The Frankenstein market continues to stagger upwards, this week at an even slower pace. Everyone - tout le monde - knows that the market has to drop after the election, it just has to. The argument that the market has to drop is pretty compelling. The question is, does the market know this? After all, the market's primary purpose in life is to separate investors from their money. Like everyone else, I too expect the market to go down next week. But then, as the entire world is shorting the market, I expect the drop to be a relatively small correction halted by people covering their shorts - remember, Bernanke is still committed to pumping up the markets.
My election prediction: 245 republicanoids in the house (218 for majority), 49 in the senate (51 for majority), 31 governators. Harry Ried will be history. Pelosi will still be around, but minus the fangs and unquestioned air force jet access. The parting on the left is now the parting on the right. Meet the new boss, same as the old boss. What is this election about? It's not about size of government - there's unspoken agreement on both sides of the aisle to continue the expensive wars to box in Iran; to pay out major money to drug and medical companies for Medicare and Medicaid; and to continue to pay the interest on the national debt. Those three things are about 75% of federal spending. It's not about the deficit - until there's a real solution for medical cost controls and tort reform (Obamacare does next to nothing about these) and a decision to let Israel go it alone, the deficit will continue to be huge. I claim it's about the number of people who are dependent on the government. Liberals are fine with this: if anything, they want to increase and improve the welfare state. Conservatives want the government to back down from "provide the general Welfare" and return to "promote the general Welfare." Our electorate is roughly evenly split on whether we want to be France or Hong Kong, and so our government will be handcuffed until this issue is resolved. Based on immigration and birth rates, I think in the long run the liberals can't lose. This means that our current system, where votes are balanced by big money, will get worse. Big money will find a way to avoid taxation. Social welfare states only work when there's a strong sense of close-knit shared community. Denmark, Germany, Sweden, France, Belgium are fraying on the edges as their people conclude that multiculturalism doesn't work.
The PIIGS are coming back. Last month insurance on their bonds (CDS rates) went down, indicating that everyone thought the fire was contained. Now rates are headed back up. Nothing will happen immediately - they all have enough cash now to make it until spring.
The European Union agreed on proposed changes to the constitution to allow for sovereign defaults within the eurozone. The changes were spearheaded by German Chancellor Angela Merkel. Starting in 2013, the new agreement will allow for sovereign default, without abandonment of the euro.
How does the housing market look? Depends on where you live. The chart below shows you, for several US cities, the current median house price and how far back in time you have to go to find that same median price. For example, Seattle's median price is $350,000, and that's more or less unchanged since 2006. Sacramento's median price is $205,000, and prices have unwound back to May 2002.
Emergency unemployment benefits in the US are set to expire on November 30th. Nearly a million will be cut off in December alone, with another 4 million losing their benefits by April. As the average weekly unemployment check is about $300/week, this amounts to roughly $80 billion / year loss of personal income in 2011, about 1% of the US total. So much for growth in 2011.
Government agencies in California shed 37,300 workers last month, more jobs than were lost in the private sector. This is just the beginning, California and the next governor face a $10-billion shortfall in the state budget. This will be a long process, as various unions come to grips with the fact that their gravy boat is sinking. Expect a couple more years of various forms of denial and sweeping problems under the rug. Panic won't set in until about 2014 or so.
In a unanimous ruling, the California Supreme Court on Monday upheld the dismissal of 18 criminal cases, two of them felonies, in Riverside County because there were not enough judges to hear them. "The lack of available courtrooms and judges was attributable to the Legislature's failure to provide a number of judges and courtrooms sufficient to meet the rapidly growing population in Riverside County," wrote Chief Justice Ronald M. George, who has been lobbying legislators for years for more judges. The defendants in the two felonies and 16 misdemeanors declined to waive their rights to a speedy trial, forcing a trial judge to dismiss the charges because there were no courtrooms available. Riverside County prosecutors challenged the dismissal, arguing that the court should have made every judge in the courthouse, including those in juvenile, family law and probate, available for the cases.
Top 5 names for boys born in Great Britain in 2009: Oliver, Jack, Harry, Alfie, and Mohammed.