Anyone for soup?
A friend who understands markets far better than I do points out that in yesterday's Wall Street melt-down, only one major stock ended the day ahead.
Campbell's Soup.
Explanation, anyone?
Archives for September 2008
Bail them out, or let them sink?
I wonder what you've made of the political shenanigans in Washington over the past week.
There are two ways of looking at it, aren't there? You might take the view that members of Congress have been fulfilling their duties as elected representatives and carrying out the wishes of their constituents in trying to amend the proposed bank bail-out deal on offer from the US Treasury.
Or you might see it all as sordid electioneering, with each side seeking maximum party advantage in the closing stages of a close-fought Presidential campaign, even as the financial markets teeter on the brink of melt-down in the continuing uncertainty.
If you take the first view, you will find supporting evidence in the , which reports: "It has become abundantly clear that members of Congress are hearing from their constituents, many of whom are furious about the proposed rescue."
If you take the second view, you'll find support from Senate Majority Leader , who told reporters that John McCain's suspension of his campaign was unnecessary and he was "standing in the way" by returning to Washington from the campaign trail. "If we lose progress, it's only because of one man, and that's John McCain."
The focus for much of the public anger seems to be the income levels of some of the biggest banks' bosses. (And of course it hasn't exactly gone unnoticed that the US Treasury secretary Henry Paulson, in his previous life as head of Goldman Sachs, managed to squirrel away something in the region of $65 million in bonuses alone over a seven-year period.)
If I were a US tax-payer, I suspect I may wonder why my contribution to the Treasury might be used to keep some of these chaps in the manner to which they have plainly become happily accustomed. Especially as it would appear to be their mistakes, misjudgments and bad calls that got us into this mess in the first place.
So why not let them all go the way of Lehman Brothers? Well, like 'em or not, we need the banks. They provide our mortgages, they invest our pension plans, and they offer credit to the companies on whom we rely for goods and services. And there seems to be general agreement that however unpalatable the deal currently under discussion, doing nothing would almost certainly be a lot worse.
(Incidentally, one small anecdote: a local shopkeeper of my acquaintance was telling me recently that he had just acquired two more properties as his business expanded. The bank had approved his business plan, but at the last moment, withdrew its offer of a loan. That's the credit crunch in action.)
And there's still the thorny issue of how much the US Treasury's "septic bank" might be prepared to pay for the toxic debt currently poisoning the system. As my colleague, the ´óÏó´«Ã½'s superb business editor Robert Peston, points out: "If the bail-out is used to punish the banks, it probably won't save the global financial system; but if the banks aren't punished, then US tax-payers may well feel that their pockets have been picked."
My Senator, My Vote: Part II
The second part of my two-part documentary series is being broadcast today on the ´óÏó´«Ã½ World Service at 0906GMT, 1206GMT, 1906GMT and 0006GMT -- and available online after broadcast here.
It's the one in which I talk to two Arizona voters: one pro-McCain and one anti, like last week's when I did the same in Illinois with pro- and anti-Obama voters.
Why panic?
I might as well start with an admission: I wouldn't recognise a collateralised debt obligation if it came up to me in the street and shook me by the hand.
So if you were to doubt my expertise when I start pontificating about financial matters, well, I'd concede that you just may have a point.
But I hope I'm not being a total simpleton if I suggest that some of the coverage of recent events risks losing a sense of proportion. Yes, I know that Alistair Darling said that current economic conditions "are arguably the worst they've been in 60 years". And I have no doubt that's how it feels if you're trying to keep the ship afloat in these storm-tossed seas.
Leave aside for a moment the hysteria on the stock markets. Consider the UK unemployment rate, up sharply to 5.5 per cent, and rising more quickly than at any time since 1992. But consider also: at 1.7 million out of work, the figure is still only just over half what it was 25 years ago.
All right, what about inflation, also up sharply? True, and it's rising at its fastest rate for 11 years - but at 4.7 per cent, it's still far lower than in 1975, when it reached 24 per cent, or 1980, when it was at 18 per cent.
Those of you of a certain age will recall a character called Corporal Jones in the TV comedy series Dad's Army. His catch-phrase "Don't panic!" was guaranteed to spark exactly the opposite reaction. So I won't do a Corporal Jones.
Nor will I pretend that the events of the past two weeks haven't been dramatic or serious. When a major UK mortgage lender is taken over; when one of the world's biggest insurance companies is nationalised in the US; when iconic names in the financial world like Lehman Brothers, Merrill Lynch and Morgan Stanley are bandied about like so many dodgy second-hand car dealers, even I can recognise that something is up.
