Monthly Archives: August 2010

US Deficit Worse Than Reported

By Andrew Busch | Published: August 20, 2010

Yesterday, the Congressional Budget Office released their estimates for the federal deficit for 2010 and it’s deceivingly ugly.

“The Congressional Budget Office (CBO) estimates that the federal budget deficit for 2010 will exceed $1.3 trillion-$71 billion below last year’s total and $27 billion lower than the amount that CBO projected in March 2010, when it issued its previous estimate. Relative to the size of the economy, this year’s deficit is expected to be the second largest shortfall in the past 65 years: At 9.1 percent of gross domestic product (GDP), it is exceeded only by last year’s deficit of 9.9 … …READ MORE

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It's the Small Business, Stupid

By Andrew Busch | Published: August 19, 2010

The optics on the US jobless claims data are terrible and will generate a renewed negative newsflow leading up to the US employment data on September 3rd. It is clear new jobs are not being created. It is clear that whatever economic prescription policy makers have attempted is past its “Sell By” date. It is clear that the policy direction forward for the US economy must focus on the creating the best conditions for small to medium sized firms. Remember, companies that are 5 years and younger generated over 90% of new hires between 1997 and 2007. These firms are … …READ MORE

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Recession 2011?

By Andrew Busch | Published: August 17, 2010

The San Francisco Federal Reserve has published a report that is generating a lot of buzz in the financial markets. Entitled, “Future Recession Risks”, the paper reviews the predictive capabilities of the US Conference Board’s Leading Economic Index. This report has been cited in several articles providing outlook for a double dip recession and generating additional angst for investors.

As most know, the LEI is published once a month by a private research group in New York City. It is composite comprised of 10 indicators that are known to swing up or down well in advance of the rest of … …READ MORE

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Potential Shift in Newsflow

By Andrew Busch | Published: August 13, 2010

As I wrote yesterday, the market is pricing in a slower US GDP for Q3. 50-75K private payroll growth is not enough to drop the unemployment rate, but it’s enough to avoid a double dip recession. It will just feel like a DD as it will dominate the newsflow due the upcoming US election. Yet…..in our 24/7 news cycle, I definitely feel that focus is myopic and trends toward the negative for impact. Therefore, we are going to need a sustained, positive theme to be established before a shift can occur.

The better-than-expected German & Eurozone GDP is a good … …READ MORE

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US Employment Bad Surprise

By Andrew Busch | Published: August 6, 2010

Clearly, the numbers are a disappointment especially with the revisions. There appears to be a disconnect between the US ISM service&manufacturing data and the US employment data as the former was much stronger than the latter. Also, the increase in average hourly earnings and workweek are strong positives that go against the grain of the headline numbers. Finally, the strong CapEx numbers are not translating into job hires. The markets initial reaction is to sell US dollars, sell Canadian dollars and sell Risk. The euro has put in a new high and is now back to the level of May … …READ MORE

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Tax The Wealthy or Reduce Jobs?

By Andrew Busch | Published: August 5, 2010

With Congress set to debate extending the Bush tax cuts, there are risks to small business from raising taxes on the “wealthy”.

US Treasury Secretary Tim Geithner gave a speech yesterday in Washington on the Obama administrations economic case for raising taxes on high earners.

He states, “….But given the size of the deficits and debt that we inherited, we must provide that tax relief in a fiscally responsible way. We believe the best way to do that is by allowing the tax rate for the top 2 percent to go back to levels seen at the end of the … …READ MORE

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Break the Fifteen Negatives

By Andrew Busch | Published: August 3, 2010

As I was attempting to dry off from the torrential rainfall occurring in Chicago this AM, I had this thought: why are interest rates so low? Are the Granthams and Grosses of the world correct in their deflation scenarios?

Let’s look at all the reasons for low rates. Some are stand alone, some are related.

1 Slow or decelerating European and US economic growth.

2 European sovereign debt crisis.

3 European bank crisis.

4 China tightening to contain inflation.

5 No or slow demand for money.

6 Lots of money around from central banks.

7 Large amount of free reserves … …READ MORE

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The Deficit Debate

By Andrew Busch | Published: August 2, 2010

Yes, they need to be cut. It’s how to do it. In Newsweek, Fareed Zakaria states, “Raise My Taxes, Mr. President!” and the NYT Sunday Op-Ed had something similar entitled, “What They’re Not Telling You.” Both articles are worth reading to understand the US fiscal deficit and how it became $1.4 trillion.

Zakaria states, “The Bush administration inherited budget surpluses from the Clinton administration. What turned these into deficits, even before the recession? There were three fundamental new costs—the tax cuts, the prescription-drug bill, and post-9/11 security spending (including the Iraq and Afghanistan wars). Of these the tax cuts were … …READ MORE

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