Oy vey!

What do Apple & GE have in common????

 

Currently they have more cash on their balance sheets than the U.S. Government!!!

 

 

 

John Broussard

 

It's The Economy Stupid: GDP

Okay, the GDP numbers are mixed at best, and still troubling.  Is the glass half full or is the glass half empty???

 

GDP Quarter On Quarter Annualized for the 2^nd Quarter:  1.3% versus economist’s expectations of 1.8% and versus the prior period number of 2.1% 

GDP Price Index Annualized for the 2^nd Quarter:  2.1% versus economist’s expectations of 2.0% and versus the prior period number of 2.5%

 

It’s still better than a poke in the eye with a sharp stick.

 

John Broussard

 

3 Ways Obama Could Bypass Congress

Okay, all this seems a bit far-fetched, but everything about the debt ceiling impasse seems a bit strange at this point.

 

 

3 Ways Obama Could Bypass Congress

By Jack M. Balkin

Special to CNN

July 28, 2011 10:48 a.m. EDT

http://www.cnn.com/2011/OPINION/07/28/balkin.obama.options/index.html?eref=mrss_igoogle_cnn

 

Note:  Jack M. Balkin is Knight Professor of Constitutional Law at Yale Law School. His latest book is "Constitutional Redemption: Political Faith in an Unjust World" (Harvard University Press 2011).

 

 

New Haven, Connecticut (CNN) -- Very soon, Congress will raise the debt ceiling. If it does not, it would be the greatest unforced error in American history, a self-inflicted wound that is as disastrous as it was avoidable.

 

Suppose, however, that the tea party gets its way, and the debt ceiling is not increased. What are President Barack Obama's options?

 

We are having a debt-ceiling crisis because Congress has given the president contradictory commands; it has ordered the president to spend money, and it has forbidden him to borrow enough money to obey its orders.

 

Are there other ways for the president to raise money besides borrowing?

 

Sovereign governments such as the United States can print new money. However, there's a statutory limit to the amount of paper currency that can be in circulation at any one time.

 

Ironically, there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.

 

Opinion: Both parties are wrong on debt talks

 

The government can also raise money through sales: For example, it could sell the Federal Reserve an option to purchase government property for $2 trillion. The Fed would then credit the proceeds to the government's checking account. Once Congress lifts the debt ceiling, the president could buy back the option for a dollar, or the option could simply expire in 90 days. And there are probably other ways that the Fed could achieve a similar result, by analogy to its actions during the 2008 financial crisis, when it made huge loans and purchases to bail out the financial sector.

 

The "jumbo coin" and "exploding option" strategies work because modern central banks don't have to print bills or float debt to create new money; they just add money to their customers' checking accounts.

 

The government has not discussed either option publicly. There are three reasons for this. First, there may be other legal obstacles to using these options that we don't know about. Second, because these devices could be used over and over again, they might scare investors and be politically unacceptable. Third, the president's political strategy has been to obtain a congressional deal lowering the deficit, and these solutions would take all the pressure off Congress.

 

However, that calculation could change if the president believes that Congress is simply unable to pass anything, a conclusion he has not yet reached.

 

Assume that the platinum coin and exploding option strategies are not available. What else can the president do?

 

Like Congress, the president is bound by Section 4 of the 14th Amendment, which states that "(t)he validity of the public debt of the United States, authorized by law . . . shall not be questioned." Section 4 was passed after the Civil War because the framers worried that former Southern rebels returning to Congress would hold the federal debt hostage to extract political concessions on Reconstruction. Section 5 gives Congress the power to enforce the 14th Amendment's provisions. This does not mean, however, that these provisions do not apply to the president; otherwise, he could violate the 14th Amendment at will.

 

Section 4 requires the president not to put the validity of the public debt into question. If the debt ceiling is not raised in time, there will not be enough incoming revenues to pay for all of the government's bills as they come due. Therefore he has a constitutional obligation to prioritize incoming revenues to pay the public debt: interest on government bonds and any other "vested" obligations.

 

What falls into the latter category is not entirely clear, but a large number of other government obligations -- and certainly payments for future services -- would not count and would have to be sacrificed. This might include, for example, Social Security payments.

