After the election markets dropped as attention returned to Europe's growing problems and people started thinking about our fiscal cliff. My short term prognosis: after several days the markets will calm down and go up - things are pretty ok in the US right now. The outlook for some sort of compromise on the fiscal cliff seems good. I think a drawn out fight is unlikely. And Europe will find a way to kick the can, right up until Greece decides to pull the ripcord.
The Paris-based Organization for Economic Co-operation and Development (OECD) said China's economy will be larger than the combined economies of the eurozone countries by the end of this year, and will overtake the US by the end of 2016. By 2025, it says the combined GDP of China and India will be bigger than that of France, Germany, Italy, Japan, UK, US and Canada put together. People in the poorest countries will see their income more than quadruple by 2060, with those in China and India seeing a more than a seven-fold increase. I think this is complete nonsense. This kind of growth requires a stable economic and political environment with freely available and inexpensive water, food and power. The US, Europe and Japan definitely enjoyed these conditions from 1950 on, but China and India will face moderate to severe food and water shortages, extreme oil prices and shrinking availability, and environmental damage due to excessive use of coal. Think London 200 years ago - polluted air and water to the point where it threatens everyone's health. The earth cannot support 10+ billion people in growing prosperity.
Greek unemployment is now solidly over 25%; Greek youth unemployment is 58% and climbing. The Greek economy is projected to contract by 4.5% next year, so these numbers will only increase. Greece is looking at a lost generation: these young Greeks with no job experience, no hope and lots of anger will never completely recover. I'm perplexed why Greece stays in the Euro, it's killing their economy and their future. I do know why the EU wants Greece to stay in the Euro - it continues to buy time for their banks, and it fulfills the demands of the religious Euro- Centrists who say the union can only move forwards, never backwards. The longer this drags on, the more likely a complete Euro-explosion as Spain, Portugal and perhaps Italy join Greece in the ranks of the AWOL nations.
Five months ago Apple stock was nearing $700 and everyone was talking about $1000. Now? It's under $550 and everyone is worried about Apple. The Galaxy IIIs is outselling the iPhone. The iPad is under 50% of tablet sales and the iPad mini is over priced. Apple has dropped out of the top five brands of phone in China. And they've had some executive turnover recently that has everyone worried. Absent Steve Jobs are we hearing back to the dark days of Scully?
American Suzuki has declared bankruptcy and will stop selling cars in the US. They had been selling just over 20,000 cars per year. Toyota is doing well, but Honda and Nissan are struggling. Mitsubishi, Scion, Lincoln, Fisker and Tesla are also in trouble. Sharp is very close to bankruptcy - they're having serious trouble with profits and market share in the face of Korean competition - and Panasonic and Sony are losing money at frightening rates. Japan Inc is showing their age and it's not very pretty.
Obama has registered a clear win in both electoral and popular vote, negating the fear of post-election challenges locking up our government. How is Obama's win viewed by the world? One big hint is that gold rose 2% the night after Obama's win. Apparently people believe Obama will generate more inflation.
Approaching the fiscal cliff, we have to wonder what a compromise would look like. Obama has said he'll veto any bill that doesn't include the rich paying more. Boehner has said tax rates must not increase. So the talk this week is putting caps on deductions. Who gets hurt the most? Rich democrats in California and New York who see their state taxes increasing, and the deduction for state taxes going away. Defense contractors in these states get a triple whammy as their contracts and profitability are likely to get cut too.
California democrats now have the governorship and are very close to super majorities in both the house and senate - a couple seats are subject to special elections in the next few months which the democrats are expected to win, then California is a one party state. There is nothing standing in the democrat's way of implementing their tax and social policies. Being a fiscal conservative myself, I presume we're now turning left onto the highway to Michigan style fiscal ruin. There will be no cuts in services to illegals; indeed I presume their life will get much better. Taxes and fees are guaranteed to go up. Unions will rule the land. On the bright side, as bureaucrats get hired and get long- postponed raises, my Sacramento house will soon go up in value and I can leave for a more rational state.
Cook county - Chicago - now has a $25 tax on the sale of a gun, and $6.67 tax on each pack of cigarettes. There's also an increased tax on a round of golf. There had been a proposed tax of 5 cents on each bullet, but that was scrapped. Chicago mayor Rahm was one of the mayors who said "no Chik-Fil-As will be built in my city;" apparently now they intend to drive out gun shops. Certainly I would drive outside the city limits to keep $25 away from this government.
Obamacare exempts employees who work less than 30 hours per week. Papa John's Pizzas has announced they're cutting back on employee hours. Red Lobster and Olive Garden are considering the same thing. We've been becoming a nation of part time workers for a couple years; expect that to accelerate. Perhaps workers will start pairing jobs: 20 hours per week each at Papa John's and Red Lobster.
Latinos gave Obama 70% of their votes, Asian Americans 73% and blacks more than 90%. Voters younger than 30 went for Obama, 60% to 37%, and unmarried women sided with him by more than 2 to 1. That's who voted for him. Los Angeles. San Francisco - San Jose - Berkeley. Salem. Seattle. Santa Fe. Denver. Minneapolis. Madison. Chicago. Memphis. Jackson. Montgomery. Detroit. Miami. The DC Beltway. New York. Boston. New England. That's where they live.
How did republicans lose? Of course blacks and hispanics voted for Obama in record numbers, but that's not enough for a majority, at least not yet. Young voters also voted significantly democrat, but they always do. What put Obama over the top was single white women, who voted for Obama 2:1. The single women were put off by stupid republican statements about some rapes being ordained by God, and implied threats to their right to abortions. I'm livid at the republican party for this nonsense: abortion law will not be overturned in this country, and it's insane to lose a presidency over a lost cause. If I had written the republican platform, I would have explicitly quoted Bill Clinton, saying that abortions should be legal, safe and rare. I would have added that we supported block grants for birth control for young women that was safe, effective, free and anonymous. Free IUDs have been shown to reduce abortions by 75% - we're talking about reducing abortions in the US from 3200 per day to well under 1000. We're talking about substantial reductions in teenage pregnancies, huge drops in the number of children raised fatherless in poverty, and hundreds of thousands of teenage women staying in school. And we're talking about winning an important presidential election. In my opinion, the republicans could have had their cake and eaten it too, but threw the cake in the trash because the middle layer was raspberry instead of strawberry. Really, the republicans deserved to lose: they've been dogmatic micro-cephalic idiots.