Quick Notes for the Day - February 26

Q4 GDP Revised Higher - The Commerce Department released the second (of three) report on the Q4 GDP on Friday and revised the number to 5.9% from 5.7%. Final sales in the US were revised lower while inventories, business investments and exports were all revised higher. The final Q4 GDP report will be issued in late March.

Existing Home Sales Fall - The National Association of Realtors (NAR) reported that sales of existing homes and condos fell 7.2% in January to a seasonally adjusted annual rate of 5.05 million which is the lowest reading in seven months. "It's not good news," said Lawrence Yun, NAR's chief economist. "There is rising concern about the strength of the housing recovery." Inventories of unsold homes fell 0.5% to 3.265 million or 7.8 months of supply at the current sales pace.

Consumer Sentiment Falls in February - The Thomson Reuters/University of Michigan survey of consumers showed that consumer sentiment fell slightly in February to 73.6 versus 74.4 in January.

Buffett Letter Has Big Audience as Berkshire Bulges - Reuters - "Unlike many corporate chiefs, Warren Buffett often plays down the prospects of his company Berkshire Hathaway, while trying to keep investors focused on the long term."

Euro Tarnished, But Rivals Lack Shine - MarketWatch - "The euro is damaged goods, laid low by a debt crisis that has revealed the shortcomings of European economic and monetary union, economists say. But while the episode raises questions about whether the single currency can survive without major changes, others say it's too early to dismiss the single currency's role as one of the world's premier reserve currencies -- and alternative to the U.S. dollar. "

Sex, Lies and Videotape – and Politics! What Could Be More Exciting?

From the Desk of Joe Rollins

I promise that this will be the last book review I will write for some time, but Andrew Young’s The Politician about the John Edwards scandal was just too hot for me not to read. If I post another book review over the next two months, it’ll have to be of the Internal Revenue Code. Believe me, that subject would definitely put you to sleep!

I decided to take a short vacation last week before things get too crazy in our office from tax season. While soaking up the sun in the Caribbean, I quickly devoured the pages of The Politician. Andrew Young was a key staff member in John Edwards’ 2008 Presidential campaign, and he is not to be confused with the highly principled former City of Atlanta Mayor, Congressman and U.S. Ambassador to the United Nations of the same name.

In The Politician, Mr. Young outlines his career wherein he basically started working as a volunteer in John Edwards’ 1998 campaign for Senate and quickly became his most trusted confidant. As you may know, John Edwards was an incredibly successful trial attorney who principally represented plaintiffs in medical malpractice and personal injury cases. His wife, the former Elizabeth Anania (she used her maiden name professionally until 1996), was also a very successful attorney.

John Edwards’ 1998 campaign for U.S. Senate was successful, and he served as a U.S. Senator from North Carolina until retiring before the 2004 Senate election. Even though Edwards was a millionaire himself, he promoted programs to eliminate poverty in the United States and generally supported initiatives that provided opportunities to the poor. This can probably be attributed to his humble background; his father was a textile worker and his mother was an antiques refinisher and postal letter carrier, and Edwards was the first member of his family to attend college.

Edwards was also a proponent of a universal healthcare plan wherein all Americans would be required to purchase health insurance. His plan also required employers to provide health insurance or be taxed to fund public health care.

In September of 2003, John Edwards became a Democratic presidential candidate, but he ultimately withdrew from the race after being defeated by John Kerry in the Super Tuesday primaries. Despite their strong dislike of one another, Kerry asked Edwards to be his vice presidential running mate in July of 2004. As everyone knows, they lost to George W. Bush and Dick Cheney, and Kerry and Edwards reportedly do not speak to one another.

In late 2006, Edwards announced his U.S. President candidacy in the 2008 election. The odds were on him to win over then Senator Hillary Clinton, who was considered to be too controversial to ever win the Democratic nomination. At that time, hardly anyone had heard of the junior senator from Illinois, Barack Obama. Things were looking pretty good for John Edwards until the allegations of an extra-marital affair surfaced in January of 2008. He withdrew from the race on January 30, 2008, although he was still hopeful that Barack Obama would ask him to be his vice presidential running mate.

As far as the book is concerned, I can’t necessarily recommend it as a good read. It was fairly clear to me that Andrew Young wrote the book as a self-serving exercise to protect himself legally. He does go through an exhaustive list of his positive impressions of John Edwards when he first met him and many of the interactions he had with Elizabeth Edwards.

You may recall Elizabeth Edwards’ announcement that she had been diagnosed with breast cancer in November of 2004. After radiation and chemotherapy treatments, she went into remission only for the cancer to return and metastasize to her bones and a lung. The Edwards announced together during John’s campaign for President in 2007 that Elizabeth now had stage IV breast cancer, but that they would continue campaigning together even though her cancer was only treatable, not curable.

Also tragic is the loss of their teenage son, Wade, in 1996, which seemed to set John Edwards’ political career in motion. The Edwards have four children together, two of which were born after Wade’s death, when both John and Elizabeth were in their late forties.

The Politician focuses on the relationship that John Edwards had with his mistress, Rielle Hunter, while campaigning beginning in 2006. As the famous colonist William Randolph said, “Truth is not only stranger than fiction, it is more interesting.” This is one of those particular situations that is so outrageous that it’s almost unbelievable.

Somewhere along the line, John Edwards met Ms. Hunter and he hired her to produce a series of promotional videos showing his life behind the scenes on the campaign trail. Her production experience before being hired by the Edwards campaign was questionable, but that didn’t keep him from paying her a $100,000 retainer from his campaign funds. Ms. Hunter utilized that money to purchase equipment and set up a crew to begin filming the campaign, but according to Young, Edwards only hired Hunter so she could go on the campaign trail with him.

With Edwards’ wife and children back in North Carolina – where Elizabeth was undergoing the fight of her life against cancer – the allegations of Edwards’ affair with Hunter surfaced. Furthermore, Ms. Hunter was pregnant, and there was speculation that Edwards was the unborn child’s father. Edwards vehemently denied those claims until August of 2008, when he admitted to having an affair with Hunter but still denied that he was the father of Rielle Hunter’s daughter, who was born in February of 2008.