 

To be sure, the president could keep paying Social Security if he could keep the total amount of debt constant by redeeming bonds in the Social Security trust fund for cash and immediately selling new bonds to replace them. But the money coming in may not be able to keep pace with the money going out. Even if he tries his best, the president may not be able to pay every Social Security check in full on time.

 

If the president stopped paying parts of Social Security or other government programs that the public relies on, we would have a partial government shutdown. This would quickly put enormous pressure on Congress to raise the debt ceiling to make it possible to resume normal government operations.

 

Thus, even if Social Security and other social safety net programs are not part of "the public debt," under Section 4, failure to pay them promptly and in full will probably lead to a political solution to the debt crisis within a week or so. The closest precedent is the 1995 government shutdown precipitated by the Republican-controlled Congress' battle with President Bill Clinton.

 

Assume, however, that even a prolonged government shutdown does not move Congress to act. Eventually paying only interest and vested obligations will prove unsustainable -- first because tax revenues will decrease as the economy sours, and second, because holders of government debt will conclude that a government that cannot act in a crisis is not trustworthy.

 

If the president reasonably believes that the public debt will be put in question for either reason, Section 4 comes into play once again. His predicament is caused by the combination of statutes that authorize and limit what he can do: He must pay appropriated monies, but he may not print new currency and he may not float new debt. If this combination of contradictory commands would cause him to violate Section 4, then he has a constitutional duty to treat at least one of the laws as unconstitutional as applied to the current circumstances.

 

This would be like a statute that ordered the president to hire 50 new employees provided that none of them is a woman. The second requirement violates the Constitution, so the president can hire the 50 employees and ignore the discriminatory provision.

 

Here the president would argue that existing appropriations plus the debt ceiling create an unconstitutional combination of commands. Therefore he chooses to obey the appropriations bill -- which was passed later in time anyway -- and ignores the debt ceiling. He orders the secretary of the Treasury to issue new debt sufficient to pay the government's bills as they come due.

 

The big test would be whether the markets treat these new bonds just like older bonds. If they do, or if they demand only a slightly higher interest rate, the president will have avoided economic Armageddon and saved the country's economy -- and the world's. The president and Congress can then move on to the real issue: fighting about future appropriations and revenues.

 

At this point, the president should ask Congress to ratify his actions by raising the debt ceiling. If they do not, he can continue the process until they do. His actions might set a precedent: Knowing that the president will invoke Section 4, congressional threats of using the debt ceiling to extract political concessions will become a defunct strategy in the future.

 

In fact, this was one reason why Section 4 was put into the Constitution in the first place.

 

An angry Congress may respond by impeaching the president. However, if the president's actions end the government shutdown, stabilize the markets and prevent an economic catastrophe, this reduces the chances that he will be impeached by the House. (After all, he saved the country.) Perhaps more important, the chances that he will be convicted by a two-thirds vote of the Senate, which has a Democratic majority, are virtually zero.

 

The public may regard an impeachment trial as a waste of time, since the ultimate result is clear. In addition, the president will point to the shutdown and the impeachment when he runs against his political opponents in the 2012 election, arguing that they did nothing to save the country from calamity while he has risked impeachment to protect the republic.

 

The final possibility is that members of Congress will sue the president for ignoring the debt ceiling. Under existing Supreme Court precedents, groups of individual congressmen would not probably have standing to sue. It is possible that a contrived suit could be created by bond holders, but courts will probably see through it. Moreover, even if the bond holders have standing, the courts will likely treat the constitutional issues as nonjusticiable under the "political question" doctrine, as they do in the case of war powers.

 

In fact, the struggle between the president and Congress is similar to recent disputes over the president's power to use military force to protect national interests or in emergency situations. If the courts won't intervene in the Libya affair, they probably won't intervene here.

 

It is still unlikely that things will get this far. Our Constitution, however, was designed to deal with extreme situations when ordinary politics fails. Let us hope that our institutions do not fail us now.

 

The opinions expressed in this commentary are solely those of Jack M. Balkin.

