Thursday, July 30, 2009

ALL THE KINGS MEN

Great Article in The Washington Post

Obama's 32 Czars

By Eric CantorThursday, July 30, 2009

"The biggest problems that we're facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all. And that's what I intend to reverse when I'm president of the United States." -- Sen. Barack Obama, March 31, 2008

To say President Obama failed to follow through on this promise is an understatement. By appointing a virtual army of "czars" -- each wholly unaccountable to Congress yet tasked with spearheading major policy efforts for the White House -- in his first six months, the president has embarked on an end-run around the legislative branch of historic proportions.
To be sure, the appointment of a few special officers to play a constructive role in a given administration is nothing new. What is new is the elevation of so many czars, with so much authority on endless policy fronts. Vesting such broad authority in the hands of people not subjected to Senate confirmation and congressional oversight poses a grave threat to our system of checks and balances.

At last count, there were at least 32 active czars that we knew of, meaning the current administration has more czars than Imperial Russia.
The administration has a Mideast peace czar (not to be confused with the Mideast policy czar), a Sudan czar and a Guantanamo closure czar. Then there's the green jobs czar, sometimes in conflict with the energy czar, who talks to the technology czar, who sometimes crosses paths with the urban affairs czar. We mustn't forget the Great Lakes czar or the WMD czar, who no doubt works hand in hand with the terrorism czar. The stimulus accountability czar is going through a rough time right now, as is the TARP czar -- but thankfully they have to answer to the government performance czar. And seemingly everyone falls under the auspices of the information czar. In a government full of duplicative bureaucracies, adding more layers with overlapping responsibilities hardly seems the way to go.

Even Democratic Sen. Robert Byrd (W.Va.) was fearful enough to pen a letter to President Obama in February highlighting his concerns with the administration's tactics. The Constitution mandates that the Senate confirm Cabinet-level department heads and other appointees in positions of authority -- known as "principal officers." This gives Congress -- elected by the people -- the power to compel executive decision-makers to testify and be held accountable by someone other than the president. It also ensures that key appointees cannot claim executive privilege when subpoenaed to come before Congress.

As we move forward, proper oversight of the growing lineup of czars is essential. From orchestrating bailouts to making industrial policies to moving toward government-run national health care, Washington seems intent on sailing into uncharted waters -- and the czars are often steering the ship.

The car czar, who stepped down this month amid controversy over his former firm's role in a scandal, had been managing government's recent takeover of a huge swath of the domestic auto industry and making decisions for auto companies. The pay czar -- also known in White House circles as the "special master for compensation" -- has the power to reject or accept any current and future compensation for the top 100 earners at companies that received, in some cases under pressure, money from the Troubled Assets Relief Program. In the coming months he will decide the fate of $235 million in pending retention bonuses at AIG. And the health czar, meanwhile, has become as influential as perhaps anyone in the Obama administration, spearheading White House negotiations with doctors, hospitals and other health providers. She will play a key role in determining which medicines, treatments and cures are deemed necessary for the public.

The point here is not that President Obama's reliance on czars is illegal (although it does raise significant, unresolved constitutional issues). Nor is it that these czars are bad people. It's that we have not been able to vet them, and that we have no idea what they're doing. It's that candidate Obama made a pledge to keep Congress in the light. Yet less than six months after his inauguration, the president appears intent to keep Congress more and more in the dark. Dozens of czars at a time.

The writer, a Republican from Virginia, is the House minority whip



posted by Peter Greene

Tuesday, July 14, 2009

Firm's S&P morning note

The S&P 500 bounced from aggressively from the lower support area we highlighted in yesterday's S&P 500 note. We still believe the summer will be choppy and we could remain range bound for quite a bit of time. It is also possible we could see some semblance of a retest later this summer or as we approach the fall.That said yesterday's bounce had some vigor to it particularly on the NYSE where up volume beat down volume by a ratio of 10:1 and advancers bested decliners by a 4.5:1 margin.The NASDAQ was close to the task on the up to down volume camp with a 6.45 to 1 ratio, however it has less participation than the NYSE with only 2.7 stocks advancing for every one that declined. While these internals may suggest we can push a bit higher up into the range, we think given seasonal summer weakness the tape won't reward those with multi-month holding periods like it did from March to June, but will favor active trading.As long as the S&P 500 stays above Friday's lows the market still gets the benefit of the doubt.
Best.


posted by Peter Greene

Monday, July 13, 2009

S&P comments from the firm

As in the attached research note on the S&P 500, the index is sitting at the lower end of its support zone. Given the index is already qualified as oversold (ie. down 8% from its’ peak) it is even more important that it hold. If the rally off the bottom is still intact then an 8 % sell-off to support should be met with enthusiasm by buyers. If buying doesn’t materialize down here then that tells you a lot about the psychology of traders and then we would likely see the market continue to drift lower. It is really important for the bull argument that the market make some sort of stand here.