Andrew Young reports that during this ordeal, he became the principal caretaker of Ms. Hunter. He would make the arrangements for her to meet Senator Edwards and he would pay all of her bills with campaign funds. This was all moving along quite smoothly until Ms. Hunter discovered that she was pregnant with John Edwards’ child. Young portrays himself to be so loyal to Edwards that he agreed to publicly announce that he was the father of Hunter’s child – not John Edwards – to keep the campaign going. As incredible as it may sound, Edwards was even able to convince Elizabeth that Andrew Young was the father of Hunter’s child. Young says he was unaware of that for several months. Interestingly, Young was married and had three children of his own, and by all accounts, his marriage to Cheri Young has always been very strong.

Young further relays that when Ms. Hunter was five-months pregnant, the Young family and Ms. Hunter lived in the same gated community in North Carolina. Can you imagine how joyful that neighborhood must’ve been with all the paparazzi and tabloids hovering outside of their gates? They all subsequently moved into a home together in Santa Barbara, California, which is where Ms. Hunter gave birth to her daughter. The cost to rent the house was over $20,000 per month. They had hoped to insulate themselves from the media and keep Ms. Hunter and the baby out of the public eye until the Democratic Convention was over in 2008. Edwards intended on seeking the vice presidential nomination if either Hillary Clinton or Barack Obama were nominated. Everyone knew that as soon as word got out about Edwards’ lovechild, his political career would be over.

Young’s story gets even more sordid when he reports that he sought money from a wealthy political contributor to the John Edwards campaign in order to pay Ms. Hunter’s expenses. He says that this same contributor gave him over $6 million, and that the contributor believed that this money was simply for Edwards’ Presidential campaign. In fact, all of the money was being spent on keeping Rielle Hunter out of the public eye.

There is an interesting passage where Andrew Young relays that he found a tape in the rental home that he had provided for Rielle Hunter. He was shocked to discover that Ms. Hunter had filmed herself having sex with John Edwards. How is he certain it’s her? Because the woman was noticeably pregnant in the film. He also reports that he found numerous pictures of John Edwards with Rielle Hunter and her baby.

On January 21, 2010 – less than 10 days before Young’s book was to be released – John Edwards finally admitted that he was the father of Rielle Hunter’s daughter. He and Elizabeth Edwards are legally separated after being married for over 30 years.

There is a significant lawsuit pending against the John Edwards campaign for violation of federal campaign laws which is extraordinarily serious. Rielle Hunter recently sued Andrew Young to turn over personal videotape which she says is her property. Furthermore, it was reported today that Elizabeth Edwards may be preparing to sue Andrew Young for “alienation of affection,” arguing that Young’s role in covering up the affair contributed to the demise of her marriage. Typically, those lawsuits are filed against a husband or wife’s lover. Some legal experts don’t think the argument will hold in court.

Unlike the public’s perception of Elizabeth Edwards, Young portrays her as demanding and menacing. This may just be a case of sour grapes, but Young recounts several events that were made much worse by the actions of Elizabeth Edwards. In all honesty, there isn’t a single redeeming character in the entire book. Even Andrew Young couldn’t be viewed as a hero, since he was clearly a conspirator to keeping the affair away from the media and from Elizabeth Edwards for over three years.

I won’t spoil the entire book for you in case you would like to read it for yourself, but if you’re interested in one of the ugliest stories in politics today then this is the book for you. If you think Washington is the center of moral ethics in today’s day and age, then I’ve got some oceanfront property to sell you – in Valdosta, Georgia.

If you decide to read Andrew Young’s The Politician, let me know what you think about it.

Quick Notes for the Day - February 22

Obama Pushes a New Health Care Plan - On Thursday, President Obama plans to meet with Congressional leaders from both sides for a health care "summit" to tackle the problem. Obama put forward his own plan on Monday, and he has challenged Republicans to do the same prior to the meeting Thursday.

"We view this as the opening bid for the health meeting," said Dan Pfeiffer, the White House communications director, on Monday morning.

Obama Offers Plan to Revive Healthcare Push - Reuters - "President Barack Obama tried to rejuvenate his stalled healthcare overhaul on Monday with a revised plan to make insurance coverage more affordable and bolster federal authority to regulate premium hikes."

National Activity Index Rises - Chicago Fed - The Chicago Federal Reserve said Monday that the National Activity Index (NAI) turned positive in January to 0.02 versus -0.58 in December. According to economists, the data indicated that the economy was in the best shape since May 2007. The bank said 55 of the 85 indicators in the NAI made positive contributions in January, 19 more than the prior month.

The three-month moving average continued to point to an "early-stage" recovery with "subdued" inflationary pressure, up to -0.16 from -0.47 in December. It marked the second straight month that the average climbed above a statistical milestone of -0.70 that has corresponded with the end of recession during four previous downturns.

“This is Only the Beginning”

From the Desk of Joe Rollins

Kudos to President Obama for his announcement yesterday of more than $8 billion in federal loan guarantees for the construction of the first nuclear power plant in the United States in more than 30 years, promising “this is only the beginning.” After over one year, the Obama administration has finally come up with a stimulus plan that will actually create good, high paying jobs in the United States. Furthermore, the end product will be something incredibly useful to this country. The best part of this plan is that it will not cost the U.S. government one dime; rather, it is just a guarantee that is highly unlikely to ever be called upon.

It took a lot of political willpower for President Obama to propose building a new nuclear plant after it’s been a taboo subject for nearly three decades in this country. Say all you want about wind power and solar energy, but those alternative energy sources will only contribute a small percentage to our energy needs. Nuclear energy, on the other hand, has the potential to furnish virtually all of our power needs in the United States, much like it does in France. In France, nuclear power constitutes approximately 80% of the needs of the entire country.

As would be expected, the environmentalists jumped all over President Obama, calling him a sell-out to big industry. To be honest, I’ve never really understood why Greenpeace and other environmental groups are so vehemently opposed to the construction of nuclear power plants. As far as I know, there is nothing cleaner than nuclear power in generating energy.

Until Obama’s announcement yesterday, the stimulus money was being poorly utilized to build things that we really do not need. There are just too many structural items that we really need to waste hard-earned taxpayer money on pork barrel projects. A good example of that is the high speed train that they are proposing to be built between Tampa and Orlando. There’s also a proposed high speed train between the San Francisco area and Las Vegas.

There are a number of studies which indicate that these high speed trains would not be utilized. Logistically, there’s the issue of actually getting to the train station and in the case of the Tampa to Orlando train, you would still need a car to commute upon arrival within those cities. Unless you’re only traveling to the train station, these high speed rails wouldn’t help you accomplish much.

