Thursday, July 02, 2009

Closing was troubling, Obama's comments did not help

Following up on the prior post, the closing did not play out as expected here, and the result was "troubling". If the equity market had a chance of a late day salvage, it definitely could not happen after President Obama's 2:30pm comments.

Obama addressed the press corps and acknowledged his disappointment and surprise at the employment numbers. He stated the obvious in saying that a problem created over a number of years could not be solved in a few months and that while the day's numbers were poor, the 2nd quarter overall was an improvement on the first quarter. Switching gears quickly he then proceeded to discuss environmental policy and green initiatives, touting energy solutions businesses as an area that will be hiring many more people into jobs that will be long term and stay in America. With a group of executives whose companies are investing in green solutions surrounding him, he stressed their role in creating employment opportunities to address the problem so evident in today's employment numbers.

There were a number of reasons for investors to be befuddled by this performance. First, even many ardent supporters of significant changes in environmental practices admit that a transition of any consequence to wind, solar, and other power alternatives is a long term process, more dream than employment bonanza today. Why was this three quarters of the President's presentation today. Second, he did not make any substantive comment at all about the employment numbers, even dice and slice the numbers in the most general way to give the public a sense of perspective. And third, he did not address any of the initiatives underway through the economic recovery programs and how they had the potential to ease employment pressures in the next two to three quarters. He did not address the gorilla in the room. He talked about his environmental initiatives.

As to the recovery program's progress, it was politically astute to keep quiet. Of the $750 billion approved by Congress in March, the most quoted figure suggests that only $170 billion of that has been allocated to projects and relief thus far(could this possibly be true), and the word is "allocated", not necessarily spent. Concerning the $100 billion of distressed securities buying through the public/private plan announced by Geithner in February to relieve credit market stresses, it was announced today that a $20 billion program would soon be underway, five months later and $80 billion short of projections(this is definitely true). Both the administration and Congress poisoned the atmosphere for such a plan with their anti-banking and anti-investor comments. "Politically astute to keep quiet", but every one who pays attention notices, and the market pays attention.

One administration official, when asked, said today that it was too early to say whether more government relief would be necessary, but that all options were open. The obvious response to the administration and Congress that should be "do the work and act constructively enough to deliver on your commitments and invest the money that's already been approved".


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