GLOBAL ECONOMY IN TATTERS
The Well-Timed Strategy for Week Ending September 26th
by Peter Navarro, Ph.D.
September 22, 2008
Market Pulse
Inquiring minds want to know -- will the biggest bailout in global history reverse the market's bearish trend? That's not a bet I would want to take on the long side just yet. Remember, this is a macroeconomic newsletter. What I see is a global economy slowing on every major continent.
In Asia, Australia, Japan, Taiwan, and Singapore all face slowing growth. Thailand is a basket case politically. China faces the uncertain future of an economy no longer driven by Olympics expenditures and heavy exports to Europe and the US.
In Latin America, Brazil is going to take its hit from the bursting of the commodities market bubble. Venezuela is turning into a basket case. Bolivia is moving from the 21st into the 19th century.
In Europe, Great Britain, Spain, and Italy are the worst of it. Germany, the biggest European engine, is facing possible recession.
The American bailout of its financial and banking sectors is not going to change any of that. What this bailout does is heavily burden the balance sheet in the United States for whichever poor sap is elected president. Just as I said, as it turns out quite presciently, that Ben Bernanke inevitably would be the fall guy for Alan Greenspan's housing bubble monetary policies, whoever the next president is going to be will be the fall guy for the biggest pair of the idiots who ever inhabited the White House and the Treasury Department. And please, I do not want to hear from anybody who thinks Henry Paulson has saved America. The guy is a loser. The only thing he ever knew how to do is make money -- not policy.
Yes, the markets may get fast out of the gate early in the week. Until I see a change in the macroeconomic fundamentals, however, cash remains king.
Presidential Politics: A Bad Week for McCain
I continue to get complaints from readers that I should stick to discussions about the markets in what is, after all, a financial newsletter. The problem with these complaints is that they ignore the incredible impact at the presidential election is likely to have on the economy and financial markets.
Perhaps what disturbs me the most about this presidential election is that none of the candidates for president or vice president on either side of the aisle appear to know very much about macroeconomics. The latest crisis merely underscores that concern. And I know some of you are tired of hearing me talk about Hillary Clinton, but she was the one candidate who seemed to have a pretty good grasp of these issue.
On balance, the latest crisis clearly favors the Democrats. Even if the Bush bailout does reverse the stock market trend, the Democrats can still argue that the only reason the bailout was necessary is because of the politics of the White House. I'm not sure John McCain can dodge that bullet.
As a final comment, I'm glad that John McCain did jettison the bunch of losers he had running his economic team and brought in Martin Feldstein. Feldstein is a class act, and we probably would not be in this mess now if he'd been chosen as the Fed chairman rather than Ben Bernanke. The problem, however, with bringing in Feldstein now is he is a big fan of cutting taxes on the corporate sector -- which ain't going to fly with the electorate.
Quick Takes
- Keep Going Dodgers, Go!
- California managed to “solve” it’s fiscal crisis by further burdening the out years. Only Enron had more creative accountants.
- Peggy Noonan’s musings in this week’s WSJ suggest she’s coming a bit unglued by the financial crisis. The nature of the crisis is clearly out of her comfort zone. If she can’t figure out the implications in politics, who can?
- How bout some of that delicious baby formula from China? Ummm good. And isn’t China glad that the stock markets around the world are melting down so no one is paying attention to babygate.
- Is Warren Buffet the only guy “buying low” now and getting good deals? .
THE CHINA EFFECT
Please see my latest You Tube report.
© 2008 Peter Navarro
“Any trader or investor who ignores the power of macroeconomics over the world’s financial markets will, sooner or later, lose more than they should and if they are trading on margin, perhaps more than they have.”-- If It’s Raining in Brazil, Buy Starbucks
Peter Navarro is a business professor at the University of California and the author of the best-selling investment book If It's Raining in Brazil, Buy Starbucks and The Well-Timed Strategy. His latest book is The Coming China Wars: Where They Will Be Fought, How They Can Be Won.
Contact Information
Peter Navarro Irvine, California USA | Email | Website | Editorial Archive