Don’t get me wrong – projects like building high speed rails would create jobs and would help commerce. But in the end, the product just wouldn’t be very useful to the taxpayers. If it is so important that we build high speed trains, then let’s build them between two cities that really need them, like New York and Washington, D.C., New York and Boston or Philadelphia and any major Northeastern city. It seems that the politics need to be eliminated so that meaningful projects can be undertaken rather than those that only satisfy local governments.

In recent months, some of the research and science regarding global warming has been called into question. Even scientists seem to disagree as to the cause of global warming and its potential risks. Furthermore, there is now evidence that certain data from climate scientists was seriously flawed. While some say the inadequacies of the data do not undermine the argument that humans are the reason for global warming, it certainly doesn’t help to influence those who are already skeptics on the subject.

It was announced on Tuesday that oil giants BP and ConocoPhillips and heavy-equipment manufacturer Caterpillar have pulled out of their membership in the U.S. Climate Action Partnership. This is a quick exodus from important corporations that originally supported the Cap and Trade bill that Obama proposed and was passed by the House of Representatives. I can’t help but believe that this erosion of support is because some of the research is questionable.

You may recall that when Denmark hosted the United Nations Climate Change Conference in 2009, a consensus was never reached regarding global warming, mainly because China, Brazil, India and South Africa walked out of the summit. Basically, they felt that the developed nations should contribute funds and share green technology if they expected poor and developing countries to take major actions on environmental protection. In other words, they felt the U.S. became a predominant economic power without regards to protecting the environment and that their countries should be given the same opportunity or the rich companies should at least subsidize the poor countries in this regard.

As you know, I am often astounded by the actions of our Congress. They are proposing to spend a trillion dollars in Cap and Trade and tax our industries based on questionable scientific data. It would seem wise to hire the absolute best scientists throughout the world to create an indisputable 20-page paper on the effects of global warming based on precise data.

An unbiased, non-partisan committee of the best global warming scientists in the world could be paid $1 million to accomplish this in the matter of a few months. If their assessment is as dire as we were led to believe, then maybe the Cap and Trade should move forward. If not, then delay it until more prosperous times. However, it is unwise to even consider spending a trillion dollars when the science is still in dispute.

As always, the foregoing are my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

On the Brink!

From the Desk of Joe Rollins

I am finding myself writing more and more blogs these days on books I’ve read than on financial matters. Maybe I need to become a book critic! So many books have been written on the meltdown of the banking system in 2008 that it’s too hot a topic for me to ignore. I’ve written before on three other books on the subject – House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan; The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System by Charles Gasparino, and; Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves by Andrew Ross Sorkin. If you want to read my thoughts on those particular books, check out my "Wall Street Debacle – Was It Really Greed" post from January 16th.

The book that I want to bring to your attention today is Henry M. Paulson, Jr.’s newly released, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System. As I’m sure you are aware, Henry Paulson was the U.S. Treasury Secretary under President George W. Bush from June of 2006 until the time that President Obama took office on January 20, 2009.

Paulson’s book is different from the others that I’ve read on the subject. First, this is first-hand account by someone who had an instrumental role in the financial debacle. Hank Paulson gives you the insider view of the actual happenings and first-hand accounts of the conversations that took place. The other books that I’ve discussed in this blog are based on conversations and impressions by third parties. None of the authors of the others books are expressing first-person knowledge of the financial meltdown.

As with the other books, this one is also extraordinarily long and detailed. Prior to Paulson’s service as the U.S. Treasury Secretary, he was the wildly successful Chairman of Goldman Sachs. According to reports, his compensation package from Goldman Sachs in 2005 was approximately $37 million. Even though his net worth has been estimated at over $700 million, he stated that took the job as U.S. Treasury Secretary because of his desire to give back to his country.

It was interesting to read about the politics associated with Paulson’s nomination. He says that his mother was a lifetime Democrat who despised President George W. Bush. When he finally told her he’d been nominated by Bush to succeed John Snow as the Treasury Secretary, and that he’d accepted the nomination, she became physically ill. Even though he doesn’t outright say it, he seemed to imply that he is a Democrat himself. His wife is clearly a Democrat, and I would be surprised to find out that he is anything other than a Democrat.

Throughout the book, I got the overwhelming feeling that Treasury Secretary Paulson and President Bush were both fighting the pressure against the government to be involved in private business. I found Paulson’s comments about making equity investments in the banks especially compelling. While you’d be hard-pressed to find a Republican that would support the nationalization of the banks, it wasn’t so clear that the Democrats did not think that was a good idea.

However, President Bush was clearly against the nationalization of the banks and Treasury Secretary Paulson was also fighting that concept. In the end, President Bush indicated he would take the political heat if need be, but in order to save the banking industry, equity investments in the banks were required. As we can now report, had it not been for those equity investments, it is unknown how bad the financial crisis would have become.

The first couple hundred pages of Paulson’s book are somewhat of a snoozefest. Hank Paulson is a devout Christian Scientist, and on several occasions in the book he discusses his doubts about the need for traditional medicine. He states that when he has been prescribed medicine in the past, he has instead chosen to rely upon prayer for relief. Paulson is also an environmentalist and an avid bird watcher. These are notable interests, but I didn’t find his discussions on those topics to be very exciting.

In contrast to the first half of the book, the second half of the book reads like a whodunit. He relays a day-by-day analysis of the financial crisis and how the country was truly on the brink of financial disaster. He gives an account of the failure of the numerous banks and the exact conversations that took place. I found it fascinating to read how Bear Stearns blew up within a three-week period of time. Paulson devotes a lot of chapters to the discussions about saving Lehman Brothers and why they ultimately elected not to do so. In retrospect, virtually everyone mentioned in this book now believes that they should’ve found a way to save Lehman Brothers.

Paulson discusses the work that was done to save the various major banks and companies from failing. In several of these cases, the tension leaps off the pages due to the fact that many of these institutions were on the verge of imploding before a package to save them could be put in action.

The following are the major banks and companies that failed:

Washington Mutual
Wachovia
Countrywide
Bear Stearns
Lehman Brothers
AIG
General Motors
Chrysler

And here are the major banks and companies that nearly failed:

Merrill Lynch
Morgan Stanley
Goldman Sachs
Bank of America
CitiBank
and numerous others – there are just too many to name them all!!

