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Larry Kudlow : We're Recovering Despite Looming Obamanomics
Real Clear Markets ^ | 9/2/2009 | Larry Kudlow

Posted on 09/02/2009 7:38:29 AM PDT by SeekAndFind

Believe it or not, sometimes good news on the economy can be bad news for stocks.

It's a distant point, but one worth considering in view of conservative pessimism over Obama's plans to spend, tax, borrow, and control the economy. I share these worries. But the U.S. is still a free-market economy, and it will be so at least until the health-care and energy sectors are nationalized. And free-market economies are resilient and self-correcting.

While so-called spending-and-deficit stimulus may be an economic depressant, Friedmanite monetary stimulus -- which has been substantial -- is gradually exerting a powerful impact on economic growth. At the same time, businesses have become lean and mean, with radical cost-cutting of inventories, employment, and hours worked. That's setting up a big profits surge, which is the biggest economic stimulus of all.

Consumers also have retrenched, as is appropriate with falling home prices, a rough stock market correction, and a slowdown of incomes. These corrective forces lead to the next recovery.

In Hayekian and von Misean terms, bad investment and spending decisions are being remedied through the free-market corrective process. And greased by easy money, today's market correctives may produce a much stronger V-shaped recovery than the stock market consensus expects.

That's the message of this week's blowout manufacturing report from the Institute of Supply Management. The ISM index rose for the eighth-straight month, climbing to 52.9 in August from 48.9 in July, with 11 of 18 industries reporting growth. (Anything over 50 is a clear recovery sign, meaning the recession almost certainly ended in June.) At this pace, there could be 4 percent growth in real GDP for the third quarter.

Within the index, new business orders soared to 64.9 (the highest level since December 2004), production jumped to 61.9, and vendor performance improved to 57.1.

(Excerpt) Read more at realclearmarkets.com ...


TOPICS: Business/Economy; Culture/Society; Editorial; News/Current Events
KEYWORDS: economy; larrykudlow; recession; recovery

1 posted on 09/02/2009 7:38:30 AM PDT by SeekAndFind
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To: SeekAndFind

Obamanomics hasn’t really hit yet.


2 posted on 09/02/2009 7:41:48 AM PDT by GeronL (http://libertyfic.proboards.com)
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To: SeekAndFind

Kudlow is a nice guy but his credibility suffers from him constantly being bullish.


3 posted on 09/02/2009 7:44:51 AM PDT by Frantzie (Lou Dobbs & Glenn Beck- American Heroes! Bill O'Reilly = Liar)
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To: Frantzie
Very good point.

But it's worth noting that one reason for his eternal optimism is that he has the utmost confidence in the ability of the American entrepreneurial spirit to weather a Marxist regulatory environment and perhaps even profit handsomely from it.

4 posted on 09/02/2009 7:47:12 AM PDT by Alberta's Child (God is great, beer is good . . . and people are crazy.)
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To: SeekAndFind

Larry, you magnificent putz!

I hope he’s correct, bless’im but I don’t belive he is.


5 posted on 09/02/2009 7:48:00 AM PDT by RexBeach
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To: SeekAndFind

I disagree with Kudlow, capitalism is in its death throws due to ZerOnomics.


6 posted on 09/02/2009 7:49:07 AM PDT by depressed in 06 (Idiotcracy has arrived 400 years early.)
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To: Alberta's Child

Oh I get that part and he is right. It will only get worse with the Islamo-marxist in charge plus Pelosi and Reid.

The economy and free enterprise can only take so much. Things are not getting better.


7 posted on 09/02/2009 7:49:07 AM PDT by Frantzie (Lou Dobbs & Glenn Beck- American Heroes! Bill O'Reilly = Liar)
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To: Alberta's Child

Oh I get that part and he is right. It will only get worse with the Islamo-marxist in charge plus Pelosi and Reid.

The economy and free enterprise can only take so much. Things are not getting better.


8 posted on 09/02/2009 7:49:13 AM PDT by Frantzie (Lou Dobbs & Glenn Beck- American Heroes! Bill O'Reilly = Liar)
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To: SeekAndFind

Wishful thinking! Obamanomics have barely started destroying this economy. The worst is on its way.


9 posted on 09/02/2009 7:55:37 AM PDT by pallis
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To: SeekAndFind
But the U.S. is still a free-market economy...

