, strict regulations on America's automakers. From his Nov. 20 Swampland blog post at Time.com:
In other words, they would have to pay you to take what is rapidly becoming Manhattan's quaint little alternative newspaper off their hands.
Yesterday, New York Times Company stock closed at $5.72. That is, by far, its lowest close in the 22 years presented in this chart at Yahoo!:
Before today's opening bell, the company is worth $822 million,
Using conservatively adjusted numbers from a hysterically titled July 25 Business Week article about the company ("How Can The New York Times Be Worth So Little?"), I will show that the market currently sees the New York Times newspaper as literally being worse than worthless.
Here are the two key paragraphs from Business Week's original "analysis":
"Well, we're not yet in anything remotely resembling the crisis, the scale of crisis of the Great Depression." When Franklin Roosevelt took office in 1933, 13 million Americans were unemployed. "That was 25 percent of the work force," Kennedy told Bloomberg host Tom Keene.
The professor laid out exactly what has changed since the troubled 1930s:
Repent, all ye owners of Suburbans, thou drivers of Explorers. Mend thy ways, ye Escalade-loving louts! Take heed of the warning the prophet Mika has vouchsafed unto you: greedy thou art; verily, destroyers of the environment be thee!
Oy. Mika Brzezinski was on quite a roll this morning. On the one hand, free-marketers would find much to agree with in Mika's arguments. As noted here yesterday, whereas Joe Scarborough has been vigorously advocating a federal rescue of Detroit, Brzezinski favors bankruptcy over bailout. But Mika couldn't help muddling her message, delivering a jeremiad against Detroit for producing larger vehicles and Americans for buying them, actually condemning the latter as "greedy."
Victoria's Secret, the well-known lingerie retailer, is being sued by a woman who claims the company's bra had formaldehyde in it and made her "utterly sick." ABC's "Good Morning America" ran a segment Nov. 11 focusing on that 37-year-old Ohio woman, Roberta Ritter.
"Victoria's Secret - certainly one of the world's most recognizable brands," anchor Diane Sawyer said. "And this morning, though, there are questions about what some of the bras might have in them. And did they cause a reaction?"
ABC's Andrea Canning warned viewers "some women say they've experienced very uncomfortable symptoms from the bras like rashes and hives, even permanent scarring ... but the bras are still on the shelves."
Well, I guess that settles it. We don't need any political discussion or economist's studies. The auto industry officially needs a bailout. It's just a fact. After all, MSNBC and BusinessWeek have just said it. The auto industry "needs" one or it cannot survive. Oh, yeah, and MSNBC is also informing the world that Republicans have told auto workers to "drop dead." I think this is what the Old Media calls "news."
This story by David Kiley of BusinessWeek is amazing for its assumptions, pronouncements and slanted anti-capatilist rhetoric and it boggles the mind that it could be called journalism. It certainly isn't "news" because of all the personal opinions that Kiley pads this thing with, anyway.
Earlier today, in a story on falling oil prices, Mark Williams of the Associated Press bemoaned "evaporating" consumption, warned that the abrupt prices drop would cause a decline in exploration, and cited the need for trillions of dollars of investment to find more fossil fuels.
Contrary to or not in what Williams wrote:
Consumption has barely fallen.
The American electorate has chosen a new president who thinks exploring for new oil is a bad thing, and the need for that oil can be eliminated through proper tire inflation.
The new president and the Congressional majority want investments in alternative energy, and to tax the alleged "windfall" profits of oil companies, which would of course take money away from exploration.
Here are the key paragraphs from Williams's report:
So what exactly is the government doing with your money? Fox Business Network's Alexis Glick would like to know.
Treasury Secretary Henry Paulson announced Nov. 12 he would be redirecting the $700 billion bailout to focus on propping up financial institutions instead of buying troubled mortgage assets, which was the original intent of the rescue plan.
Glick, the host of FBN's "Money for Breakfast," told the CBS's "The Early Show" Nov 13 that the Treasury Department's move away from the original plan to buy up troubled mortgages "does not make sense" and was "actually pretty outrageous":
[T]he markets responded to that yesterday ... Look, the original intent of this Troubled Asset Relief Program was to purchase troubled assets. And I think the marketplace started to adjust several weeks ago when we started to see the size and magnitude of the capital injections.