As a side note, the State of Georgia suffered the largest amount of local bank failures nationwide – a count of approximately 35 according to the FDIC. That’s not something to be particularly proud of…

What makes this book so interesting to me is the politics behind the transaction. In each case, you see how the Treasury Secretary is controlled by Congress and can only do what they approve. At that time, even though the Democrats controlled Congress, they did not have enough votes to get through any type of legislation without at least some participation by the Republicans.

I also found the comments regarding the 2008 Presidential election to be quite interesting. I found one of Paulson’s comments to be particularly interesting. Paulson was complimentary of Barack Obama during his candidacy, indicating that he was a quick study and understood the politics of everything that went on. The following statement, however, jumped off the page at me: “Through-out the crisis he played it straight [referring to candidate Obama]. He genuinely seemed to want to do the right thing. He wanted to avoid doing anything publicly – or privately – that would damage our efforts to stabilize the markets and the economy. But of course, there’s always politics at play; the day after the election, Obama abruptly stopped talking to me.”

Paulson is not so kind about Candidate John McCain. In various points throughout the book, Secretary Paulson documents that Senator McCain wasn’t particularly in tune with what was happening in the economy. On numerous occasions while on the campaign trail, McCain would interject on matters in which he did not have a clear understanding. The most famous of these occasions is when McCain suspended his political campaign in its entirety to go to Washington to help push along the TARP bill. After McCain made a gigantic show to call a meeting and return to Washington, Paulson reflects that at the meeting, John McCain clearly had no plan and the fact that he’d called so much attention to returning to Washington to work on the plan actually hurt, if not destroyed, what was left of his political campaign.

It amuses me to hear how politicians interacted with one another during the peak of the financial crisis. For those of you who find Sarah Palin annoying, you will be amused by Hank Paulson’s account of an exchange with her when she was the Vice Presidential candidate on Senator McCain’s ticket. This conversation took place when Governor Palin was first nominated as McCain’s Vice Presidential candidate, via a telephone conversation during the height of the financial crisis. Paulson recalled the conversation as follows:

“Right away, she [Governor Palin] started calling me ‘Hank.’ Now, everyone calls me Hank. My assistant calls me Hank. Everyone on my staff, from the top to the bottom, calls me Hank. It’s what I like. But for some reason, the way she said it over the phone like that, even though we’d never met, rubbed me the wrong way.”

Hank Paulson had been an incredibly successful businessman during his professional career, and he essentially accepted the Treasury Secretary position in gratitude for what his country had provided for him. Reading through the final chapters where Paulson outlines the financial meltdown, if you didn’t believe the country was on the brink of financial disaster then you really did not understand what was going on. There are numerous incidents in the final chapters where Paulson shows how the financial system bordered on the brink of a complete failure.

I found it interesting that Paulson admitted that he needed a moment to himself at one point. He relayed that he walked behind a marble pillar in the U.S. Treasury office in Washington, D.C. to call his wife. At that time, he confessed something to his wife that he thought he’d never have to admit. He explained to her that for the first time in his life, he had absolutely no clue what to do to make things better. She reassured him that all he could do was what he thought was best and that he needed to ignore the politics and governmental infighting.

The United States was fortunate to have Hank Paulson and Ben Bernanke involved during this scary period of time for our country. It was interesting to read Paulson’s praise for how President George W. Bush handled the situation, and he stated on more than one occasion that if it had not been for the President’s support, none of the actions could have been taken. In fact, he relays that in every case, even if it went against everything that President Bush believed in, he supported Paulson’s and Bernanke’s actions in the matter. The political fallout for President Bush will long be discussed, but I can tell you from reading these pages that we should all be thankful for the actions that these three men took during financially harrowing times.

If you can get through the first half of this book, I think you’ll be enlightened on the subject. There’s an important lesson to be learned from Paulson’s words; during the Great Depression, the government took a hands-off attitude regarding banking, the economy, and unemployment. During the 1930’s, there was very little banking regulation, virtually no Wall Street regulation, no unemployment insurance and no Social Security. When companies laid off employees during that time period, there was no safety net, and therefore, poverty was overwhelming. Anyone who believes that what we endured recently was as bad as what happened in the Great Depression simply does not have a clue. Unemployment reached 26% during the Great Depression and arguably, it lasted almost entire decade.

As we look back on this recent financial meltdown, we will see the government intervening to keep another crisis at bay. While the 10% unemployment percentage is disappointing, it is nowhere close to the 26% unemployment rate during the Great Depression. Likewise, we now have unemployment insurance that seemingly pays those who do not have a job forever. While approximately 150 banks failed during the recent financial meltdown, during the Great Depression over 1,000 banks failed at a time when there were only about 4,000 banks in the entire country. We currently have close to 8,500 banks in the United States, and frankly, some of them needed to fail.

When it’s all said and done, the recession we have suffered recently will have lasted no more than two years – from September of 2007 through September of 2009. It seemed traumatic at the time, but compared to the Great Depression in the 1930’s, it wasn’t even close.

In any event, if the events of the financial meltdown are of interest to you, then you should read Paulson’s, On the Brink to get a clear picture of exactly what happened and what actions were taken to avoid a huge catastrophe. If you do, let me know your thoughts on Paulson’s account of this historically important time period in the United States.

In closing, I want to provide you with Hank Paulson’s quote from On the Brink, that I found particularly meaningful:

“Let’s not forget that these markets helped tear down the Iron Curtain, lifted hundreds of millions of people out of poverty, and brought great prosperity to our nation. Efficient, well-regulated capital markets can continue to provide economic progress around the world. That inevitably leads to more political freedom and greater individual liberty.”

Quick Notes for the Day - February 16

Empire State Manufacturing Index Rises - The New York Federal Reserve Bank reported that the Empire State Manufacturing index rose to 24.9 in February versus 15.9 in January. In prior months the index had both risen and plunged on the data, but the new data puts the index at its highest level since October. The data showed both positives and negatives, but the most important news was that inventories were flat for the first time after 17 straight negative months.

Oil, Gold Rise - After a 3 day weekend, the commodities markets opened up with a slightly weaker dollar, renewed optimism in Europe, and a rally. Oil rose more than 3% to get above $76. Gold also moved higher by $26 to above $1,100.