 

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

301 Main Street

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One American Place, 7th Floor

Corner of North Street & 4th Street

Exit 1D I-110 North Street / Capitol Park / Downtown

 

It's The Economy Stupid: Initial Jobless Claims

Initial jobless claims drop below 400K to 398K.  That’s some good news.  Now if we can get some  proctologists to go to Washington and help Congress get their heads in the right place we would all rest a little better.

 

John Broussard

 

Debt Ceiling Impasse

Yesterday The Dow Jones Industrial Average fell for a third day in a row, the dollar slumped and gold hit a new high.  Clearly the debt ceiling deal impasse between the White House and Congress is weighing on the markets.

 

Without a deal, the most feared scenario is that the U.S. will miss payments on its bonds and default — which financial experts say would be disastrous. While still considered unlikely, the prospect is popping up more in conversations.

 

"No one … could possibly say that there is no chance of a catastrophic outcome," JPMorgan Chase & Co. CEO Jamie Dimon told analysts last week of the debt ceiling negotiations in Washington.

 

The more likely scenario that investors are preparing for is that a temporary deal is struck to lift the debt ceiling. But such a makeshift plan is unlikely to allow the U.S. to maintain its AAA grade with bond rating companies. Citigroup analysts say the odds are 50-50 that the U.S. will be demoted to an AA rating for the first time ever.

 

Such a downgrade could lead to a temporary market disruptions. In the longer term it could push interest rates up for everyone from bankers down to ordinary people taking out car loans, and weaken the dollar's position as the world's reserve currency.

 

Meanwhile, bond rating company Moody's Investors Service warned Tuesday that the impasse in Washington threatened money market mutual funds. The investments are required to hold high-quality securities, including Treasury issues, and could be hurt if the government misses an interest payment on its debt.

 

Clearly, defaulting on the debt would be a disaster.  It would reverberate though all asset classes.  Institutional investors (China) would likely reduce their Treasury holdings, driving prices down and interest rates up. The exchange rate of the dollar would likely be depressed driving up the cost of all imported goods (oil).  Gold would be pushed even higher.  Mortgage rates would be driven higher, further depressing the fragile real estate recovery. Financial prognosticators are talking about a 2% to 10% further downturn in the stock markets.  Everyone hopes that a default is avoided, but at this point market participants are unwilling to rule out the possibility.

 

Think shutting down the Federal government is a good idea?  Think again.  A typical State budget depends on federal funding for 30% to 40% of their total spending.  At a time when revenues are depressed and most  states are dealing with budget deficits, a shutdown of the Federal government would cut off this source of funding and likely result in a fiscal crisis.

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

 

FW: New Study

Women's ass size study:   There is a new study about women and how they feel about their asses, the results were pretty interesting. 30% of women think their ass is too fat, 10% of women think their ass is too skinny, the remaining 60% say they don't care, they love him, he is a good man, and wouldn't trade him for the world.

 

RE: news - LSU to brew and sell its own beer (Times-Pic)

I want to go back to school and get THAT degree!

 

John Broussard

 

 

From: Jennifer L. Marusak [mailto:jmarusak@bellsouth.net]
Sent: Wednesday, July 20, 2011 1:12 PM
To: John Broussard
Subject: Fwd: news - LSU to brew and sell its own beer (Times-Pic)

Begin forwarded message:

From: Jennifer Marusak <ontrack54@gmail.com>
Date: July 20, 2011 1:07:14 PM CDT
To: jmarusak <jmarusak@bellsouth.net>
Subject: news - LSU to brew and sell its own beer (Times-Pic)

http://www.nola.com/lsu/index.ssf/2011/07/lsu_to_brew_and_sell_its_own_b.html

LSU to brew and sell its own beer
Published: Wednesday, July 20, 2011, 12:21 PM     Updated: Wednesday,
July 20, 2011, 12:21 PM
By The Associated Press


LSU plans to brew and sell its own beer, with release planned during
the fall football season.

A spokesman for the university, Ernie Ballard, says the logos and can
designs are being finalized with an eye toward putting the beer on
store shelves in September or October.

Ballard says local Baton Rouge-based Tin Roof Brewing Co. is
partnering with LSU to produce the beer, which will be distributed by
Mockler Beverage.

No word yet on a name for the beer -- or a list of the types of beers
that will be offered. Ballard says the project was developed through
LSU's food science department, with classes involved in creating the
recipe.