Hey, Larry .... prove this!

10 posted on 09/02/2009 7:55:47 AM PDT by Right_in_Virginia
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To: SeekAndFind

Avoiding future interest rate exposure as a result of huge deficit spending is the name of the game right now.

I’m sort of conflicted about this for a couple of reasons. The first is that since fixed rate credit is what’s most likely coming to the forefront, it means that there will necessarily be less risk and more collateralized debt in the system. I’m not a fan of over leveraging, but there’s a big dampening effect on the risk taking that puts innovation and options out there in the market place, and it detracts from labor force competition. We need new ventures and risk out there for maximum job creation.


11 posted on 09/02/2009 8:03:58 AM PDT by dajeeps
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To: Frantzie

Kudlow talks as if there will be no impact at all from cap and tax or Obamacare(which will get passed,even if it takes reconcilliation to doit) since it is the intent of BO to control both risk and capital via the government. Kudlow thinks on a macro basis whereas decisions made by the job creators, small business, non Wall Street, are done on a micro basis within a macro environment.Let’s look at BO’s record of prediction: Off 133% on this year’s GDP to the bad, and THAT MIGHT BE OVERLY OPTIMISTIC; revised GDP growth for next year down 60% ; off 18.75% and rising on unemployment and a mere 28.5% on projected deficits. If we accept the fact that our economy is predicated 60% or more on consumer spending, and it is, as unemployemnt goes up does the discretionary income needed to fuel economic expansion go up? NO. As costs to businesses and individuals go up due to cap and tax price inflation does that increase disposable incom for other conomic expenditures? NO, it doesn’t. As marginal tax rates go up on everyone after 2010, does that increase disposable income? NO. Does the impending inflation/increase in interest rates OR BOTH lend itself to having any disposable income for fueling economic growth,? Does the continual srinkage in tax receipts, at all levels of government lend itself to economic growth, other than that of deficits, which need to be financed and impact the capital markets? True, the markets will act, but they’re going to be constricted by the BO reality.


12 posted on 09/02/2009 8:29:51 AM PDT by easttennesseejohn
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To: SeekAndFind

The private economy is dying on the vine, we have state capitalism, facism, but that is okay with his employer the state supported junk debt king GE.


13 posted on 09/02/2009 8:30:34 AM PDT by junta (Conservatives, the word "racism" is now ours.)
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To: SeekAndFind

obama didn’t officially raise taxes but he has basically said if you are in finance, we don’t want you. We will regulate you to death and put caps on compensation so that the best and brightest will have less incentive to run your companies.


14 posted on 09/02/2009 8:34:38 AM PDT by ari-freedom (Shop at Whole Foods Sep 1!!!)
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To: GeronL

No we’re not. Recovery is not possible until unemployment is first arrested and companies begin to hire again. Really, a “jobless recovery” is a oxymoronic lie. And anyone like Kudlow who buys into it is a fool. How can manufacturing be up if the RATE of unemployment continues essentially unabated. And this has not even taken into account the seasonal folks who will be without jobs come the end of September.

Moreover, IMHO, I don’t even believe the housing numbers are materially up for the same reason stated above—unemployment.

The more objective financial analysts are predicting a precipitous decline in the DOW for October. Yesterday’s plunge of 180 pts is just the beginning.


15 posted on 09/02/2009 8:56:46 AM PDT by dools007
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To: dools007

As soon as the elites are all cashed out they’ll let the dominoes fall. I bet thats going to happen between now and the next election in 2010


16 posted on 09/02/2009 9:00:33 AM PDT by GeronL (http://libertyfic.proboards.com)
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To: Frantzie

AGREED. It is the good news / bad news thing:

http://finance.yahoo.com/news/Productivity-up-66-percent-in-apf-2295037724.html?x=0&sec=topStories&pos=1&asset=&ccode=


17 posted on 09/02/2009 9:06:43 AM PDT by 11th Commandment (Proud Member of the DHS radical list since Jan 20, 2009)
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To: Frantzie

I’m a Kudlow fan. But sometimes I worry about what the cocaine did to his brain.


18 posted on 09/02/2009 9:54:17 AM PDT by freespirited (The only thing growing faster than the deficit is Chris Matthews' man crush on Obama -- Tim Pawlenty)
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To: freespirited
I've had Freepers get on my case for referring to "Cocaine Larry Kudlow".

The best response I think is to say "You're right. We shouldn't rag on Larry for his nose candy use. After all, cocaine has done far less harm to America in the past decade than asset bubbles and bank bailouts have."

19 posted on 09/02/2009 10:04:37 AM PDT by Notary Sojac (Will we ever have another President whose lips aren't attached to Goldman Sachs' ass??)
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To: easttennesseejohn
"... the U.S. is still a free-market economy, and it will be so at least until the health-care and energy sectors are nationalized. And free-market economies are resilient and self-correcting."

---<>---<>---<>---<>---<>---

I believe that you and many others here have not read the first paragraph. Kudlow is saying that if ObamaCare and CapNTax come into being, all bets are off. This whole premise of his article would be negated, and in that case he does not necessarily believe the US economy will be able to rebound.

20 posted on 09/02/2009 1:46:09 PM PDT by AFPhys ((Praying for our troops, our citizens, that the Bible and Freedom become basis of the US law again))
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To: GeronL

Yo GeronL—I have concluded that something very bad will happen to the stock market in the Oct-Nov timeframe. That assessment is being validated almost on a daily basis from objective financial analysts.

Unemployment is the key component. There can be no economic recovery without the rate of unemployment being first slowed and then moved into positive numbers. We’re nowhere close and there is no reason to believe it will get better—despite carefully couched lies coming from the WH and Bernake. It is simply impossible to materially improve house sales and manufacturing without people working.

On Tuesday I took steps to protect as much of my investments as possible. My premise: Immediately withdrawl from the stock market to the extent that it made sense to do so. I have two IRAs plus a gaggle of other stocks in my portfolio. Here’s what I did:

1. Sold all my losers (including AIG).

2. Retained my “performing” stocks. At some point the market will come back. This assumes that The Marxist Onada and his crowd are sent packing at some point and that his policies are dismantled.

3. Converted a number of my IRA stocks to gold and silver. The remaining IRA investments will be covered by FDIC.

This is a short term plan meant to protect as much of my money as possible. I can always get back into the stock market if the disaster does not materialize or after it’s run its course.


21 posted on 09/03/2009 5:37:25 AM PDT by dools007
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To: dools007

I think its going to be worse and longer than you seem to think, I don’t think THEY care if it goes bad.


22 posted on 09/03/2009 6:05:38 AM PDT by GeronL (http://libertyfic.proboards.com)
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To: GeronL

Agreed. Economic growth won’t really return until we know for certain ObamaCare is dead.


23 posted on 09/03/2009 6:27:00 AM PDT by MinorityRepublican
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To: SeekAndFind

Mr Mustard Seed talking out his hiney.


24 posted on 09/03/2009 10:10:18 AM PDT by Freedom_Is_Not_Free (Depression Countdown: 55... 54... 53...)
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To: freespirited

I am NOT a Kudlow fan. I am NOT a fan of anyone who worked for the New York Fed. They are all criminals in my book. Fraudulent, manipulating criminals. Kudlow was an insider from day one.


25 posted on 09/03/2009 10:12:47 AM PDT by Freedom_Is_Not_Free (Depression Countdown: 55... 54... 53...)
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To: SeekAndFind

Bullshit!


26 posted on 09/03/2009 10:16:53 AM PDT by sport
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To: Freedom_Is_Not_Free

Just Who Was Buying this Sotck Market rally when it was underway this year anyway?

ANSWER: Computers and no one else.

Many don’t know this. But computer trading
programs that are dominating this market. All told,
High Frequency Trading Programs (HFTPs) control
70% of trading volume on the NYSE.

However, at this point, five stocks (yes only five)
account for 40% of the trading volume on the market.
Those five stocks: Citigroup, CIT Group, Fannie Mae,
Freddie Mac, and AIG. Think about that, five stocks
out of several thousand, are accounting for 40% of
ALL trading.

I have a strong feeling that The Stock Market Rally the past 2 months is ALMOST Over.

When it reverses, the losses will make 2008 look like a PICNIC.


27 posted on 09/03/2009 10:25:21 AM PDT by SeekAndFind
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To: SeekAndFind

I think the S&P will be back below 700 by the end of the year (or so...)


28 posted on 09/03/2009 10:31:37 PM PDT by Freedom_Is_Not_Free (Depression Countdown: 55... 54... 53...)
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