Obama Announces Nuclear Power Plans - $8.3 Billion for Georgia Plants - Reuters - "President Barack Obama announced some $8 billion in loan guarantees on Tuesday to build the first U.S. nuclear power plant in nearly three decades and said he saw some common ground with Republicans on climate legislation."

Obama to Announce Georgia Nuke Loan Guarantees Today - AJC - "An administration official said late Monday that the loan guarantees will apply to work at the Southern Co. plant in Burke, where Georgia Power is planning the new reactors at its Plant Vogtle facility.Southern Co. estimates the project will create 3,000 onsite construction jobs and about 850 permanent positions."

Perceived Reality

From the Desk of Joe Rollins

As you know, I make most of my living by keeping up with the stock market and financial matters. Because of that, I tend to think that almost everyone has a fairly good understanding of what is going on with the market and where it stands year-to-date, especially with as much media coverage as there is these days regarding the financial markets. However, in conversations I have with others regarding the economy and stock market, it’s clear to me that it isn’t unusual for people to misperceive the reality of what is going on in the stock market.

For example, I recently had dinner with a distinguished gentleman who has been a client of mine for over 20 years. At one point, he exclaimed to me, “I just don’t understand how you can deal with the pressure with the stock market down so much in 2010!” Since I had a few glasses of expensive French wine under my belt at that time, I didn’t consider it the appropriate forum to discuss the matter. But the more I got to thinking about it, the more it seemed to me that this type of discussion might be something of interest to all of my readers.

It may seem like the stock market has been extraordinarily volatile thus far in 2010; it seems like there are regular moves up and down of over 100 points. However, as of this past Friday, the Standard & Poor’s Index of 500 Stocks is down a total of only 3.3% for all of 2010. I am almost willing to bet that most people reading this post believe that the S&P is down considerably more than that percentage. Given that this same index was up 26.5% for 2009, this small downward movement so far this year was not only predictable, but also reflects a minor correction that could potentially be recovered within a matter of weeks. The S&P enjoyed a massive rally from March through December of 2009, so the 3.3% it is down is truly insignificant.

Why do so many people perceive the stock market to be so bad right now? One reason is because the economic news being reported by the financial press has been overwhelmingly bad. This gives most people the perception that things are worse than they really are. In my February 7th post, “Ding-Dong. The Recession is Dead,” I argued that the economy is better than the public perceives. I received a great deal of criticism from my readers regarding this post, but I believe a good way to gauge how the economy is doing is by visiting your local shopping mall. The U.S. is such a vibrant and diverse country that the economy in one part of the country can be robust while it borders on recession in another region. But combined, there is absolutely no question that the economy is improving now. The only question is whether it will continue to improve at a quick pace or if it’s a slow grind to full recovery.

For the last two decades, I have been arguing that many of the problems that we are suffering through today have to do with decisions made by former Federal Reserve Chairman, Dr. Alan Greenspan. It was always worrisome to me that Dr. Greenspan seemed more concerned with his own image than he was with controlling the economy. After famed Watergate reporter Bob Woodward’s book, Maestro: Greenspan’s Fed and the American Boom, was released, it seemed that Greenspan realized his term was coming to an end and he wanted to cement his legacy with great economic years.

Take a look at the chart below, which reflects the Federal Funds Rate since 1990. This chart, of course, includes the years that Dr. Greenspan was Chairman of the Federal Reserve. The years that led to our current problem are immediately after the terrorist attacks on September 11, 2001. As you can see, the Federal Funds Rate had been moving up during 2000, which was before the large stock market sell-off in 2000. During that entire period, Dr. Greenspan was arguing that he did not need to stimulate the economy even though, in retrospect, the economy was clearly in a recession.

In fact, not until the beginning of 2001 did Dr. Greenspan even start cutting interest rates well into a bad economy. Even though Dr. Greenspan was quite late in trying to stimulate the economy with lower interest rates, you can see the large slide that occurred which was even further accelerated after the terrorist attacks of 2001. You may recall that the country slipped into a recession due to the attacks, but only rested there for a total of three quarters. The country pulled out of the recession quickly due to the Federal Reserve and Dr. Greenspan’s quick actions to cut interest rates and to stimulate the economy with liquidity. However, the problem really began after 2001.

Dr. Greenspan argued continuously during this time period that there was no inflation anywhere in sight, and therefore, he saw no reason to increase interest rates. Not until the middle of 2004 were interest rates edged up, and only at a quarter of a point at each meeting for the following two years until his resignation. You may recall that this was the critical time which led to the financial disaster we have suffered through over the last few years.

As you can see from the chart, the Federal Funds Rate got down to approximately 1% during 2004 and stayed there for almost an entire year. It was during this period that the entire world binged, causing the real estate speculation boom and the leveraging that was the ultimate undoing of Wall Street.

The chart basically shows this process in action. Money could essentially be borrowed at 1% while U.S. government guaranteed bonds were paying 4%, which was a license for high profits. Any successful contractor knows that if you can make money on one house, then you can make a lot of money on 100 houses (not necessarily!). During this time period, some of the Wall Street firms were leveraged at almost 40 times their amount of equity. This is a great recipe for high profits during good times, but it’s a complete and total disaster during bad times.

Frankly, Dr. Greenspan made very critical mistakes. You cannot get a good read on the economy by just looking at things that are in your face. Dr. Greenspan was a notorious reviewer of hard copy printouts and had little computer skills. In fact, he prided himself on the fact that he only reviewed hard copy information, so he could not have been in real time touch with the data.

While he saw no inflation on the horizon – and there ultimately was none – he could never grasp the amount of leverages being built up in the economy due to the tremendously low interest rates that he was promoting. If Dr. Greenspan had been cognizant of what was going on in the real estate market and the number of homes being built and sold due to the low interest rates, he would have clearly moved interest rates up much faster.

The way to slow down the economy is by increasing interest rates and restricting cash flow. The United States would never have become as leveraged as it was from 2004 through 2007 if it had not been for the easy availability of money, high liquidity furnished by the Federal Reserve, and historically low interest rates. As you can see from the chart, during the 20-year period interest rates had never been as low until the most recent financial downturn. Regardless of the accolades given to Dr. Greenspan, the turmoil we’ve suffered was on his watch.

