View Full Version : Stimulus Update
If the Stimulus has already done all it can do (can anyone PLEASE tell me what that is) then why should we continue shelling out the rest of the money if even members of the administration admit it won't have much effect???
Romer: Impact of stimulus will level off next year
By JIM KUHNHENN (AP) – 3 hours ago
WASHINGTON — The government's economic stimulus spending has already had its biggest impact and probably won't contribute to significant growth next year, a top White House adviser said Thursday.
Christina Romer, the chair of President Barack Obama's Council of Economic Advisers, said the initial jolt of the $787 billion stimulus expanded the economy in the second and third quarters of this year. But she said the remaining spending will simply keep the economy from slipping.
"By mid-2010," she said, "fiscal stimulus will likely be contributing little to further growth."
That assessment underscored the fragility of an economic recovery marked by stubbornly high unemployment.
Romer said the government has already spent $194 billion of the total stimulus package, most of it in tax cuts, aid to states and unemployment and food stamps. In addition, she said, $146 billion of spending had been already obligated.
Romer, testifying before Congress' Joint Economic Committee, said that as of August the stimulus had created or saved 600,000 to 1.5 million jobs. She said a premature end to the stimulus would be "misguided."
"This is not a normal recovery," she said. "Coming out of this, we've got lots of things working against us," she said.
Unemployment will remain high, at or above 9.6 percent, through the end of 2010, Romer predicted.
"While job losses will likely end early next year, robust job gains may still be several quarters away," she said.
The pace of the recovery and the unyielding jobless numbers pose significant political and policy problems for the president and for congressional Democrats who face midterm elections next year.
The administration and Congress are confronting competing demands to spend more money to create additional jobs and a desire to confront rising deficits and a burgeoning national debt.
Republicans were skeptical of Romer's claims of stimulus success.
"The impacts of the stimulus are wildly exaggerated," said Rep. Kevin Brady, R-Texas.
Sen. Sam Brownback, R-Kan., said the administration's push for health care and climate change legislation have also created uncertainty among employers who worry about tax increases and are thus unwilling to take risks that could create jobs.
Romer said the Federal Reserve and the Treasury Department are keeping a wary eye on commercial real estate lending, an area that economists and financial experts predict could be the next crisis to befall banks, particularly smaller community institutions.
Romer said that unlike the housing market crash that brought Wall Street to the edge of collapse last year, the troubles facing commercial real estate are "a slower evolving problem; one that we will have the time and ability to deal with."
In testimony to separate panels, Romer and Assistant Treasury Secretary Herbert Allison also credited the government's $700 billion banking rescue fund for pulling the financial sector back from a free fall. The program, known as the Troubled Asset Relief Program, injected billions of dollars into large financial institutions and into the auto industry and has become increasingly unpopular with Congress and with the public.
At the same time, the president has been under pressure from Democrats to use the rescue money to help homeowners facing foreclosure and to assist small businesses. Republicans have called on the administration to simply end the program upon its scheduled expiration Dec. 31.
Without saying that the program will be extended, Allison told the Congressional Oversight Panel that acts a a watchdog over TARP: "It is time to set a new direction for the TARP, to account for the recent improvements in capital markets and to address lingering weaknesses in housing markets and small business lending."
Copyright © 2009 The Associated Press. All rights reserved.
Ageth olde storye - once a gouvernmente program starteth ist, trye aynd stoppeth the damndeth thinge!
And so it goes...;)
Richard's $.02 :munchin
Peregrino
10-22-2009, 18:33
Obamunism - Worse than a vampire novel. Sucker the unsuspecting idiots in with romance and BS, suck the life out of everything beautiful it touches, spread filth and corruption indiscriminately, and doesn't even have a heart to drive the stake through when a hero finally gets around to ending it. :mad:
There's a fundamental problem with the stimulus program - and I have to give credit to the TickerForum site for providing the insight on this one.
Stimulus could work if the money came from savings. If accumulated money were spent, then we would have some actual stimulus. But this stimulus is all from borrowed money - and that's a problem.
One aspect of borrowing is that we bring demand forward. In essence, we take from the future and bring it into the present. Cash-for-clunkers is a case in point. People were encouraged to buy a new car, which they did. But that meant that as soon as the program ended, sales would go sharply lower - because we robbed tomorrow's sales to improve todays. Unfortunately, there comes a time when so much has been taken from tomorrow that there's nothing left to take. We may well be at that point.
