Stocks enter the final hour with modest losses despite a much stronger than expected GDP report. Since Monday the DOW has given up about 40 points or a little less than ½% while the NASDAQ has slipped more than 50 points or some 2.5%.
The ongoing testimony involving Timothy Geithner and others involving the bailout of AIG grows darker by the day. As it has been revealed that the NY Fed, on Geithner’s watch, despite little if any public transparency and or accountability, demonstrated that it’s allegiance is to the corporate interests.
The staff recognizing that the guano was about to hit the fan embarked on a plan to cover it up and explain things away as best they could. Geithner said he recused himself despite never signing a letter formally doing so, Hank, we all want transparency, Paulson claimed he wasn’t in the loop as did Ben Bernanke. Who was reappointed for a second term despite all of his shortcomings including what is increasingly looking to be a lack of integrity.
If you believe that the Fed Chair and then Treasury Secretary were unaware of what was going on regarding an 85 billion Dollar plus bailout of AIG give me a call as I have a magic wand that turns clay bricks into gold.
Recent events plus the Supreme Courts decision to allow unlimited corporate spending on elections caused Jeremy Grantham to state the USA had become the UCA, or United Corporations of America, I can’t argue with that.
The 4th Quarter GDP report came in much better than expected at +5.73%, the highest figure in 6-years. Prompting the cheerleaders to proclaim that the recession is definitely over with predictions of prosperity and economic growth later this year.
A careful analysis of the numbers using historical comparisons reveals that this figure isn’t anywhere near as good as it looks at first glance, especially when one considers how much stimulus was thrown at the economy to achieve it.
The following observations are courtesy of David Rosenberg Chief Economist and strategist of Gluskin Scheff. Strip out the inventory blip and foreign trade and the figure drops to +1.7% for domestic demand last quarter, lower than the previous quarters 2.3%. The GDP figure implies that productivity should be surging at a 6% annual rate, 4-times its historical average. During the 4th quarter aggregate hours worked fell .5% annualized. Never in the 50-year history of this data series has hours worked declined .5% and GDP come in at +5.7% during the same quarter. In fact the historical correlation is for private hours worked to increase 3.7% with a GDP figure like this. +5.7% is a good number just not as great as the headlines suggest.
