THE BAD NEWS: Sen. Chris Dodd (D-CT) is a great deal more vulnerable than one might have expected, less than two years before his 2010 re-election.
In February's Quinnipiac poll, Dodd's approval rating had dropped to 41 percent versus 48 percent who disapproved. Largely, this drop stemmed from revelations that Dodd had received sweetheart mortgage terms from Countrywide Financial. By a substantial 54 - 24 percent margin, Connecticut voters say they are not satisfied with Sen. Dodd's explanation of his mortgage deal and 51 percent say they are likely to consider voting for someone else.
Says Quinnipiac's pollster:
"Sen. Dodd is vulnerable. His approval has sunk to a new low. More voters disapprove than approve of the job he is doing for the first time in 15 years of polling," Schwartz said. "The mortgage controversy has taken a toll on his approval rating. Most voters are not satisfied with Dodd's explanation and say they are less likely to vote for him next year because of it."
Why is that good news?
Well, aside from former Sen. Phil Gramm (R-TX), there are few other economic types that have shown to be so disconnected from the recent economic realities than Kudlow. Despite his near-daily pontificating on CNBC and in his ubiquitous columns on Wall Street and the financial health of our country, Kudlow was one who was completely missed the boat on our current economic crisis which began in the fall of of 2007.
Since October 2007 -- a month before the recession began -- Kudlow ridiculed those who argued a recession was upon us, repeatedly asserted that the mortgage crisis was fully under control and nothing that Wall Street couldn't handle, agreed with Gramm that America is a "nation of whiners," and even went so far -- once he finally acknowledged recession was upon us -- to argue that "recessions are therapeutic." I kid you not.
So, I spent some time yesterday and today going through Kudlow's archives to lay-out an assortment of his pronouncements and predictions since about that time when our economy began to deteriorate. What you'll find is someone as out-of-touch as Phil Gramm but who gets paid by CNBC to offer his economic opinion on pretty much a daily basis.
Chris Dodd must be praying that Larry Kudlow is his 2010 general election opponent. I strongly suspect that left-leaning Connecticut voters -- many of whom work on Wall Street or in the state's significant insurance industry -- will surely not send to Washington someone so incredibly off-the-mark on the most important issue now facing them -- the American economy.
Here is a sample of Larry Kudlow's economic wisdom over the past 18 months:
The recession forecast is all but wiped out as the Dow hovers around 14,000, having engineered an impressive comeback from the August credit crunch valley.
Some will argue that the stock market is not a good economic predictor. And while there are always exceptions to the rule, over time stocks do have a good track record of predicting the economy.
Housing woes will take a percent off GDP for the next several quarters, leaving about 2 percent growth and 2 percent inflation. It is the quintessential Goldilocks soft landing scenario.
...A 2008 recession would have been devastating for the Republicans. Now, as Goldilocks moves ahead, they have a fresh, new opening to relaunch their fiscal message and make the case to the investor class and the rest of the voting public that they [GOP] can be trusted stewards of lasting growth and prosperity.
It's quite simple actually. If you want to fatten your wallet, and if you want to sleep better at night, then you need to own a piece of the American rock. Own it for the long run. Our dynamic system of free market capitalism works. It's still the safest, surest, most profitable investment strategy out there.
If things are so bad, why are they so good?
With all the gloom coming out of Wall Street, the Democrats on the campaign trail, and the mainstream media, a remarkable thing just happened: Real gross domestic product, the best summary report of the American economy, came in at a breathtaking 3.9 percent annual rate for the third quarter. In fact, following the 3.8 percent growth rate for the second quarter, the U.S. economy has posted its strongest quarterly growth in four years. The economy actually appears to be speeding up, following the relatively sluggish performance of the prior 18 months.
...But listening to the Democratic presidential debate on Tuesday, you'd think it was 1929 all over again. The litany of scare-talk complaints includes China trade unfairness, globalization, immigration, income inequality, stagnant wages, a shrinking middle class, the sinking dollar, and high oil prices.
Yes, there is home deflation on Main Street and loan deflation on Wall Street. It will continue. But what about the rest of the story? When you listen to the hedge-fund short-sellers and the liberal politicians as they attempt to discredit the Bush economic boom, you could almost fall for their bear-market seduction. But the seductress turns out to be an economic harlot -- not a beautiful woman.
The true message of the strong economy is that we're virtually guaranteed of a Goldilocks soft landing or better -- and certainly not a recession.
I think the election-year economy will be stronger than the Fed's estimate -- closer to 3 percent. Too much is being made of both the sub-prime credit problem and the housing downturn. A recent Bank of England study shows that residential mortgage-backed securities in the U.S. total $5.8 trillion. Of that, only $700 billion, or 12 percent, are sub-prime. Even when you add in $600 billion of so-called Alt-A mortgage paper, most of which will not default, the total of these home loans is still less than 20 percent of all mortgage-backed paper.