At this juncture, the best solution might well be to do nothing. Let the correction take its course. Let the failed businesses and individuals fail and go bankrupt. Then let the capitalist system reallocate resources. We would get the pain out of the way and start correcting the problem.
However, we won't do that. It isn't politically viable. So we can expect a long and unpleasant decade - or more.
xenoviv7
10-22-2009, 19:55
I believe at least one reason that they will continue shelling out money is the same reason that Bernanke's PR announcement was made in which he stated that we had hit the bottom of the recession and were now on our way toward recovery. Mere appeasement and forstalling of the inevitable collapse of the dollar until economic positioning can be acquired to prevent chaos! What happens among the masses when the economy collapses? To get a little taste imagine the Great Depression and what happened in major metropolis areas.
Effects of depression in the United States[23]:
13 million people became unemployed. In 1932, 34 million people belonged to families with no regular full-time wage earner.[24]
Industrial production fell by nearly 45% between the years 1929 and 1932.
Homebuilding dropped by 80% between the years 1929 and 1932.
In the 1920s, the banking system in the U.S. was about $50 billion, which was about 50% of GDP.[25]
From the years 1929 to 1932, about 5,000 banks went out of business.
By 1933, 11,000 of the US' 25,000 banks had failed.[26]
Between 1929 and 1933, U.S. GDP fell around 30%, the stock market lost almost 90% of its value.[27]
In 1929, the unemployment rate averaged 3%.[28]
In 1933, 25% of all workers and 37% of all nonfarm workers were unemployed.[29]
In Cleveland, Ohio, the unemployment rate was 60%; in Toledo, Ohio, 80%.[24]
One Soviet trading corporation in New York averaged 350 applications a day from Americans seeking jobs in the Soviet Union.[30]
Over one million families lost their farms between 1930 and 1934.[24]
Corporate profits had dropped from $10 billion in 1929 to $1billion in 1932.[24]
Between 1929 and 1932 the income of the average American family was reduced by 40%.[31]
Nine million savings accounts had been wiped out between 1930 and 1933.[24]
273,000 families had been evicted from their homes in 1932.[24]
There were two million homeless people migrating around the country.[24]
Over 60% of Americans were categorized as poor by the federal government in 1933.[24]
In the last prosperous year (1929), there were 279,678 immigrants recorded, but in 1933 only 23,068 came to the U.S.[32][33]
In the early 1930s, more people emigrated from the United States than immigrated to it.[34]
The U.S. government sponsored a Mexican Repatriation program which was intended to encourage people to voluntarily move to Mexico, but thousands were deported against their will. Altogether about 400,000 Mexicans were repatriated.[35]
New York social workers reported that 25% of all schoolchildren were malnourished. In the mining counties of West Virginia, Illinois, Kentucky, and Pennsylvania, the proportion of malnourished children was perhaps as high as 90%.[24]
Many people became ill with diseases such as tuberculosis (TB).[24]
According to the U.S. Census Bureau the population of the U.S. was 121,767,000 in the 1930's and as of July 2008 the population is 304,059,724. Now realize that most of that population is confined within major metropolis cities such as New York, Los Angeles, and Chicago; most of which are wholly reliant upon an economic system that has remained realtively stable their entire lives. They have been able to go purchase food a the local market or restaurant without ever having to slaughter or grow their own food. They have pulled a lever to recieve water everyday of their life besides the days they forgot to electronically send a payment to the water company. Now imagine an economic collapse on the scale of the Great Depression, 25% unemployment rate......... Get it?
Surgicalcric
10-22-2009, 19:58
I believe...
I believe you need to re/read the email you received when you registered here and follow the instructions contained therein. Dont post again until you have done so...
Crip
NoRoadtrippin
10-22-2009, 20:40
So, nmap, my question is when do I walk away from the market?
I read what I can (maybe a couple articles a day) but I am certainly far from an expert on what to expect. I am willing to say that I have recovered much of what I lost, and a couple of holdings are back in the black. A couple others are still slightly down. Will the rally be likely to hold through December, or should I walk away now? I have read at least one article that stated it is typical to leave the market in the winter even in good years.
I'm afraid I don't have enough invested to retain my own adviser :rolleyes:
So, nmap, my question is when do I walk away from the market?
I read what I can (maybe a couple articles a day) but I am certainly far from an expert on what to expect. I am willing to say that I have recovered much of what I lost, and a couple of holdings are back in the black. A couple others are still slightly down. Will the rally be likely to hold through December, or should I walk away now? I have read at least one article that stated it is typical to leave the market in the winter even in good years.
