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Dallas, TX
June 22, 2010, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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What The White House Can Learn From A Donut Shop
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What's Hot Today: |  |
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U.S. stock index futures were pointing to a lower opening on Tuesday.
Asia and Europe were mostly lower. The Euro is back below 1.23 to the
dollar.
News For Thought
Poll: Americans have "deep" concerns about economy and energy. According
to The New York Times: "Overwhelmingly, Americans think the nation needs
a fundamental overhaul of its energy policies, and most expect alternative
forms to replace oil as a major source within 25 years. Yet a majority
are unwilling to pay higher gasoline prices to help develop new fuel
sources."
The Times further reported: "despite intense news coverage and widespread public
concern about the economic and ecological damage from the gulf disaster, most
Americans remain far more concerned about jobs and the nation’s overall economy." According
to the report: " in that regard, President Obama does not fare well: 54 percent
of the public say he does not have a clear plan for creating jobs, while only
34 percent say he does, an ominous sign heading into this fall’s midterm elections.
Respondents were nearly evenly split on the president’s handling of the economy
— 45 percent approve, 48 percent disapprove. His job approval rating remains
just below 50 percent. And by a nearly 2-to-1 margin, Americans think the country
is on the wrong track."
This poll has the same general tone as the Rasmussen Reports polls of likely
voters have for months. In our opinion it underscores how the feeling of helplessness
and pessimism is starting to spread to those in the population who are not as
politically active and likely to follow stories as closely as likely voters.
Also important is the fact that Democrats are targeting that same, now increasingly
unhappy demographic as the major source of votes in the midterm election.
The Obama team is jumping ship early it seems. The big news on
Monday was that White House Chief of Staff Rham Emmanuel was leaving, according
to Washington "insiders." The story appeared in a U.K. newspaper and was denied
by the White House. However, according to The New York Times: " Peter R. Orszag
will leave his job as the White House budget director in July, according to someone
familiar with his plans, making him perhaps the first official to leave the Obama
Cabinet and removing a major player from President Obama’s economic team. Mr.
Orszag, an economist who previously spent nearly two years as director of the
Congressional Budget Office, somewhat reluctantly accepted Mr. Obama’s invitation
to join the Cabinet after the 2008 election and never planned to stay more than
two years. Typically, budget directors do not."
The Times added: " For all of his recent attention to deficit reduction, Mr.
Orszag’s first job for Mr. Obama, even before they officially took office in
January 2009, was to be an architect for greatly adding to a deficit then projected
at $1.3 trillion for the fiscal year. He helped put together the $787 billion
two-year stimulus package. A longtime scholar of health policy economics, Mr.
Orszag also helped devise and sell the president’s signature initiative overhauling
the health insurance system. He privately has told associates that having worked
on two budgets, a stimulus plan and the health care law, it is time to leave
while he is ahead."
Ahead of what? |
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What The White House Can Learn From A Donut Shop
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When Reality And Ideology Clash You Get Bad Donuts
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Americans aren't only showing their concerns over the
economy, the job situation, and the direction of the country in polls,
they are also running into major problems with government programs aimed
at helping their situation.
One of the increasingly common charges in right wing punditry about the current
White House is that it has no experience in real life business situations. The
rap is based on the lack of business management experience in the president and
many of his top aides, not to mention the rank and file staff. And the situation
developing with the president's programs to renegotiate or extend mortgages may
be a perfect example of how good bureaucratic intentions don't jibe with the
reality of doing business which involves actually getting paid for something
instead of just talking about it.
According to Investor's Business Daily: "More than a third of the 1.24 million
borrowers who have enrolled in the $75 billion mortgage modification program
have dropped out, more than the 27% who have had their loan payments reduced." The
report added: "Last month alone, 150,000 borrowers left the program — bringing
the total to 436,000 who have exited since it began in March 2009." The bottom
line seems to be the continued disconnect between the White House and the reality
of daily life, as "Administration officials say borrowers will get help in other
ways. But analysts fear the majority will still wind up in foreclosure."
This analysis is not meant as a knock on the White House. They seem to be pretty
good at knocking themselves. But there is clearly a pattern of behavior in the
administration that even made its way into the big news leak on Monday, where
White House Chief of Staff Rham Emmanuel is reportedly thinking of quitting due
to conflicts between his pragmatism and the idealism of the rest of the president's
inner circle. And it's that same conflict that seems to be affecting the president's
foreclosure modification program, which seems to be floundering as reality sets
in.