There was a tremendous sell-off in the financial markets in Asia over the last 30 days (10% or so). This sell-off is an example on how investors view things differently. It is anticipated that China will have a GDP growth this year approaching 10%. India may even have a GDP growth of close to 9%. All of Asia is growing tremendously for reasons that are not very clear to Americans. However, Asia is not sitting by and accepting the bubble that could potentially ruin their economy. Why would we sell their stocks when they are doing exactly the right thing?

The financial markets sold off last week when the Chinese government announced that they would restrict liquidity and loans to businesses. They moved up interest rates and increased their reserves last week to slow down their economy and to take some of the air out of the real estate bubble. Those moves by the Chinese government were exactly what they should have done. Does any of this sound familiar as it relates to the U.S. economy? If Dr. Greenspan had taken the same measures in 2004 to slow down the growth of the real estate bubble, perhaps the fall out of the financial crisis in 2008 could have been averted.

As I stated out in my January 21st post, “Why Aren’t Banks Lending?,” it is time for the Federal Reserve to increase interest rates. As you can see, interest rates are now at near historic lows and the economy is recovering slowly but surely. I hope Dr. Ben Bernanke sees this coming and will begin adjusting interest rates upward soon. While this will mean higher interest rates for the entire economy, we need to move prior to a runaway economy and not after it’s already been realized. When interest rates increase, banks will be encouraged to lend again in order to make money for their investors.

We all need to realize that interest rates are at historic lows and have been for some time. This should not persist in any economy, so it warrants an adjustment at the current time. Yes, it will affect real estate, but I really question to what degree. Residential real estate in the United States will recover due to a shortage of supply and demand. My personal opinion is that interest rates will have limited effect on that recovery.

As always, the foregoing are my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Quick Notes for the Day - February 10

Bernanke: Trial Reserve Drains May Launch Exit - Reuters - "The Federal Reserve could begin pulling back its unprecedented stimulus for the U.S. economy by first removing some cash from the financial system and then raising interest rates, Fed Chairman Ben Bernanke said on Wednesday."

Dollar Gains Against Euro - The dollar index which tracks the greenback against a trade-weighted basket of six major currencies rose to 80.225. The euro fell to $1.3691. The dollar gains have been attributed to Bernanke's remarks today about future Fed moves and news on a prospective aid package for Greece.

Trade Deficit Widens - The Commerce Department reported that the US trade deficit widened to $40.2 billion in December. Imports increased $8.4 billion to $189.2 billion led by higher imports of petroleum, autos, and capital goods. Exports rose $4.6 billion to $142.7 billion led by higher exports of capital goods and industrial materials.

Quick Notes for the Day - February 9

Fed's Dudley - 'Raging Crisis' Now Over - Federal Reserve Bank of New York President William Dudley said the US financial system is "in much better shape today than it was a year ago," and the worst of the credit crisis has passed. "Although the raging crisis appears to be over, our work is not close to being complete," he said in comments at an Australian central bank symposium, referring to actions that regulators and policy makers around the globe must do to avoid another financial crisis. Dudley also said that commercial real estate continues to be "under considerable pressure." Loan losses in the sector, on top of consumer and mortgage loans, "seem likely to continue to pressure smaller banks for some time to come."

Rebuilding Greece's Finances - The Economist - "Since the launch of Europe’s single currency, there have been theoretical worries about profligacy. The main fear was that free-spending countries (ie, Italy) might borrow excessively and pass either higher interest costs or the bill for a bail-out on to their sober, frugal brethren (ie, Germany). Eleven years after the euro’s birth, as Greece skids towards disaster, those vague fears have become an urgent question of policy."

Coke's Earnings Rise - Coca-Cola reported that its Q4 net income climbed to $1.54 billion (66 cents per share) versus $995 million (43 cents) a year ago. Revenue also rose to $7.5 billion versus $7.1 billion. Coke said it gained volume and market share globally in non-alcoholic ready-to-drink beverages for the tenth consecutive quarter. Coke continues to expect $500 million in annualized savings by year-end 2011.

McDonald's Same Stores Sales Rise - McDonald's reported that its January global same-store sales rose 2.6%. Comparable sales declined 0.7% in the US, but they rose 4.3% in Europe and 4.3% in Asia, Middle East, and Africa.

Ding-Dong! The Recession is Dead.

From the Desk of Joe Rollins

The evidence that the recession that began in the 3rd quarter of 2007 is over is now overwhelming. While we’re not back to a roaring economy, it does look like we’ve established a base and are moving forward. It is somewhat perplexing to the average investor to see the stock market sell off over the last few days, but I think that should be dismissed as more of a trader’s mentality than logical moves by long-term investors.

In recent days, we’ve seen enormous evidence that the economy has turned the corner. For the 4th quarter of 2009, the GDP grew at a rate of 5.7%. Almost all of the commentators have tried to dismiss this percentage as meaningless since it included a fairly large component of GDP that was created by rebuilding inventories. Prior to the 4th quarter of 2009, inventories had gotten to historic lows, and at some point, manufacturing would have to be increased to replenish these inventories. Much of that occurred in the 4th quarter of 2009.

It’s difficult for me to dismiss any type of increase in manufacturing activity when it comes to putting more people back to work. When inventories are not replenished, the GDP goes down, so why are we dismissing them when inventories are increased? It is presumed that the increase in inventories added roughly three percentage points to the GDP numbers, and therefore, the true growth (taking out the inventories) would’ve only been 2.7%. Those numbers notwithstanding, we still ended 2009 with two strong quarters of GDP growth at 2.2% and 2.7%.

The Federal Reserve is now estimating that the GDP growth for the 1st quarter of 2010 might be as high as 5%. I’m not quite so optimistic, but I’m not too far off. I believe a more likely number is around 4%. If either of those numbers ends up being true when all is said and done, that means that we will have recorded in April, 2010 three consecutive very positive GDP quarters. By any economic definition, the U.S. economy is no longer in recession.

I’m blown away by the negativism I hear these days in the media reports regarding the economy. While it’s true that there continues to be approximately 6 million Americans who are unemployed, there are still well in excess of 100 million Americans who are employed. It seems like we should be more focused on the glass being half full (90%) rather than half empty (10%). As we all know, it will be months, if not years, before the employment base gets to a reasonably full level, but the decline is definitely at a stop.