I'm afraid I don't have enough invested to retain my own adviser :rolleyes:
That's the toughest question there is. I ponder it often.
Right now, the trend is up. There is nothing to be gained from fighting the trend.
So...here's a tool you might want to consider using. Go to:
stockcharts.com (http://www.stockcharts.com)
For basic charts, they're free!
Keep an eye on the Dow Industrials and the Dow Transportations - the symbols are $INDU and $TRAN. Also follow your particular stocks.
At the bottom, choose a 50 day simple moving average (SMA) and a 200 day SMA. If the 50 day average goes below the 200 day average, there's a good chance the trend is down. As long as the 50 day average is above the 200 day average, the trend is up.
Is it perfect? Nope. But it does let you follow and trend, and it will get you out when things start going down.
Hope that helps....
NoRoadtrippin
10-23-2009, 07:31
That is helpful. I'll start to keep an eye on it. Comparing the 200 day to the 50 day is a helpful tip that I haven't thought about before. Gives a nice semi-short-term view of where the stock is headed.
Thanks.
NoRoadtrippin, here are some other things for your consideration....
For the overall market, use a weekly basis chart and a 20 and 50 day simple moving averages. The S&P 500 is a good one to follow. Notice how the crossover would have gotten you out at a good time - and would also have gotten you back in at a favorable level.
LINK 1 (http://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p05830871313&a=181737007)
Another thing to look at is the VIX, or expected volatility of the markets. Right now, its low.
Explanation of VIX link (http://www.wisegeek.com/what-is-vix-the-volatility-index.htm)
Here's a weekly basis chart of VIX. LINK (http://stockcharts.com/h-sc/ui?s=$VIX&p=W&b=5&g=0&id=p34778297285&a=181736956). Notice that the expectation of high volatility served as a warning - bumpy road ahead!
And here's the daily basis chart of VIX. LINK (http://stockcharts.com/h-sc/ui?s=$VIX&p=D&b=5&g=0&id=p36586152006&a=181736991). We're fairly low right now - but if it went up a lot, that's something to take note of.
Finally, I've attached a Dow Theory newsletter I like as a PDF.
Enjoy!
Utah Bob
10-23-2009, 17:18
Inertia.
Nmap,
If you've explained this before just point me at the thread, but what dpes the "RSI" chart at the top and the "MACD" at the bottom indicate?
I'll look it up, but you're very good at explaining this stuff in plain, easy to understand english, while using small words.
thanks!
Thank you for the kind words!
RSI stands for Relative Strength Indicator. It varies between 0 and 100. Values over 70 suggest something is "overbought", whereas values below 30 suggest "oversold".
If something is overbought, there's a good chance it will pull back. And, on the other hand, if something is oversold, there's a good chance it will go up a little. So if you are looking at buying a stock, you might wish to wait a little if it is overbought - it might come down in price. Of course, its best to never depend on a single indicator - Enron was oversold all the way down to oblivion.
MACD (Moving Average Convergence/Divergence) is one of my favorites. You'll notice two lines and a bar chart (histogram). When the black line (a 12 day exponential moving average) goes above the red line (a 26 day exponential moving average), the trend is up. In addition, the histogram measures the width between the lines. If the gap is increasing, then the strength of the stock (or index) is increasing and the bars are above the line. But if the black line is below the red, then that means the trend is declining, and you'll see the bars going negative. Changes in the bars, from strongly positive to less positive, and ultimately to negative (below zero) can give guidance on the market (or stock) trend.
It's possible to look at the peaks and valleys, and see fairly consistent tops and bottoms. Again, this can be a guide to entry and exit points. It's even possible to look at the trend of those tops and bottoms - so consistently lower peaks wouldn't be good.
Now where all this gets really interesting is with the longer-term charts - weekly, or even monthly. Here, we're talking about major trends up and down. So it helps (but nothing is perfect!) discern when the market is turning and takes away some of the emotion.
If we look at a chart of the Dow Industrials (perhaps in a new window) LINK (http://stockcharts.com/h-sc/ui?s=$INDU&p=W&b=5&g=0&id=p05830871313&a=163853014), notice the notes.
RSI is high - not overbought, but close. Maybe suggesting that it's OK to hold, but not to get to eager about buying new positions.
MACD has a chart with steadily lower levels, and with a second peak lower than the first.
Now this is a weekly chart, so we're talking long term trends. It's still in an uptrend, but it's looking a bit winded to me (MOO, YMMV). So if one had a large amount invested, this chart says to me: do nothing. Just wait.