Can I have permission to utter the S-word ("socialism")?
Ken Thomas's Associated Press report today (link is dynamic, subject to change, and will probably be gone in a week) on auto industry bailout ideas emanating from Washington includes these items, all of which expand soc- ... soc- ... socialism:
Legislation proposed by Barney Frank involves the government taking ownership stakes in the companies.
Lawmakers want to use funds that were meant only for the financial sector bailout.
A note that the current bailout is over and above the $25 billion in government-guaranteed loans that has already been approved for "development of fuel-efficient vehicles."
News that auto industry suppliers want in on the bailout action
The United Auto Workers wants a separate $25 billion "to help cover future health care obligations for retirees and their dependents."
Wednesday evening's dour Associated Press report by Tom Krisher and Ken Thomas on the proposed bailouts of General Motors, Ford, and Chrysler acted as if their fates will determine the viability of the entire US auto industry, and waited until the 15th paragraph to name the primary reason why the companies are where they are financially. Beyond that, the AP report did not mention that United Auto Workers has flatly ruled out union contract concessions.
Here is how the AP's report began, followed by selected other paragraphs, including the one (of over 30) that mentioned labor costs (bolds after headline are mine):
It's not like Barack Obama is a socialist or anything. It's just that Thomas Friedman wants him to put a "government master" in charge of the country's biggest manufacturing sector. Friedman made his modest proposal in his New York Times column of today, and expanded on it during a Morning Joe appearance. [H/t reader Tom.]
Now that Barack Obama has won the presidency, the poll cookers at the Associated Press have dutifully generated a barely-disguised press release for him.
A report this afternoon on the results of an AP GfK Roper Public Affairs & Media Poll is headlined "Most in AP poll confident Obama will fix economy " at Yahoo!, Google (shorter report), and the wire service's home site (all are dynamic links subject to change).
There are "only" two problems:
The underlying sample is heavily skewed towards Democrats, including strong Democrats.
Much more important, in fact crossing into downright dishonesty, the poll question asked had to do with whether respondents thought that Obama would "improve" the economy, not "fix" it.
Here are the first two paragraphs of the relatively short, unbylined report (bolds are mine to note fawning and erroneous reporting):
"I agree with you," economics reporter Louis Uchitelle said, also pointing out that it took two years before the government really "stepped in and acted" during the Depression - referring to Franklin Roosevelt's action.
Norris said one of the first lessons of the 1930s was that bailing banks out would "limit the damage of the financial crisis."
"If you go back just two or three years ago, you had this powerful argument that government was the problem.So there is emerging from this an understanding that markets and government are married whether they like it or not," Uchitelle said.
Who's going to be the leader of the financial world in the role of Treasury Secretary under President Obama? It may be Democratic New Jersey Gov. Jon Corzine, who has pushed for an additional economic stimulus package to the tune of $300 billion to support infrastructure projects.
CNBC's Carl Quintanilla asked Corzine outright on "Squawk Box" if he would accept a job in the Obama administration as Treasury Secretary. "If it's offered, governor, will you say no?" Quintanilla asked.
"Squawk Box" co-host Joe Kernan encouraged Corzine to consider accepting the job if offered, even as the former U.S. senator expressed his contentment as governor. "You could save the world" as Treasury Secretary, Kernan said.
An Obama victory could boost conservative talk show hosts according to CNBC's "Squawk Box" this election day. The show was more skeptical over the future of left-wing talk. Always with the rhetorical questions, Joe Kernen got things started:
Who is going to win in terms of the cable wars? ... Are we going to become totally nonpartisan now? Do you think that we will be able to bury all of our divisions and there won't be any incendiary cable shows anymore? Who wins if Obama wins? What happens to Olbermann? What's Olbermann going to do, or Maddow?
Co-host Carl Quintanilla suggested "television feeds on conflict" and co-host Rebecca Quick followed up by adding that syndicated radio host Rush Limbaugh "has done better" when there are Democrats in power.
Kernen said that Limbaugh and Fox News Channel and syndicated radio host Sean Hannity both signed new deals and an Obama win would be "great for them."