But my experience of previous crises - and I don't think anyone who lived through the recession of the early 1980s is likely to forget it - leads me to conclude that what goes down must, sooner or later, come back up again. The whole point of economic cycles, I would have thought, is that they are cyclical.
Yes, if you have a mortgage, you'll be worried about interest rates. But doesn't any prudent borrower factor in possible rate changes over a 25-year period? If you're saving for a pension, you'll be worried about the value of your pension pot. But unless you're planning to cash it in now, there's a fair chance it'll claw back its previous value within the next couple of years. (After all, the stock market now, even after all the falls of recent days, is about where it was three years ago.)
Of course, jobs are being lost, businesses are suffering, and homes are being repossessed. Not for a moment am I suggesting that the current crisis doesn't involve real hardship. And with the financial services industry playing such a significant role in the national economy, clearly a crisis in the City has important knock-on effects.
All I'm saying is that I doubt the world is about to end just yet.
Oh, and by the way, remember how oil prices were close to $150 dollars a barrel a couple of months ago? You may not have noticed, but yesterday, they were below $100. That's a drop of one-third in eight weeks. Just thought I'd mention it.
My Senator, My Vote: Part 1
Hope you'll be able to catch the first of my two-part documentary series on the ´óÏó´«Ã½ World Service today. On air at 0906GMT, 1206GMT, 1906GMT and 0006GMT -- and available online after broadcast here.
In Part 1, I'm in Chicago, talking to two voters, one pro-Obama, one anti-Obama -- and bringing them together to see if either can change the other's mind.
Next week's programme comes from Arizona, where I do the same with a pro-McCain and an anti-McCain voter.
Thoughts from Phoenix
PHOENIX, ARIZONA -- A couple of nights ago, I was at a party of highly motivated political women here in Phoenix. Arizona is the state which John McCain represents in the US Senate, so perhaps you'd expect these female Arizona politicos to be thrilled by his decision to appoint a woman, Governor Sarah Palin of Alaska, as his vice-presidential running mate.
In fact, not so. Because these women were Democrats, and as one of them told me: "It's not just about biology; it's also about ideology." To them, Sarah Palin is anathema, because she is pro-life, and they are pro-choice. (Or if you prefer, she is anti-abortion, and they believe in a woman's right to choose.)
These are strange days in the Presidential election campaign. There's been more talk this week about lipstick than about the economy or Iraq; more coverage of a vice-presidential candidate who has remained unavailable to reporters than to the other half of her party's ticket, the man who would be President.
(Just to put the record straight about what Barack Obama meant when he spoke of "putting lipstick on a pig": Sarah Palin is the lipstick, he insists, the pig is John McCain's policies. He didn't mean Mrs Palin is a pig.)
I've spent the past two weeks first in Missouri, then in Illinois, and now here in Arizona. And I have a few conclusions to report to you, admittedly wholly unscientific and totally impressionistic.
First, this election really is engaging people: everyone I've had contact with -- in shops, hotels, on the streets - has wanted to talk about it. (One exception: a young man here in Phoenix who within the last few months has lost his job, been left by his wife, and is now having his home repossessed by the bank ... he told me he had other things on his mind more important than the election.)
Second, the people who support John McCain cite his political experience and his military background as the main reasons: his specific policies seem to have made little impact. And those who prefer Barack Obama say it's because he inspires them as a new face and a new voice: they speak of him with the same reverence that McCain supporters adopt when they speak of their candidate.
Third, the Iraq war is just not an issue. Over the past week, I have had several hours of in- depth conversations with voters on both sides of the debate; not one of them has mentioned Iraq. (And if you heard our programme from Rolla, Missouri, last Friday, you may remember that no one in the audience there raised it either.)
Fear of terrorism is an issue, the economy is an issue, and for some, abortion is an issue. Both John McCain and Sarah Palin are vehemently anti-abortion (that's why the pregnancy of Mrs Palin's 17-year-old daughter made such an impact). Some women who desperately wanted a chance to vote for Hillary Clinton will never be able to vote for Sarah Palin - but the opinion polls suggest that many white working class women in particular are being won over.
A word of warning about those polls: many of them are showing relatively small shifts, often within the margin of error, and there is some evidence to suggest that the mood, when it is shifting, is being heavily influenced by daily media coverage.
So my advice is: don't jump to any conclusions just yet. Yes, John McCain is doing better in the polls than he was three months ago - but if you look at the state-by-state breakdown of how he and Senator Obama stand, it still looks extraordinarily tight.
The first of my documentaries for the ´óÏó´«Ã½ World Service - - will be broadcast next Wednesday. The second will be on air the following week.
