SpeakerArticles.net

Archive for the ‘Wayne Angell’ Category

Wayne Angell

Stock market gains in the midst of introduction and application of Obama economic policies have confounded political-economic skeptics.  The Dow Jones Industrial Average has increased 39 percent since the March 9 low of 6547 and the Dow at 9093.24 is only 36 percent below the all time high of 14198 posted on October 11, 2007.  What goes—how has the market posted the sharpest rate of gain since 1975 while market participants see President Obama’s economic policies as of high risk to market capitalism?

The answer for now and more likely than not for the balance of the year is that the Obama economic prescription is more harmful to labor than for capital.  Who can safely say that the stock market will not see the Dow break 10000 and 11000 before the end of the year?  Could the Dow finish the year near 12000?  My answer is maybe.

Judging the effects of the Obama economic policy is complicated by the fact that while labor seems to be Obama’s favorite constituency, employment bears the horrible burden of increased labor costs.  While wage gains are likely to escalate from an anemic 2 to 3 percent to a 3 to 4 percent range gain due to an untimely increase of 10.7 percent in the legal mininimum wage which rose today to $7.25.   Employment costs are escalating with the forecast rise in health care cost estimates.  More Obama problems are coming.

How could policy be more wrong for labor?  Employers are even more ready to lay off workers and to postpone hiring new workers.  Cost cutting zeal has contributed to the earnings surprise—76 percent have surpassed analysts estimates.

Another major benefit for capital has been the more robust turn around from declining output to positive output growth in the second half of 2009.  In my view acceleration of the output growth that may have begun in the second quarter of 2009 is likely to extend through 2011.  It is early to predict 2010 real output growth of 6 to 7 percent, but that is my number.   Rapid output growth will go along way to keep earnings growth that will call for higher stock prices.

But, alas for labor, employment growth is likely to be significantly below the Obama promises.  Unfortunately President Obama is not yet ready to change his goal to focus on reducing the rate of growth of health care and other employment costs.

The outlook for stocks is positive.  My major concern is that Chairman Bernanke is not ready to let rising commodity prices lead him to an increase in the target Fed funds rate from near zero to one percent sooner rather than later.  The problem is that Bernanke is not ready to act and will be tempted by the same difficulty this year and next year.  The Federal Open Market Committee seems to find too much comfort in the employment gap—they continue to be willing to rely on a high unemployment rate to keep inflation at bay.

Although the Fed continues to distribute a weekly commodity price report to all members of the Board of Governors action to increase the target Fed funds rate seems to be remote.

Dr. Angell is an engaging speaker, highly sought for his financial expertise, especially in the areas of interest rates, bond market, equity market, and currency futures and is renowned for his monetary policy forecasting. More information about his speaking ability can be found at Speakers.com.