The most recent labor report indicates that only 20,000 jobs were lost in December, and the unemployment rate moved down to 9.7%. However, if you read the report closely, you will see that virtually all of these jobs were lost in the construction business. If those jobs hadn’t been lost, the month of January would’ve reflected a net positive employment report. I can’t help but believe that a considerable amount of the loss in construction jobs in January had more to do with the miserable weather than a lack of jobs.

The Atlanta Business Chronicle reported on Friday that there is a shortage of new homes in the Atlanta area. It was only a matter of time before we knew this condition would occur. At this time, almost no new homes are being built in America except on a pre-purchase basis. New home permits continue to fall, and builders seemingly see little hope of recovery. While we will see foreclosed houses continue to flood the market for some time, this is the type of market cleansing that is required. We need to finish this foreclosure cycle and new homes will start to be constructed again. As new home construction starts, Americans will be put back to work to further stabilize the economy. Given the long lead time between a house starting to be constructed to when it’s completed, you should expect to be seeing new home construction occurring sometime during the summer of 2010.

The Federal Reserve, up to this point, has been the buyer of virtually all real estate mortgages produced by Freddie and Fannie in recent months. The Federal Reserve has already announced that they will discontinue the purchase of these mortgages in March of 2010. At the current time, it’s still possible to get a 30-year fixed-rate mortgage at less than 5%. I can almost give you 100% assurance that will no longer be the case once the government is not the only buyer of these mortgages. If you planned on refinancing your mortgage at a rate below 5%, you need to do so now.

Rates are increasing and they may increase dramatically. I would expect that as soon as the Federal Reserve is no longer the ultimate buyer of these mortgages, we will immediately see long-term mortgage rates jump up above the 5% range. Given the potential for inflation in the coming months, it would not surprise me at all to see mortgages closer to 7% than 5% by the end of 2010. Again, now is the time to refinance if you have been considering doing so lately.

I’ve written extensively on the subject of the TARP and how it was necessary to stabilize the banks and the American economy. Please refer to my previous post, "This is Not a Bailout" for my prior discussions on the subject. I have also repeatedly commented that the TARP has been extraordinarily beneficial to the banks and to the taxpayers. At the current time, all the major U.S. banks have repaid their TARP money along with interest, and in many cases, an equity kicker in the form of warrants paid back to the government. Interestingly, the Federal Reserve made a cool $6.4 billion on the assets during 2009 that they were required to purchase during the economic downturn. The Federal Reserve has never made a profit anywhere close to this large sum of money in the past. They turned this profit over to the U.S. Treasury to reduce the deficit

One of the major benefits of the TARP was that it specifically set out that when the money was repaid by the banks, the money would be returned to the Treasury to reduce the deficit. You may recall that the $700 billion was never even utilized. Only $350 billion of it was authorized, and the remaining portion was never even spent. At the current time, the outstanding amounts are almost all owed by Chrysler, General Motors and AIG. There are numerous loans from other small banks, but these amounts are relatively insignificant.

It’s troubling that Congress seemingly cannot keep their hands off this money. It’s been proposed and is working its way through the House that they use $100 billion of this TARP money for an additional stimulus bill. More interestingly, President Obama, in his State of the Union Address, has essentially committed to spending $30 billion of the money returned by the banks to fund a small business lending program for regional banks. It seems to me that these people cannot stop spending money at any cost. It is important to point out that the use of this TARP money for these programs is specifically outlawed under the bill as written. Spending this money is like crack to this Congress – they just can’t keep away from it!

I have also openly criticized the stimulus plan, since it didn’t accomplish what it was set out to do. It was supposed to immediately improve the economy. Over a year after its approval, only $180 billion of the over $700 billion has been spent for job creation. Maybe we are finally getting to the point where this stimulus money will be beneficial to us. As we start to work off these projects that are funded by the stimulus this summer, they should improve the economy and make things better by putting construction workers back to work.

All of that being said, it is fairly clear to me that we need neither the second stimulus bill nor do we need the assistance to regional banks for small business lending. Banks are currently flooded with money and have both the capacity and the ability to make these small business loans. Even today I am seeing a much improved borrowing market for small businesses than only six months ago. Once one bank is brave enough to make the first business loan, they all will; competition will require it. The U.S. economy will recover in a much more stable manner if we just get government out of every day business and let small businesses and entrepreneurs grow the economy rather than use the artificial government stimulus.

The average investor is baffled by the market’s sell-off over the last few days. The S&P was down 3.6% for the month of January, 2010. The average of all of the accounts under our management was down 2.6% during the same relative timeframe, about 33% better due to the bond positions we hold. While it is troublesome to incur any month with a loss, it could easily be argued that this was not unexpected. Since the low in March of 2009, the S&P is up close to 60% on a relative basis and a pull back of 5% to 15% should never be unexpected. Even after this week’s losses, we are nowhere close to that reasonable pull-back in the averages.

What confuses people the most is that the market has pulled back in the face of extraordinarily good economic news. Profits for the 4th quarter of 2009 have been nothing short of spectacular. Interest rates are at historic lows and it is relatively impossible to earn anything on cash these days. If you have money invested in a money market account today, you are earning virtually zero. Therefore, we are in a time where stocks should be moving up, not down. Let me summarize the items we know about the economy at the current time…

• GDP growth is accelerating in 2010.
• Earnings for the 4th quarter of 2009 have been extraordinary, and earnings projections for 2010 are being increased significantly.
• Interest rates are historically low and are not expected to move up dramatically anything soon.

Basically every component that you could ever want for higher stock prices is now in place. It is my prediction that any short-term decline in the major market indices will be short-lived and will be a buying opportunity for your future. It makes little sense to trade out of positions for this short downturn only to reinvest a few months later. If there ever was a good time to invest for a more secure financial future, now is that time. Have you contributed to your IRA for 2009 and 2010 yet?

I saw something in Friday’s paper that I couldn’t help but point out. The provincial governor of Newfoundland and Labrador, Canada, Danny Williams, is taking a leave of absence to get heart surgery in the United States. Even though he is an independently wealthy elected official, he fully realizes that if he is going to get world-class medical care, it could not be in Canada. Therefore, he is coming to the United States at his own cost to pay for this care. I cannot imagine that the vast majority of Americans really want the type of inferior care that Canada provides in its single-payer system. If their elected officials do not want it, then I can imagine how the rest of their populace feels. Fortunately, we dodged that bullet since even the President has already admitted that healthcare reform is likely dead in Congress.