What's more, the entire market in sub-prime debt is just 1.4 percent of the global equity markets. On any given day, a 1.4 percent drop in world stocks would erase the same amount of value as the collective markdown of all sub-prime-backed bonds to $0. It's just not that big a deal.
The recession debate is over. It's not gonna happen. Time to move on.
At a bare minimum, we are looking at Goldilocks 2.0. (And that's a minimum). The Bush boom is alive and well. It's finishing up its sixth splendid year with many more years to come.
[E]ven if Wall Street takes $200-300 billion in mortgage losses, as a result of loan markdowns, profitability is more than adequate to stem the tide and hold us.
There ain’t no recession.
There is no recession. Despite all the doom and gloom from the economic pessimistas, the resilient U.S economy continues moving ahead 'quarter after quarter, year after year' defying dire forecasts and delivering positive growth. In fact, we are about to enter the seventh consecutive year of the Bush boom.
...There's no recession coming. The pessimistas were wrong. It's not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that's a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It's finishing up its sixth consecutive year with more to come. Yes, it's still the greatest story never told.
Following last week's solid jobs report, the New York Times got back to its Bush-bashing recession mantra with the front-page headline: "Slowing Growth and Jobs Seen as Ominous Sign for the Economy."
This chant has been going on for quite some time. Doom and gloom from the economic pessimists has been political sport for seven years, even though the Bush boom just celebrated its sixth anniversary. The current expansion is now in its 74th month -- 17 months longer than the average 57-month business cycle since World War II.
This sort of fiscal and monetary coordination will continue the Bush boom for years to come. Though mainstream media outlets will never admit it, President Bush has kept America safe and prosperous. But history will eventually judge him in a more kindly light.
[B]anks are taking significant steps to repair their balance sheets. Even though some people might not be happy with the speed, the reality is things are improving.
At home, the economy is not nearly as weak as the Wall Street bears would have us believe. After-inflation income is rising rapidly. Family wealth is at an all-time high. Bank balance sheets are being repaired and corporate cash flows are unusually high.
I'm going to bet that the economy will be rebounding sometime this summer, if not sooner. We are in a slow patch. That's all. It's nothing to get up in arms about.
The greatest threat facing this country is not subprime, marginal tax rates, stimulus packages, etc. It's our safety.
Watching the venerable old firm pawned off to JPMorgan Chase for a couple hundred million bucks -- basically a bag of peanuts -- is painful to me. The building itself is worth at least $1.5 billion. And even though Bear made big mistakes with sub-prime hedge funds, the firm is chock full of talent and brainpower. Down through the years, the smart people at Bear were able to avoid numerous financial difficulties while helping the firm stay profitable. Bear alumni are scattered everywhere, as successful investment bankers, broker-dealers, and financial advisors.
Here’s what’s going on right now: The more the American public sees and hears Hillary and Obama, the more voters are moving to McCain. Democrats and independents are shifting to McCain in droves. McCain commands a strong lead over Hill-Bama in the national match-ups. And his favorables are rising while his unfavorables are falling. It’s just the opposite with Hill-Bama: Unfavorables are up, favorables are down.
...From my perch, we don’t look far from the point where John McCain establishes a commanding lead in the run-up to November.
And let's also remember that recessions are therapeutic. They're even necessary to create the foundations for the next recovery. Economic excesses always occur in free-market capitalist economies, and from time to time they must be cleansed. Just think about the excessive risk-speculation, leverage, and housing prices of the current episode. If anything, recessions make for clean starts.
Kudlow: I’ve been talking sir, a little bit, just in recent days and weeks, this funny story, I’m calling it the new socialism. Nobody can fail in America. If something fails, then government’s gonna come in and bail them out. Now the latest of course is Fannie and Freddie. There’s a huge housing bailout bill out there. Who knows? Maybe we may [bail out] the airlines, the automobile companies, I don’t know. You know, Phil Gramm may have had a point. We are a nation of whiners.
Media reports painted a pessimistic picture of today’s release on existing home sales, which fell 15 percent from a year ago and recorded higher inventories. But inside the report was an awful lot of very good new news, which appear to be pointing to a bottom in the housing problem; in fact, maybe the tiniest beginnings of a recovery.
...It’s a pity the mainstream media keeps searching for more and more pessimism. The reality is a possible upturn in the housing trend, and at the very least we are getting a bottom. Stocks sold off 165 points largely on media reports of terrible home sales and prices. But I am hoping the market comes to its senses and realizes the data are a whole lot better.
Mark Nickolas is the Managing Editor of Political Base, and this story was from his original post, "CT-SEN: Larry Kudlow Mulls Senate Run Despite Record Of Disastrous Economic Predictions."