"Periods of crisis often beget bad policies," Lee E. Ohanian, an economist at the University of California, Los Angeles (UCLA) said in an interview with Reason.tv. The professor stressed that six weeks ago the fundamentals of the economy looked "pretty good," before bailout "rumors" caused "panic":
What I mean by fundamentals are the amount of factories and office buildings and capital equipment we have in place, there's no change in that. There is no change really in individuals' interest in working. We've got the same work force right now we had six weeks ago. Productivity is about the same as it was perhaps even higher. All those fundamentals of the economy are the same.
Ohanian said Gross Domestic Product growth over the last five to six quarters was "on average," and productivity growth was "very high"
Washington Post reporter Sholnn Freeman frontloaded his October 31 business section front page article, "Airfare Surcharges Stay Despite Oil Price Drop," not on examining the valid business reasons for why some airlines retain the fee but in citing a liberal politician seeking to grandstand the issue.:
When oil prices were rising rapidly, many financially-strapped airlines started adding special surcharges to ticket prices to cover the bill. So now that oil prices are falling, are the fees coming off? Not yet.
The lag is drawing complaints from air travelers, consumer watchdogs and a member of Congress. Sen. Robert Menendez (D-N.J.) is sending a letter to U.S. Transportation Secretary Mary E. Peters asking the department to investigate whether the charges "have any basis in reality or if they are being used to mislead travelers, reduce competition and increase fares."
I want to put up two graphics that show how much prices have increased in the last year. To fly from New York to Miami the current average fare is $363 round-trip ... Now last year the same trip cost on average $321, that's 13 percent higher than last year. And to fly from Los Angeles to Dallas, Fort Worth airport, the current average is $391 round-trip. Last year that same trip cost on average $341, that's 15 percent higher than last year. Do you see any signs of airfare prices changing direction?
Amy Ziff, the editor-at-large of Travelocity, qualified Chen's numbers by saying those figure only tracked Thanksgiving specific airfare and opposed Chen's assumption that airfares were unusually high:
It's obvious The Washington Post's "Style" section is broadening it horizons beyond fashion, music, books and other fluff, plus of course - Howard Kurtz's media column and the comics. The editors of that section are tackling important events that changed history by commemorating them as milestones.
Normally such attention is given to anniversaries that fall more under the definition of a landmark: the 25th, 50th, 75th, etc. But with the American public seeing the economy as the top issues in the presidential election - and the media tendency to compare current economic conditions to the Great Depression already well-established - the Post has deemed the 79th anniversary worthy of attention.
On Tuesday, Editor & Publisher released daily and Sunday newspaper circulation figures from the Audit Bureau of Circulations as of September 30, along with percentage changes from the preceding year. Showing that the press can't even report accurately about itself E&P's accompanying commentary vastly understated the situation:
Most Major Papers Continue Circ Decline
According to ABC for the 507 newspapers reporting in this period, daily circulation slipped 4.6% to 38,165,848 copies. For the 571 papers, Sunday dropped 4.8% to 43,631,646 copies.
For comparison purposes, in September 2007 reporting period, daily circ fell 2.6% and Sunday was down 4.6%.
"Most"? Try "Virtually All." The daily figures show that all but two of the top 25 papers lost circulation during the previous 12 months (USA today and he Wall Street Journal both gained a "whopping" 0.01%). Only the St. Louis Post-Dispatch, at +0.80%, gained on Sundays. E&P's commentary cited precious few tiny increases at non-Top 25 papers.
If you think the one-year news is bad, check out what has happened during the past five:
Sometimes former CEOs have a reason to be downbeat when they make predictions.
Former Chairman and CEO of Citigroup Sanford Weill told CBS's "The Early Show" Oct. 28 that unemployment would hit 9 percent and that Wall Street CEOs "didn't deserve bonuses this year." It went something like this:
Well, I think we've set in motion a whole series of events that is going to make the economy really, really bad over the short term. I think we are going to see the biggest drop that we've seen in GDP. I think we are going to see unemployment go up to about 9 percent.
Weill said that a year from now things would be a lot better, but still was critical of the Federal Reserve for not acting sooner: