GDP Surprise? C’mon!

Last month, Q4 2008 GDP was expected to show a 3.8% annualized drop. Economists were expecting the actual number to be -5.4%. But GDP came in worse than that this morning. The U.S. economy shrink at a 6.2% annualized rate between October and December, 2008. That’s the worst performance in 25 years. 
Stocks fell sharply on the opening, partly in response to the news. But should it be that big of a surprise?
After all, we’ve known that the fourth quarter was bad – that’s why the S&P 500 is trading at 1997 levels. Is there any reason to have been hopeful that maybe it wasn’t so bad? 
Don’t be surprised if buyers step in during today’s decline. 
*****Unemployment remains the key to any economic stabilization. But oil is our economic barometer. The recession has reduced demand for oil and knocked prices lower than anyone could have imagined. OPEC production cuts can stabilize prices, but only increased demand will move oil prices significantly higher. 
So it’s worth noting that gasoline use rose 1.7% earlier this week. That sent oil prices to $44 a barrel (and Jason Cimpl led TradeMaster Daily Stock Alerts members to a +9.3% gain on the US Oil Trust (NYSE:USO) in two days.) 
Analysts chalked the rise in demand up to low prices, but the reason doesn’t really matter. About half of the 21million barrels of oil consumed in the U.S. daily are gasoline. So even an incremental rise demand will affect prices. 
The question is: what does the incremental rise in demand mean for the economy? I’d say it means that Americans have come through the panic phase for the recession and are now in the acceptance phase. 
*****I’d like to thank everyone who wrote in with their thoughts on the changes Obama wants to make to the US economy. Great discussions require input from different perspectives, and that’s just what I got. 
Of course, I got far more letters from you than I can actually print. And they were more optimistic than I expected. Here are a few samples: 
*****Bruce writes: Hail to the chief!!   Finally, someone addresses America‘s real problems and can speak the language.  
Health Care – I have a problem with health care costs.   Considering the
poor service, their fees are significantly overpriced.    I earned as
many engineering degrees as physicians and would not think of charging
physician prices let alone the poor service you receive. 
One problem here is to release control of the number of physicians – let
the free market act.    I would like to see competition drive a more
reasonable price for health care (take the insurance company cuts out of
the pie) and AVAILABILITY.    When you call for an appointment only to
find the earliest available is weeks away independent of your problem,
then the system is not functioning. 
Energy – after 30+ years of talking, let’s get down to business with
domestic sources of conventional and renewal energy.     This is our
best control over the price of oil and gas.
Economy – Obama is on track and trying to improve the economy.   
Republicans fail to support the issue; however, recall what happened
when Coolidge and Hoover neglected the economy saying it will improve.  
Trickle down taxe cuts failed 3 times and will not work now.   They only
make the rich richer because they cannot spend the extra money – when
you already have everything, you simply put the money away – out of
I see an underlying fundamental problem as the "ME" issue.   The
attitude that if a plan does not help me, then I oppose it – hands out
to the government at ALL income levels; particularly the high paid.   We
need a new attitude and a new trickle down economics based on "if a plan
is good for the nation, then I will benefit from a stronger country".  
This is true trickle down economics.    Yes, I AM prepared to pay higher
taxes if needed to drive the country forward.   America needs "America
First and I will benefit".  
*****From Margaret: My view is this: If enough hope can be injected into the masses of the country where they are allowed to dream still it is possible to get through this; now obviously there are more people living their everyday lives that has no direct involvement with Wall Street but to listen to the news and stock markets they make you feel nothing is evolving outside there.
So i feel President Obama is keeping his focus on the majority and trying to keep their hopes high because when that torch goes out …… because there’s no torch on Wall Street to carry the flame.
It looks like to me Wall Street is the reason we’re in this mess and some others i won’t mention.   Would anybody else do any better? 
*****Another Margaret writes: The socialist moves being made by our government are completely unconscionable. American people have always been self-reliant and innovative until this period in history. We are fast becoming a nanny-state, helpless and dependent. The greed that has corrupted our society is now filtering down to the average citizen with his/her hand out. 
Your opinion regarding no objections to the doctors making a buck is my opinion also. Rising health care costs must be attributed to the greed of the pharmaceutical companies with obscene drug prices and those companies that lease out the equipment, such as MRI machines, etc. and hospital buildings at overinflated rates. Pharmaceutical companies should not have exclusive rights to new drugs for overextended periods of time. Taxpayer funding through government grants has allowed them research money for this.
Children are being indoctrinated into this "gimme" society everyday. Do they even bother to teach much about the Constitution in the schools anymore? 
I believe any oversight panels/committees should also be made up of people that made an average wage or less as we are the only ones that seem to know what "budget"means. Rampant spending by the government on ridiculous pork projects must be stopped. As we tighten our belts, so must they. 
I could go on ad infinitum but will close with this: As we are now becoming a socialist nation, we will need a new name. Here is my suggestion:
        United American Socialist States – with an acronym of UASS.
And let us not forget: "A nation large enough to give you everything is large enough to take everything away.  
*****Larry says: I’m betting the ranch he can. If he can’t than who can? I hope the recovery includes some heads rolling on Wall St. If not, we can look forward to a repeat of this mess 10-15 years down the road. If we don’t add new regulations and transparency to the system all is for naught.  
We are having a 50% off sale in the investment markets and (so far) no one in coming! It’s a shame too because it’s a no loose proposition for the investor – heads you win (and the markets recover) or tails and you lose we continue down (and the dollar will not be worth a damn) so it will not matter.  
*****Jeremy: The only thing Obama is doing is letting his mouth outrun reality. There is no financial way for him to do all the changes he his talking about. If he did succeed in bringing about nationalized healthcare,. it would only cause trouble in the longrun. We who do not learn from the past are bound to repeat it. There is nothing new under the sun, but the people of the United States as a whole are so gullible that they believe anything a politician tells them if they have their label of beliefs attached to them,. Conservative or liberal it does not matter, we all need to take time to look at these ideas that are thrown before us and actually analyze the details before we jump on the bandwagon.  
*****David gives us a doctor’s perspective: I’m a physician, and, to a degree, of course I’m motivated by money. 
But the health care mess is far bigger. First of all, we need to change American lifestyles. So much of our disease burden relates to diet and physical inactivity. Secondly we have to solve the access issue. And, we would be way better off with more primary and preventive care (coupled with the aforesaid lifestyle changes) rather than the high cost, high technology specialty care to which we resort because of a lack of primary care and lifestyle change after serious illness manifests. 
And, yes, the non-value added administrative burden uses resources, and the regulatory burden, which is admittedly necessary, has, I would argue, gotten out of hand. The problem is that there are a lot of oxen that would get gored, from industrial beef and pork producers to medical equipment makers to specialists to insurance companies. THEY get mobilized when change is in the air, but the vast majority of the public does not. I’m not at all optimistic. Primary care is so unattractive in income, lifestyle and status relative to specialty care, hardly anyone wants to do it any more. 
*****Greg has the employment angle: What motivates the economy is jobs. Every dollar of a stimulus bill should be used to support business growth, employment and rebuilding the taxable base. 
Capital gains and healthy stock market support the above objectives, not more government and certainly not nationalized companies. 
Any notion of a national healthcare system is ill advised. It is a receipt for out of control costs and fraud. Additionally, if the government would put capital in the hands of the tax payers, it would stimulate the economy from numerous sectors. Housing, retail and banks in the form of retiring outstanding debt. 
He said he would cut out earmarks, based on what was passed last week he failed to honor his own promises.  
Reduce tax rate on payroll, stimulate small businesses which account for the majority of job growth, and allow financial institutions to put more credit into the market. That is where growth will come from. And no based on what I have seen he can’t do it.
From Marsha: The only thing Obama is doing is letting his mouth outrun reality. There is no financial way for him to do all the changes he his talking about. If he did succeed in bringing about nationalized healthcare,. it would only cause trouble in the longrun. We who do not learn from the past are bound to repeat it. There is nothing new under the sun, but the people of the United States as a whole are so gullible that they believe anything a politician tells them if they have their label of beliefs attached to them,. Conservative or liberal it does not matter, we all need to take time to look at these ideas that are thrown before us and actually analyze the details before we jump on the bandwagon. 
One of the best things that could happen to our political system is term limits,. because we keep electing the same do nothing good people to political office. People will fuss and complain but then turn around and elect the same person again. Obama is the pied piper,. he is playing his flute and we the rats are following wherever he goes,. Real soon the flute he is playing is going to be repoed by some bank and the nice music will stop. All the people will look around and say what happened. Then they will turn on him faster that you can blink.  
From Brian: I don’t think so. Look at health care. We should identify the things that cause healthcare cost to be high, like liability issues and excessive regulations. Improve the things that cause the cost to be high and the cost will come down. But taking it out of the private sector’s hands and placing it into government’s hands will not help control these types of costs. 
We already have a $50 trillion unfunded medicare liability. That makes our current budget issues look like peanuts. So give that same group more control over our medical system? Sorry, but I just don’t see it.  
*****Jerry writes: He sure talks a good game. I note though, that the banks who have already taken billions in government handouts are most certainly not doing with that money what was intended to be done with it  
There is no reason I can see that President Obama’s luck with health, energy and education is going to be any better than it has been with the banks. 
*****Mike writes: My thoughts are that I hope he can. But he didn’t cause the mess and can’t fix it alone. As a concerned citizen who watched most of the speech on tape until the tape ran out (applause made it run long for my set up) I was very concerned to see many Republicans sit stoically by while many of the initiatives were talked about. Especially taking away tax breaks for the richest 2% of Americans which should never have been granted in the first place. They even showed McCain reluctantly stand when Obama said he wanted an honorable end to Iraq. I guess he was disappointed we may not be spending another hundred years there because it has been so good for our economy to fight that misguided war and give out all those multi-billion $ no bid contracts to the wealthy companies some who are deep in bed with our own former VP.  
If people don’t start pulling the rope in the same direction we will fall, and fall hard. Everyone is still looking to get rich, even off this catastrophe. Way too much partisanship fueled by the very politicians who are supposed to be on our side. The people, like sheep, follow rooting on their side like sports teams. Loving then win or lose right or wrong. Too proud to admit the mistake of electing pure greed to Washington, twice. The party of fear and greed. Unless this country as a whole has an epiphany that Gordon Gecko was not right when he said "greed is good" we are headed for a whole lot of pain. That was Hollywood, this is reality.  
Wake up. It’s so simple. Bring jobs back to AmericaNOW. Screw China, India, Japan, Korea and any other country. Quit and sending all our work there and bringing in all their products without a level playing field to keep them and the CEOs wanting to reap larger profits happy. Once we are all working there will be so much prosperity even the Republicans will be happy. It’s wrong because it does not work. Trickle down is the lamest excuse for an economic plan ever muttered. Who is going to buy the products if they are all made overseas? Stop the war on the middle class. Build the country from the bottom up so everyone can live a decent, respectful life with the dignity of holding a self-supporting job. So they can send their children to college. Own a home, pay taxes and build the infrastructure.  
Do you see any other countries rushing to make sure we have work and are competitive? They are too busy protecting and taking care of their own citizens. And we have to do it too by force if needed. CEOs will not do it, they have theirs and have checked out of the system and only want more. It’s all ego. America has been lost in the quest for money for too long and now we are paying dearly. Bit by the snake we pursued so long and hard and at all costs. We may end up with class warfare just like the French Revolution if things don’t change and change fast. The Republican money lords need to wake up soon of the guillotine will come back in some new form.  
When you read this you will say "wow this guy is off the deep end" and it may be true but then it may also be because you are either in denial or truly don’t understand where we are and how we got here. Right now the ultra rich are planning new ways to take the taxpayers money once again during this crisis and further ruin the country. Let’s all pray the transparency Obama wants in the recovery plan is enough to prevent it. 
*****That’s it for today. Have a great weekend. I’ll print some more letters on Monday.

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