Obama, Federal Reserve Further Muddy Economic Waters

Originally posted in the Daily Journal of Commerce, Portland OR

Published July 8, 2013
William RutherfordFederal Reserve Chairman Ben Bernanke, usually very clear and precise in his comments, muffed his recent testimony to Congress. Bernanke attempted the impossible and ended with egg on his face. Every thinking person on the planet has known for some time that the Fed would begin raising interest rates at some time. Every thinking person has known that interest rates had been kept abnormally low by quantitative easing, which also buoyed the equity markets. Every thinking person has known that the effort to curtail QE would be very difficult to achieve and could potentially cause great upheaval in the markets.

The Federal Reserve has taken great pains to tell the markets under what circumstances it would reduce QE, and raise rates. The conditions were a reduction in unemployment to 6.5 percent, a growing economy and a lack of serious inflation. Two of these conditions are being met. Therefore, every thinking person has known that rate increases were in the cards and being contemplated. Indeed, Federal Reserve minutes and Fed speakers indicated that there was not board unanimity, and some governors favored ending quantitative easing even now. But when Bernanke, in testimony before Congress, tried to emphasize that the Fed was considering tapering QE, the equity markets staged a tantrum.

Ending QE is admittedly a very difficult task for anyone, even normally articulate Bernanke. However, the markets appeared “shocked and appalled” that the Fed would even consider raising rates. Talk about an entitled generation. How about a whole industry? Wall Street, which has been bailed out over and over during the Great […]

July 10th, 2013|Categories: Daily Journal of Commerce|Tags: , , , , , |Comments Off on Obama, Federal Reserve Further Muddy Economic Waters

Market Slumps Amid Economic Slowdown

Published June 11, 2012
William RutherfordA dramatic slowdown in Europe caused by credit issues there has brought the global economy to stall speed. European unemployment has reached all-time highs during the euro era. Manufacturing in the euro zone has fallen further. The Chinese economy has shown effects of a government-engineered slowdown. China has devalued the yuan, after allowing it to appreciate, in order to stimulate its economy.

All of these factors impact the U.S., where the rate of economic growth (gross domestic product) is less than 2 percent. U.S. factory output is near a 2½-year low, indicating the economy may be headed back toward recession.

The Institute for Supply Management reported that its business barometer fell 3.5 points to 52.7 in May; it was the third straight monthly drop and the lowest reading since September 2009 (readings above 50 reflect economic expansion). The consensus estimate was for the barometer to continue at 56; so the current reading reflected a significant weakening.

At the same time, the ISM production index fell 7.1 points in May to a neutral reading of 50, also the lowest since September 2009. This index is compiled from surveys of purchasing managers in the Chicago region.

Also, the Labor Department showed that the number of workers filing for unemployment benefits rose by 10,000, to 383,000, for the week that ended May 26.

On June 1, the jobs report from the Labor Department showed that non farm payroll grew by a lackluster 69,000 last month. The rate of unemployment ticked up to 8.2 percent. All of the growth came from private industry: 82,000 jobs were added, but governments cut payrolls by 13,000.

Compounding the already weak report, […]

Markets’ Solid Starts Bode Well For 2012

Published February 10, 2012

William RutherfordThere is an old saw about the equity markets: As January goes, so goes the year. But like many old saws, there is a basis in fact for this one. Note that the S&P jumped 4.4 percent for the month, with the tech-heavy NASDAQ up 8 percent.

In addition, the “first five days” theory holds that the S&P has never fallen in a year when the first five days of the year see gains of 1.8 percent or more. In the first five days of 2012, the Dow rose 1.8 percent.

The Dow index has matched the direction of January performance in 92 percent of years since 1970. In 85 of the Dow’s 114 years – 75 percent of the time – the January effect has held true.

Reasons for optimism have emerged. Most recently, the unemployment rate fell to 8.3 percent from 8.5 percent a month earlier and 9.1 percent as recently as August.

This is because net job creation in January was 243,000 – more than expected. Moreover, December job growth was revised upward, as was November from 100,000 originally to 157,000.

These jobs were created in the private sector; business added 257,000 jobs as the public sector continued layoffs. Small businesses added 95,000 jobs, while medium-size firms added 72,000. Large companies added only 3,000 jobs. Most Americans work at businesses ranging in size from small to medium; these are the ones that banks are becoming more willing to lend to.

