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Al Lewis
July 2, 2010, 12:01 a.m. EDT · Recommend (3) · Post:
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By Al Lewis
DENVER (MarketWatch) -- Sing along with President Obama: "The economy is getting stronger by the day. The economy is getting stronger by the day. The economy..."
Obama sang this on June 4. Why aren't you singing it, too?
Only 30% of U.S. adults expect the economy will strengthen in the coming year, according to a Harris Poll released Wednesday.
A nearly equal number, 28%, believe it will get worse, and 42% believe it will stay the same. That means 70% of Americans aren't in Obama's glee club.
It's amazing how political ideology colors economic expectations.
Among Democrats, 27% say they expect their household finances to improve over the next six months, and 18% expect them to decline. Among Republicans, only 15% expect improvement and 37% expect declines.
Obama's latest pronouncement, however, is no dumber than President Bush's hesitant admission years ago that we might be facing a "rough patch."
With global markets reeling, financial adviser Harvey Rowen of Starmont Asset Management is embracing specialized mutual funds that act like hedge funds, able to invest anywhere. He talks with MarketWatch Money & Investing Editor Jonathan Burton.
Thanks to the election cycle, too much attention is paid to what people think about forces beyond their control. Many economists say consumer psychology dictates the economy. They argue that when consumers lose confidence, they stop spending, causing downturns.
Remember when Bush urged consumers to keep buying after 9/11? He was trying to head off a recession using the power of positive thinking.
Quantum physicists can demonstrate that the very act of observing a particle can alter its path. But the economy is more like the asteroid belt, where another set of physical laws apply. The asteroid belt keeps spinning whether we are looking through the Hubble Space Telescope or not.
The same can be said of debt and risk. Bailouts, stimulus spending and tax credits have mostly just moved these flying rocks around, but they are still out there, waiting to smash into something.
The housing foreclosure crisis that started this mess continues.
RealtyTrac, Irvine, Calif., reported Wednesday that 31% of all residential home sales in the first quarter were foreclosures. In a normal market, foreclosure sales make up only 2% of the total. Additionally, home-buyer tax credits are going away. Guess which direction home prices are headed next?
Unemployment also remains stubbornly high. A few improvements in the rate have been attributed to temporary hiring. Then there's that growing number of people who get so discouraged, they quit the job hunt altogether. That's one way to fix the unemployment rate. Another might be a great plague.
The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 9,733, -41.49, -0.42%) has hit a summer slump, skipping below 10,000. Remember when the Dow first crossed 10,000? Back in 1999? Wasn't it supposed to be at least 20,000 by now? Not too long ago, it was almost impossible to imagine interest rates at nearly zero and the Dow stuck below 10,000.
The worst second quarter for stocks since 2002 has the news flush with theories about the dreaded double-dip. With government printing presses at full crank, the double-dip theory had been widely discounted. But now the political will to keep racking up the national debt is declining like a Triple-A rated mortgage-backed security.
This won't end the Federal Reserve's strategy of using record low interest rates as a giant loop of bailing wire.
"The economy...appears to be on track to continue to expand through this year and next," Fed Chairman Ben Bernanke told Congress on June 9.
Bernanke cautioned that he couldn't rule out a double-dip entirely and predicted only a "slow reduction" in unemployment. Translation: Even if the economy keeps expanding, you're still not getting a job.
Bernanke also predicted Europe's debt crisis wouldn't dampen the U.S. recovery, which reminded me of the time he said the subprime debt crisis would be contained.
"Americans are hoping for some clear signs of economic improvements, but...they have yet to see any," Harris said in a press release on its poll. "They also do not think that there are any signs in the near future."
Those of you who disagree can repeat after Obama: "The economy is getting stronger by the day. The economy is getting stronger by the day."
And those of you still facing foreclosure can repeat after Dorothy: "There's no place like home. There's no place like home."
Al Lewis writes Al's Emporium, a column, and Tell It To Al , a blog, which offer commentary and analysis on a wide range of business subjects through an unconventional perspective. This column originally appeared on Dow Jones Newswires.
Ford Motor Co. Chief Executive Alan Mulally is having lunch Thursday at the White House, writes Jim Jelter.
4:10 p.m. July 1, 2010 | Comments: 4
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