Then, once a week, perhaps on a Saturday afternoon, take a look and see what's happening. Notice the 20 and 50 week averages. If MACD goes below the midpoint (at zero), and if the 20 week average goes below the 50 week average, it might be time to lighten up in order to protect capital. For a trader, it might be appropriate to lighten up if RSI went above 70 - but it also might be a sign of weakness if it cannot reach 70.
Again, none of these are perfect - but it is a way to discipline trading and take some of the emotions out of the equation.
Hope that helps!
Thank you for the kind words!
RSI stands for Relative Strength Indicator. It varies between 0 and 100. Values over 70 suggest something is "overbought", whereas values below 30 suggest "oversold".
If something is overbought, there's a good chance it will pull back. And, on the other hand, if something is oversold, there's a good chance it will go up a little. So if you are looking at buying a stock, you might wish to wait a little if it is overbought - it might come down in price. Of course, its best to never depend on a single indicator - Enron was oversold all the way down to oblivion.
MACD (Moving Average Convergence/Divergence) is one of my favorites. You'll notice two lines and a bar chart (histogram). When the black line (a 12 day exponential moving average) goes above the red line (a 26 day exponential moving average), the trend is up. In addition, the histogram measures the width between the lines. If the gap is increasing, then the strength of the stock (or index) is increasing and the bars are above the line. But if the black line is below the red, then that means the trend is declining, and you'll see the bars going negative. Changes in the bars, from strongly positive to less positive, and ultimately to negative (below zero) can give guidance on the market (or stock) trend.
It's possible to look at the peaks and valleys, and see fairly consistent tops and bottoms. Again, this can be a guide to entry and exit points. It's even possible to look at the trend of those tops and bottoms - so consistently lower peaks wouldn't be good.
Now where all this gets really interesting is with the longer-term charts - weekly, or even monthly. Here, we're talking about major trends up and down. So it helps (but nothing is perfect!) discern when the market is turning and takes away some of the emotion.
If we look at a chart of the Dow Industrials (perhaps in a new window) LINK (http://stockcharts.com/h-sc/ui?s=$INDU&p=W&b=5&g=0&id=p05830871313&a=163853014), notice the notes.
RSI is high - not overbought, but close. Maybe suggesting that it's OK to hold, but not to get to eager about buying new positions.
MACD has a chart with steadily lower levels, and with a second peak lower than the first.
Now this is a weekly chart, so we're talking long term trends. It's still in an uptrend, but it's looking a bit winded to me (MOO, YMMV). So if one had a large amount invested, this chart says to me: do nothing. Just wait.
Then, once a week, perhaps on a Saturday afternoon, take a look and see what's happening. Notice the 20 and 50 week averages. If MACD goes below the midpoint (at zero), and if the 20 week average goes below the 50 week average, it might be time to lighten up in order to protect capital. For a trader, it might be appropriate to lighten up if RSI went above 70 - but it also might be a sign of weakness if it cannot reach 70.
Again, none of these are perfect - but it is a way to discipline trading and take some of the emotions out of the equation.
Hope that helps!
Thanks Nmap, I appreciate the explanation.
I see what you mean about the single indicator... looking back historically, the RSI doesn't really seem to be a strong indicator. It never really threw an "overbought" signal before the big downturn.
Well...it depends. Not all securities work well with all indicators.
Let's take a look at one of my favorites. Oil. LINK (http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&b=5&g=0&id=p01127714017&a=170520145)
RSI gives a sort of warning that we're overbought. Maybe we should be cautious about adding to positions. Then MACD has a crossover. Notice what we're saying - we've had a strong move up, and now momentum is starting to fade. It might be a time to take profits - it probably wouldn't be a good place to buy.
It's a lot like your professional activities, I would guess - one takes incomplete, ambiguous, conflicting information and tries to put it together to make a good decision.
Well...it depends. Not all securities work well with all indicators.
Let's take a look at one of my favorites. Oil. LINK (http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&b=5&g=0&id=p01127714017&a=170520145)
RSI gives a sort of warning that we're overbought. Maybe we should be cautious about adding to positions. Then MACD has a crossover. Notice what we're saying - we've had a strong move up, and now momentum is starting to fade. It might be a time to take profits - it probably wouldn't be a good place to buy.
It's a lot like your professional activities, I would guess - one takes incomplete, ambiguous, conflicting information and tries to put it together to make a good decision.
Yes, but my problem is that I'm more of a "Ranger" investor. Once I make that good decision, I'm damned determined to make it work. NO MATTER WHAT!