Factory orders are up for the second consecutive month. Factory orders grew in Germany for the first time in four months. Orders also grew in Austria, Britain, Norway and Sweden. Northern Europe’s […]

February 13th, 2012|Categories: Daily Journal of Commerce|Tags: , , , , |Comments Off on Markets’ Solid Starts Bode Well For 2012

Economic Growth Slows; Bernanke Takes Congress To Task

William RutherfordPublished September 9, 2011
After rolling through Labor Day, we continue to have high unemployment. It’s at 9.1 percent, and even President Obama says it will remain high through 2012. If so, Republicans are salivating over the opportunity to retire the president after only one term.

The pundits already are expecting Republicans to gain enough seats to take control of the Senate. Because of Democrats’ large victory in 2006, they have about twice as many seats to defend as Republicans. This gives the Republicans a big advantage going into the elections, so it is their election to lose.

As if high unemployment wasn’t enough bad news, housing starts have been moribund, the Philly Fed index fell to its lowest level since March 2009 – the recent market bottom. The consumer confidence index tumbled as well, to its lowest level since April 2009; the drop was far bigger than anticipated. As the global economy slows, and fears of the European debt crisis continue, worries over another
recession have put a damper on the markets. According to David Kelly, chief market strategist at JP
Morgan Funds, “… the market is an engine flooded with liquidity but without a spark.”

Economic growth is surely slowing not only in the U.S. but globally as well. Economic forecasters are
expecting GDP to grow from 1.5 percent to 2.9 percent next year. At 1.5 percent, we are not in a
recession; however, it will feel a lot like one. Employment really needs GDP growth of 2.5 percent to
reduce unemployment.

What will the market do between now and the end of 2011? As always, the pundits are divided. While
the case can be made for the S&P of […]

September 14th, 2011|Categories: Daily Journal of Commerce|Tags: , , , , |Comments Off on Economic Growth Slows; Bernanke Takes Congress To Task

Will Obama Keep On Truckin’ With Agenda?

William RutherfordWhile president focuses on health care, voters’ actions suggest they’re more concerned with the economy

Nearly a year ago, Vice President Joe Biden notoriously asked, “Why are we focusing on health care when the economy is the problem?” Apparently Obama didn’t get the memo.

In the Scott heard around the world, previously unknown Massachusetts state Rep. Scott Brown (R-Mass.) drove his dusty, old pickup truck to victory in knocking off the Democratic nominee for the U.S. Senate seat previously held by Ted Kennedy. Elected in the bluest of the blue states, Brown is the first Republican elected to the U.S. Senate from Massachusetts in 38 years. German news source Der Spiegel pronounced: “The World Bids Farewell to Obama.” Elected just a year ago in a stunning victory, President Barack Obama now finds himself facing declining approval ratings and upheaval. He promised change, but voters did not like what they perceived as European style socialism. With the nation suffering through the worst economic conditions since the Great Depression, exit polls from his presidential election showed that two-thirds of the voters cited the economy as their number one concern, and fewer than 10 percent mentioned health care. Since taking office, Obama has focused on health care. Obama, in his first year in office, gave 158 interviews and 411 speeches – more than any other U.S. president; perhaps more than all of them put together. Yet the Democrats have now lost the governorships of Virginia and New Jersey, and a Senate seat in Massachusetts.

In the meantime, the Brookings Institution says the largest and fastest growing population of poor people in the U.S. is in the suburbs. […]

April 6th, 2010|Categories: Daily Journal of Commerce|Tags: , , , , , |Comments Off on Will Obama Keep On Truckin’ With Agenda?

Bill Rutherford Quoted In Dow Jones

Consumer Staples, Health Care Seen As Recessionary Havens

by Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145; maryellen.lloyd@dowjones.com

A year into the U.S. recession, the smart money on Wall Street says traditionally defensive sectors such as consumer staples, health care and telecommunications remain among the best bets.

That’s because it is businesses like drugstores, food producers, managed-care companies, and beer and cigarette makers that tend to do well despite tough economic times, according to several market strategists, money managers, economists and fund data managers.