Lastly, I’d like to leave you with the following point to ponder. Warren Buffett was asked at a CNBC Town Hall Event at Columbia University in November of 2009 what he thought the best year has been for the market since 1942. He responded:

“The answer is 1954. In 1954, the Dow, counting dividends, was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of 1953. Unemployment peaked in September of 1954. So until November of 1954 you hadn’t seen an uptick in the employment figure. And the employment figure more than doubled during that period. It was the best year there was for the market. So it’s a terrible mistake to look at what’s going on in the economy today and then decide whether to buy or sell stocks based on it.”

As always, the foregoing are my opinions, assumptions and forecasts (I cannot speak for Mr. Buffett). It is perfectly possible that I am wrong.

Quick Notes for the Day - February 5

Unemployment Rate Drops to 9.7%, Labor Market Sees Improvements - The Labor Department reported that the unemployment rate fell to 9.7% in January versus 10% in December. This is the lowest unemployment rate since August. Additionally, nonfarm payrolls fell by 20,000 in January. Under the revisions released today, job losses since the start of the recession in December 2007 totaled 8.4 million.

There were numerous "bright" spots though in the data that were pointing to improvements in the overall labor market. In particular, the services sector added 40,000 jobs after shedding 96,000 positions in December. The data did include a rise in federal government employment partly as a result of the hiring for the 2010 Census.

Also, temporary help employment rose 52,000 last month, while manufacturing payrolls increased 11,000, the first gain since January 2007. Manufacturing employment had dropped 23,000 in December. Temporary employment generally improves prior to full-time positions being added.

Another positive improvement was that the average workweek unexpectedly rose to 33.3 hours which is the highest level in a year from 33.2 hours in December. Total average hourly earnings increased to $18.89 from $18.84 in December. Also, manufacturing overtime rose to 3.5 hours which is the highest since September 2008.

Oil Trades Below $70 - Crude oil briefly fell under $70 a barrel as the dollar hit an 8-month high against the euro, amid continued jitters over the debt woes of several European countries. Crude oil for March delivery was last down $2.58, or 3.7%, at $70.50 a barrel. It briefly plunged more than 4.5% to $69.50 a barrel.

Breaking News – I’m Married!

From the Desk of Joe Rollins

Last weekend was an exciting one in my world. I’ve been seeing Dakota, an incredible woman, for a short while now, and we decided to make it official in a private ceremony in Las Vegas last weekend. I couldn’t be more pleased to tell you this wonderful news.

The wedding was a fantastic event. We made arrangements to be married at the famous “A Little White Wedding Chapel,” and although Elvis Presley couldn’t make it to perform the nuptials (he was apparently “Taking Care of Business” in Heaven above), we did have a wonderful minister officiating the ceremony. The chapel even provided a very “mature” organist to play the Wedding March. She played amazingly well considering one of her hands was extended to accept a gratuity while the other played away on the keyboard.

As you can see from the pictures, Michael Jordan is one of the celebrities who was married at A Little White Chapel. I’ve always wanted to be mentioned in the same sentence with Michael Jordan. Now people can say that Michael Jordan and Joe Rollins both got married in the same chapel. Even though the chapel is kitschy and silly, it truly was a beautiful moment for us. I’m a very lucky man!

After the ceremony, Dakota and I celebrated by having dinner at the Eiffel Tower restaurant in the Paris hotel and then we walked across the Brooklyn Bridge to the New York, New York hotel. We were world jetsetters without ever leaving the Vegas Strip!

Mrs. Dakota Rollins is originally from Akron, Ohio. For several years, she was the Director of Operations for Jose Eber Salons based on Rodeo Drive in Los Angeles. Her area of expertise is in opening high-end salons and spas, and after moving to Atlanta 16 years ago, she ventured into the cosmetic arena, working in upper management for Chanel, Estee Lauder, and Lancome. Dakota is currently the Southeast Sales/Education Manager for Frederick Fekkai Haircare, a Procter & Gamble brand, where her territory is from New Orleans to Charleston and Northern Florida. Her clients include Neiman Marcus, Saks Fifth Avenue, Bloomingdales, Nordstrom and SEPHORA. As you can see from the pictures, she is a beautiful woman who certainly makes me look good.

At some point this spring, when the weather has warmed up and all my roses are in bloom, we will have a gigantic party at my house to celebrate our marriage. I’ll be sure to keep you posted on the date. Your presence will be gift enough to us.

In any event, for those of you who thought I’d be a bachelor for the rest of my life – I being one of those people – I have proved you wrong. Dakota is “The One” for me, and I couldn’t be happier.

Quick Notes for the Day - February 2

December Pending Home Sales Rise - The National Association of Realtors stated the pending home sales index rose 1% in December versus a 16.4% fall in November (when buyers new the home tax credit had been extended). A recent survey of real estate agents by the NAR stated that buyers returned to the market for preowned homes in December after a federal tax credit was reinstated. On a year over year basis, the index is up 10.9%. The gain in the pending sales index portends a similar gain in existing home sales for January, which will be reported in three weeks. In December, existing home sales fell 16.7%.

Geithner Appeals for Bipartisan Attack on Deficits - Reuters - "Treasury Secretary Timothy Geithner appealed to Republicans on Tuesday to join a bipartisan bid to wrestle down soaring deficits that he blamed largely on the former Bush administration."

Quick Notes for the Day - February 1

ISM Rises in January - The Institute for Supply Management (ISM) reported the ISM factory index rose to 58.4% in January versus 54.9% in December. Ecomists had expected a rise, but the increase to 58.4% was much greater than expected 56.0%. Any reading above 50 indicates an expansion.

Consumer Spending Rises in December - The Commerce Department estimated that real consumer spending (adjusted for inflation) rose a seasonally adjusted 0.1% in December following a 0.4% gain in November. This was the slowest rise since September and in conjunction, the savings rate moved to 4.8% which is its highest level since June. Real after-tax incomes rose a seasonally adjusted 0.3% in December, boosted by transfer payments, small-business profits, income from investments, and a small gain in wages.

Obama Sends $3.8 Trillion Budget to Congress - Jobs, spending cuts and war top 2011 Obama budget - Reuters - "President Barack Obama on Monday sent a $3.8 trillion budget request to Congress that would narrow the federal deficit by curbing 120 federal programs but set aside $100 billion to tackle unemployment."