E.U. Back In The News
It's Sunday evening and I've just finished watching Bubba Smith win the Masters Tournament. He is a humble man if I've ever seen one, God bless him. I'm sitting at my home office considering what to include in this months newsletter, and suddenly I'm rewarded with 60 minutes and the lead story; the European debt crisis. I had to go back to my November newsletter to find the last time we've discussed this because it seemed that I had written something about not every country being truthful about the debt issues. Guess what, it's true. Greece is in an essential depression with unemployment at 21%, pensions cut by 40%, soup lines, riots and all kinds of crazy stuff, like people setting themselves on fire. Spain seems to be the next problem for the European's. Spain has a GDP almost 5 times the size of Greece. which creates the obvious concern of 5 times the crisis. As I've stated in the past, the E.U. issues are far from over. You should note that the E.U. is our largest trading partner, which is why I spend time communicating about the problems in that part of the world. Its been pretty conclusive that the European recession is beginning to affect the recovery here in the U.S. Just this week we've seen another increase in unemployment and more people actually just leaving the job market permanently. People departing the job market does in fact push the unemployment rate down, the problem is it creates an artificial actual rate because people are just fed up looking for jobs and have essentially become part of the population that receives entitlements, and that's not good. It reflects poorly on consumer confidence, which is critical when recovering from a very deep recession. We've started to see some changes in employment and it's duly noted that unemployment is at 8.2%. Unfortunately, as I have stated many times, that figure does not include the "under employed" (people working but for less than what they have made in the past) or people that have actually stopped looking or essentially left the workforce, as stated above. By the way, the number who have left the workforce last month was 164,000. If you ad that figure back to the unemployment percentage and a few of the previous months where the same thing occurred, we are really at 9+% unemployment. I think it's going to take years for the United States to get back to the 2007 unemployment rate of 4.4% and as a result of that, it's going to take more time to recover from the recession.
There is a a buzz that we are about to see some reduction in oil prices which should result in decreases in gasoline prices. This is a result of two primary items. First, Iran has decided to negotiate over their nuclear objectives, that's supposed to begin this Saturday in Istanbul, Turkey. Second, the Saudi's have essentially stated that any pullback by Iran on oil production would be compensated by them.
With regard to Iran coming to Istanbul to negotiate the nuclear issue, am I the only person who thinks this is a stall tactic so they can keep their nuclear program moving towards a weapon? I mean really....It seems the negotiations are a delay tactic to influence Israel not to take military action on the Iran nuclear issue.
Lots of people were watching the markets over the past few weeks and there was excitement about how quickly the indices had risen. Last week things didn't look so promising. Last week was the worst week in the market this year with the Dow falling 1.6%, the S&P500 falling 2% and the NASDAQ declining by 2.3%. The consensus on the factors that led to those declines were a slowdown in the Chinese economy and the still looming issues surrounding the Eurozone, specifically Spain and Italy. We will start to see some additionally 1st quarter results this week and I don't expect anything shocking. Last week 32 companies reported earnings for 1Q and 75% of those reports exceeded estimates of the analysts, yet the market still found a way to post a decline for the week......go figure.
Mitt Romney is apparently going to be the GOP candidate, despite continued efforts from Gingrich and Paul. President Obama has raised almost 10 times the money that Romney has for the upcoming Presidential campaign. It's going to be a very interesting fight for the leadership of our nation. Critical to the election is probably going to be the Supreme Court decision regarding the legality of Obama Care. The fundamental issue surrounding the legality of Obama Care is actually very simple; Is it constitutional to require people to have health care coverage or pay a fine? It's called the "individual mandate". The consensus is that the individual mandate is probably going to get thrown out. The much larger question will be, what happens if that takes place? Essentially, the entire bill could be overturned which would a disaster for the president as this is his signature piece of legislation. There are other questions that come as part of this process, including the governments ability to infringe on free liberty. I'm clearly no legal expert, but I would imagine if the individual mandate gets struck down, the rest of the law will likely fall as well. I do think we need to deal with the healthcare issues that face this country, but as with a great many people, I am not a supporter of this legislation and believe there is a better way to deal with this issue.
The President's budget was received and voted on this past week and incredibly, it received zero supporting votes, what an embarrassment. The vote received very little press for some reason and was overshadowed by the Trayvon Martin/George Zimmerman case in Florida and the surrounding Stand Your Ground laws that are essentially hanging in the balance. I'm certain that the result of this case is going to bring up the issue of gun control and that will likely be a topic for the 2012