--



© 2011 Jennifer Marusak – "On Track With Marusak" on-line clipping
service compilation is subject to United States copyright laws. Any
unauthorized reproduction or transfer of this material is strictly
prohibited.

Did you miss Sean Egan on CNBC this Morning?

Egan Jones downgradeD the U.S. Government over the weekend to ‘AA+’ from ‘AAA’

See report attached.

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

 

 

Life Explained by Graphs

 

Life Explained.......by Graphs

 

 

It's The Economy Stupid: CPI

Consumer Price Index (Month On Month) -.02% versus economists’ expectations of -0.1%.  The prior period number was +0.2%

Consumer Price Index (Year On Year) 3.6% versus economists’ expectations of 3.6%.  The prior period number was 3.6%

Consumer Price Index Ex Food & Energy (Month On Month) +.03% versus economists’ expectations of +0.2%.  The prior period number was +0.3%

Consumer Price Index Ex Food & Energy (Year On Year) +1.6% versus economists’ expectations of +1.6%.  The prior period number was +1.5%

 

So, there isn’t a whole lot of inflation pressure in the numbers so far.  However let me point this out.  CPI is 3.6%.  The yield on the 3 Month Treasury Bill is .01%.  That is a -3.5% real return after adjusting for inflation.  2 Year Treasuries yield .375% which is a -3.125% real return after adjusting for inflation.  The 5 Year Treasury?  -2.943% real return.  The 10 Year Treasury?  -0.67% real return.   

 

At some point the real return on Treasuries will return to a positive number and I wouldn’t bet on inflation going lower.

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

301 Main Street

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One American Place, 7th Floor

Corner of North Street & 4th Street

Exit 1D I-110 North Street / Capitol Park / Downtown

 

It's The Economy Stupid: PPI, Retail Sales, Jobless Claims

Okay the Producer Price Index came in at 7.0% growth, slightly under economists estimates of 7.4%, but still a good growth number

 

Retail Sales came in at 0.1%, slightly above economist’s estimates of -0.1%, and an anemic number, but at least it’s positive.

 

Initial Jobless Claims came in at 405K, slightly below economist’s estimates of 415K, a nice change compared to recent unemployment numbers.

 

But the economy need better numbers than these to get our growth to where it needs to be to get us out of this economic malaise.

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

301 Main Street

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One American Place, 7th Floor

Corner of North Street & 4th Street

Exit 1D I-110 North Street / Capitol Park / Downtown

 

It's The Economy Stupid: Trade Deficit Widens

The U.S. Trade Deficit widened great than expected to -$50.2 Billion. Economists expected -$44.1Billion.  Another bad economic number surprising to the negative side. 

 

Second Quarter GDP is looking like it is going to have a hard time getting above +2.0%.

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

 

It's The Economy Stupid: Unemployment

Okay, as compared to yesterday’s ADP jobs report, this morning’s government unemployment/employment numbers were just plain old disappointing.

 

Change in Nonfarm Payrolls   +18K, versus economists estimate of +105K, the prior period number was +54K

Change in Private Payrolls   +57K,  versus economists estimate of +132K, the prior period number was +83K

Change in Manufacturing Payrolls   +6K, versus economists estimate of +6K, the prior period number was -5K

Unemployment Rate    9.2%,  versus economists estimate of +9.1%, the prior period number was 9.1%

 

There is no way to sugar coat these numbers, they suck.  Without employment gains the economy is going nowhere and the thought of a stronger rebound in the second half of the year is now in serious jeopardy.

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

 

Doh!

It should read:  “it’s a good number”. 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

301 Main Street

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One American Place, 7th Floor

Corner of North Street & 4th Street

Exit 1D I-110 North Street / Capitol Park / Downtown

 

It's The Economy Stupid: ADP Employment Number

Okay, the ADP private payroll number jumped up 157,000 surprising the street and me too.  Who’d a thunk!?

 

Now, one number does not make a trend.  Still, it’s a god number.

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

301 Main Street

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One American Place, 7th Floor

Corner of North Street & 4th Street

Exit 1D I-110 North Street / Capitol Park / Downtown