“You’re dealing with industries and companies that provide necessities – everything from toothpaste to stents to pharmaceuticals to cereal,” said Brian Belski, Merrill Lynch’s U.S. sector strategist.

And some not-so-basic items can feel like necessary luxuries for folks during times of stress. “People tend to drink and smoke more during recessions and slowing times in the economy and the stock market,” Belski said. […]

December 18th, 2008|Categories: Bill Quoted|Tags: , , , , , , , , |Comments Off on Bill Rutherford Quoted In Dow Jones

Pre-Market Report

The market has taken a sharp tumble in the past few days.  The S&P has closed at its lowest point since April 14, 1997. This brings the average Large Cap Growth manager and Multicap Growth manager down about 50% on the year.  (We are beating the markets)

The economic news is grim and the Fed believes the recession, which they now recognize, will last into the first half of next year.  Others think the recession will last longer.  Historically the market has turned up about six months in advance of the end of the recession.

Markets are also suffering a lack of confidence.  We have one president with his bags packed and another yet to assert himself.  Obama should act now, or face much tougher problems when he takes office. Treasury Secretary Paulson seems to have a new game plan each day, so it is no wonder that investors are confused.

Is this the end of the world as we know it?  Not likely.  Government regulation, and involvement in business will grow, but the economy will recover.  So far the government has thrown (literally) about 2 Trillion dollars at this problem.  We have seen some results-credit markets are starting to work again-but not all of the results. […]

November 21st, 2008|Categories: Comments from Bill|Tags: , , , , , , , |Comments Off on Pre-Market Report

Bill Rutherford Quoted By CNNMoney.com

CNNMoney.com

Dow sheds 486 points: Post-election worries about the weak economy are front and center.

by Alexandra Twin, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) — Stocks fell sharply Wednesday, with the Dow sliding as much as 513 points, as Barack Obama’s historic victory gave way to renewed worries about the struggling economy.

The Dow Jones industrial average (INDU) lost 486 points or 5%. The blue-chip average lost as much as 513 points earlier. The Standard & Poor’s 500 (SPX) index lost 5.3% and the Nasdaq composite (COMP) gave up 5.5%.

Investors were taking a classic “buy the rumor, sell the news” response to President-elect Barack Obama’s victory over John McCain, said Bill Stone, chief investment strategist at PNC Financial Services Group. […]

Market Update

Yesterday the market just had its second largest up day ever; up 889 points. This rise came in spite of historical lows in the consumer confidence index (backward looking and volatile) and a nationwide drop in home prices of 16.6% (a real threat to the economy). The Fed is yet to weigh in with a rate cut which will almost certainly happen today. In the meantime, the Fed has increased the money supply by 25% in the last three weeks, a truly astonishing number.  The rally occurred toward the end of the day, with banks stocks getting a big lift in the last two minutes of trading. No doubt this was short covering and therefore not a sustainable rally.  Volume was very heavy (a good sign).

I do not know if this is the market bottom, although the October 13 bottom has now been tested twice and held both times.  I frankly expect at least one more test of the bottom, and of course any more BIG bad news could send the market lower.  (There is plenty of bad news in the market valuation already, news that a few weeks ago would have been considered big bad news, but has now become commonplace-the market has become inured to a degree). […]

October 29th, 2008|Categories: Comments from Bill|Tags: , , , , , |Comments Off on Market Update

How Could Mr. Right Have Been So Wrong?

Amid the financial meltdown, former Fed chairman Alan Greenspan is a rock star no more

by The Oregonian Editorial Board

He was a legend, the “maestro,” the man who knew how to pull the levers that others couldn’t even see, the man who uttered the market-crippling phrase “irrational exuberance,” who courted celebrity and married the television news reporter, whose absolute faith in free markets led many to declare him the greatest chairman of the Federal Reserve the country had ever known.

Now, with markets crashing and wealth evaporating around the world, he is regarded as the man who steered blindly into a storm, tacking when he should have jibed.

“Man, I loved Alan Greenspan,” lamented Portland economist and business consultant Bill Conerly this month on his Businomics blog, “but it turns out that he is to blame for today’s problems.”

Conerly says Greenspan and many others failed to see that the Fed’s policy of keeping interest rates low was fueling a housing bubble — a bubble that popped and has plunged the world into recession. […]