Given the summer months and many pm’s and traders hitting peak vacation time (July to August) we would expect trading volumes to taper off a bit making liquidity a bit of an issue.



posted by Peter Greene

Wednesday, July 8, 2009

Consumer credit at 3PM

So the next economic number that may put a wrench in the market is the Consumer Credit number released at 3pm Wednesday. Survey numbers say -8.5 Billion with prior month -15.7 Billion...Will this move us for the close, short answer is YES---market pros will use "any" excuse to trade the news....


Also big news today is Alcoa earnings-always big but for some reason everyone is jumping all over their earnings as a was to tell ALL future earnings for the quarter. Kind of dumb but true.


Below is a quick note from my firm on Consumer Credit:



Total consumer credit balances are shrinking at an aggressive pace. According to the Federal
Reserve, a majority of banks are still tightening their lending standards for consumer loans
and credit cards. Meanwhile, consumer spending is slipping again after an unexpected increase
earlier in the year.
Revolving credit balances are falling at a steadily increasing rate. Consumer spending has slipped in
recent months, although it is still holding up much better than it was in late 2008. Consumers also have
more cash to work with thanks to several months of greater savings, increased transfer payments from
the government, and payroll tax credits. These factors have lessened the need for credit cards, while
consumers also try to dig themselves out of debt.
Non-revolving credit balances are also shrinking, but the recent rate of decline has been slower and
steadier than it has for revolving credit. New vehicle sales remain extremely weak but seem to have
found a floor at an annualized sales rate of about 9 million units. Demand for new non-revolving lines of
credit is very weak, while current borrowers are steadily paying off their existing balances. Consumer
delinquency rates for auto loans remain much lower than they are for other types of credit.
Total consumer credit balances are expected to gradually decline over the months ahead. In particular,
revolving credit balances will fall steadily as consumers hold more cash and look to reduce their debt.
Consumers are not expected to significantly increase spending or their demand for credit until the labor
market begins to firm up in 2010 or beyond. On the upside, reducing credit utilization during this severe
recession will help consumers avoid a longer-term decline in credit quality.




posted by Peter Greene

S&P review from firm

As seen in the attached research report the S&P 500 Index recently slammed into a convergence of resistance and a downtrend line. After needing a near 44 % rally from the lows just to trade up to the aforementioned resistance area it was hard to imagine the S&P 500 would just blast up though that level. Add to the mix that we recently entered a period that is historically weak for stocks and it makes sense why prices have corrected of late. As we have said a few times recently in other S&P 500 updates the index has most likely set its high point for a while and was likely at best to trade range bound or realistically lower for a while. We also suggested and continue to suggest that stops on remaining long holdings be adjusted/tightened and long exposure be reduced for the time being.



Since the dawn of the markets most if not all bottoming processes have had some sort of testing process after
setting an initial low. In 2002 for instance (our most recent low prior to March of 2008) the S&P 500 tested the
lows on 3 separate occasions (red arrows) before the final lows were ultimately set. So to expect this time things
would be different doesn’t make much sense.


There will be short-term trading opportunities that present themselves during the remainder of the
summer and into the fall however we don’t see any directional bull trend re-establishing itself before
some sort of retest sequence. The only thing that would change this outlook is a high volume move on
strong internals back above the recent highs.



posted by Peter Greene

Monday, July 6, 2009

Firm's S&P levels

As seen in the attached research note the S&P 500 has been capped by resistance at the 950 level. As we had said in earlier S&P 500 notes we expect this level to mark a high water mark for a good period of time as we enter the seasonally weak period of the mid to latter summer. How deep of a correction we get will depend on the ability of the S&P 500 to hold support near the 875 level.

The best case scenario is we stay locked in a trading range between 950 and 875, while the more alarming scenario is we break back below the 875 region and we have a deeper sell-off as part of a retest of the lows.



posted by Peter Greene