According to IBD: "A major reason so many have fallen out is the Obama administration
initially pressured banks to sign up borrowers without insisting first on proof
of their income. When banks later moved to collect the information, many troubled
homeowners were disqualified or dropped out. Many borrowers complained that the
banks lost their documents. The industry said borrowers weren't sending back
the necessary paperwork." In other words, the banks were looking to make money
on the transactions, and homeowners either didn't qualify or make an effort.
The banks, likely understaffed and overwhelmed may have lost, misplaced, or ingored
paperwork.
That's not unexpected. Just think about it. The economy was imploding. People
were scrambling to make ends meet. Many of those who were facing foreclosure
had subprime mortgages that were way beyond their means and may have recently
lost their jobs as well. That means that people who were in way over their heads
were running into institutions that may have been fighting for their own survival.
In comes the government with high pressure tactics in order to alter the situation,
and you have a recipe for disaster.
So, the failure of the program should come as no surprise. What is surprising
is the notion that the program, when the situation is thoroughly thought out
would work any better than it has. And that's where the Obama White House seems
to run into problems. There is their fairy tale Cumbayah world and the cold reality
of the real world where people actually expect to get paid for selling products
and services.
The Treasury has readjusted the program to where "collect two recent pay stubs
at the start of the process. Borrowers have to give the IRS permission to provide
their most recent tax returns to lenders." But the bottom line is that time has
passed, things have gotten worse, and "The growing number of people leaving the
program could lead to a new wave of foreclosures. If that happens, it could weaken
the housing market and hold back the broader economic recovery."
Conclusion
If you're going to run a donut shop, it's a good idea to learn how to make donuts.
It's good to know where the best and least expensive materials are to be found,
and which section of town actually needs a donut shop. It's good to secure loans
and to have enough backing to let the business develop. And it helps if you make
good donuts, and give good customer service.
No one at the current White House has ever run a donut shop. And if they have,
they haven't exactly put the experience to work, at least not in any way that
seems to have made its way to policy. When it comes to money, there is no substitute
for planning and paying attention to detail. And experience in the detail front
is utmost in importance, which is why many people who want to own a donut shop
look to Dunkin' Donuts as a potential franchise opportunity.
Dunkin' Donuts makes good donuts, and has the business experience and clout to
give the franchisee an excellent opportunity for success.
What's our point? No one in the White House gets it beyond knowing that Dunkin'
Donuts are good to eat. If they would spend some time at any donut shop for a
few days, they may learn a few things about how the world really works.
And if they would replace some cabinet and staff members with a few Dunkin Donut
franchisees or small donut shop owners, who knows what heights they might reach.
That message was clear on Monday, which may have played a role in the negative
reversal seen in the stock market. Wall Street clearly loves a good donut, and
has a better idea as to how donut shops work.
We'll be on Twitter
some time today before the market closes with some updated comments.
Know when to sell and how to make money when the market falls. Get
a detailed trading plan in your pocket. Read Dr. Duarte's All
NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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S & P SPDR ETF (NYSE: SPY) Struggles On Post Options Monday
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The S & P
SPDR ETF (NYSE: SPY) is still below its 50-day moving average,
despite displaying a tantalizing "W" bottom on the charts.
Chart Courtesy of StockCharts.com
Close, but no cigar, was Monday's message to the bulls, as the S & P 500
failed to cross above its 50-day moving average. The lack of success, may turn
into failure of the rally, if the index can't close above the 1130-1150 area
in the next few days.
Much of what's going on is both technical as well as tactical. On the technical
side, the 20, 50, and 200 day moving averages, as well as two long standing trend
horizontal trend lines, are clustered in this general area. That means that there
are lots of buyers and sellers that have made trades in this price area. Some
of them are holding positions at slight gains, or slight losses. Others are trading
in and out of the market in this area. And many others are waiting to see what
happens next.
That's where the tactical comes in. Some are going to sell, others are going
to buy, and still others are holding on. There are lots of external reasons for
the lack of conviction in investors right now. And one of them has to do with
the season. This is the summer, and there are plenty on Wall Street who have
enough money left to actually go on vacation, far away from the Gulf oil spill.
And as the fear of higher taxes and reduced income rises, many may be taking
what they consider to be their last good ride for a long time.
In other words, the rally to this key resistance area may or may not have run
its course. But the lack of conviction displayed on Monday brings the recent
enthusiasm down a moderate notch or two.
We'll see how things develop in the next couple of days.
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