The Rolla debate: conclusions
Let's see if you can guess which subjects came up during our live "town hall" programme from Rolla, Missouri, on Friday.
The state of the US economy? Of course. Energy policy? Definitely. The teaching of creationism in schools? Oh yes. (I admit I was surprised by that one.)
The war in Iraq? Er, no. Not one. About 100 people turned up to be in our audience, and none of them wanted to ask about Iraq.
So what, if anything, does that mean? That Missouri voters don't care about the war? I doubt it. That they think it's probably going OK so it's not something they regard as an election issue? I wonder.
I was impressed by the Missourians who came along on Friday. They asked serious questions, and listened carefully to the answers from two local Congressmen, a political science professor and a local radio journalist. (To be honest, they probably asked better questions than a professional interviewer would have done.)
By the way, if you want to listen to the programme, there's an article about my travels and a link to the programme audio file .
The road to Rolla: Day 3
I've finally made it to Rolla, a typical middle American town set in rolling green hills about 100 miles south-west of St Louis, half way to Springfield.
On the way in to town, we passed a sign next to the highway: "Rolla: the center of everywhere". Which, of course, is why we have come. There are the same number of Americans living between here and Canada as there are between here and Mexico; the same number between here and the Pacific as between here and the Atlantic. This is truly the middle of middle America.
So what's on voters' minds? You'll have to listen to tomorrow's edition of The World Tonight to find out. We've already lots of questions sent in by email, and we expect to get plenty more when voters arrive for the show at the Missouri University of Science and Technology tomorrow afternoon. If you're in the area, you're more than welcome to show up. We'll be in the Leach Theater, and the programme goes on air live at 4pm local time.
The road to Rolla: Day 2
What makes being out on the road again such fun (for me, at least) is that you always learn something new. This morning, I spent a couple of hours at an ethanol manufacturing plant, so now I know how husks of corn can end up as fuel in the tank of my car. (Don't ask me to explain in too much detail, but I do know that enzymes play an important role in the process.)
I also learned that while the starch in the corn is turned into fuel, the rest of the stuff makes high quality animal feed that is shipped off around the world. So don't tell the ethanol guys that they're responsible for high food prices ... they just don't accept it.
And voters in this part of rural north-eastern Missouri, on the western bank of the Mississippi, north of St Louis, who I had imagined would be staunchly Republican, in fact are overwhelmingly "Dixie Democrat", in other words, much closer to the conservative Democrats of the deep South than to their more liberal fellow-Democrats of Chicago or New York. (So neither Barack Obama nor Hillary Clinton would have been their first choice as Presidential candidate.)
Tonight, I'm in St Louis, home of beer, often spoken of as a symbol of America right up there with the Stars and Stripes. But now a Belgian company is bidding to buy it, and many local Bud-lovers are up in arms. Mind you, when I sampled some views in a downtown bar earlier this evening, the drinkers seemed more concerned about the state of the economy than who owns the brewery.
I've just been watching Sarah Palin's speech to the Republican convention: they loved her and her folksy, gutsy style. And by the way, so far on my travels, I haven't met a single Missouri Republican who wasn't impressed by her.
Tomorrow, weather permitting (they say we're due to be hit by what's left of Hurricane Gustav), we head for Rolla, to get ready for Friday's programme.
The road to Rolla: Day 1
I'm on my way to Rolla, Missouri, to prepare for a special edition of The World Tonight, to be broadcast live from there on Friday in front of an audience of local voters.
Why ? Come to that, why Missouri? Two words: middle America. Neither north nor south, neither east nor west, Missouri is the perfect bellwether state: in every Presidential election since 1904 (with just one exception), Missouri voters have favoured the candidate who won the election.
Rolla is a small town in central Missouri where we hope to hear what's really on the minds of voters who often get overlooked when the media get into election mode.
What do they make of the Republican convention, which will just have ended? What do they think of John McCain's surprise running mate, Governor Sarah Palin of Alaska, and her unmarried pregnant teenage daughter?
What do they think of Barack Obama and his campaign slogan: eight years (of a Republican president) is enough? Are Missourians ready to vote for a black President?
The immigration officer who greeted me at O'Hare airport in Chicago told me: "I ain't never gonna vote for a man with a name like Obama ... and there's lots of folk who think like I do." Was he typical, or an aberration?
Tonight, I'm in the small town of , on the banks of the mighty Mississippi. It was the boyhood home of Mark Twain, and is full of Twain memorabilia. Twain was anti-slavery in a pro-slavery state, and, according to the curator of the Mark Twain museum, insisted on portraying black slaves as humans with souls rather than as a white man's property.
More tomorrow, by which time I hope to be in St Louis.
