Consumer Confidence Jump May Show that Ignorance is Bliss

Bloomberg reported this morning that "Confidence among U.S. consumers jumped in May by the most in six years, fueling speculation the economy will recover later this year. The Conference Board’s sentiment index surged to 54.9, higher than forecast, according to figures from the New York- based research group today."

To say that this "confidence" is optimistic is to put it light. Consumers do know that over the last several months many things have taken place on the political and economic front. There is this hope among these people that "doing something" has to be a good thing.

What is interesting is that Wall Street seems to be thinking in similar terms to consumers and may be drinking from the same drink, Bloomberg notes "Stocks climbed for the first time in five days on speculation a lifting of the gloom surrounding the worst recession in half a century may spur consumers, who account for 70 percent of the economy, to spend. Still, rising unemployment and falling real estate values underscore that it will take time to establish a sustained rebound. " I think the key word in this paragraph is "speculation."

I believe that this optimism is based only on perceptions and not substance. Once the American people begin to see the policies that are going into effect, they will likely lose a great deal of that confidence.

For example, when the $1.4 trillion dollars that was pumped into the economy on one day earlier this year to help satisfy some of our expenses, we will begin to see a significant jump in prices (which never makes consumers feel confident), a likely decline in economic activity due to the instability that will create, and have a punishing effect on job creation. What will also hurt consumer confidence is the direct attack the Obama Administration is waging on employment, by focusing on raising taxes on job creators.

Obama also wants to double tax businesses with operations both here and in other countries, which will certainly chase capital to other parts of the world. The vast majority of the jobs created in this country are from those who make over $250,000 a year, yet, according the National Taxpayers Union, those who make $153,542 or more already pay more than 60 percent of the total tax bill. Thinking that this is a viable source for more money will only translate for greater economic difficulties.

When the fact that the US has increased its debt annually over the next ten years with the Obama budget and when the additional strain that will bring on the economy finally sinks in, "confidence" is not the word that comes to mind.

The biggest concern that even the most casual observer of our economy and politics should have, is the apparent huge lack of understanding of the consequences of public policy by the American people (including the geniuses on Wall Street), when it comes to the choices being made by the Obama Administration. Optimism is one thing, but the upswing in consumer confidence seen this recently is pure fantasy.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. Eric Bolling of Fox News and Fox Business says that Price’s Blog “is very influential and moves the blogosphere.” Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

The Stanford Financial Group Web Begins to Spread

As someone who lives in Houston and monitors financial articles, I have been particularly interested in the Stanford Financial story. Today, the Fox Business Channel has taken the lead on providing information on this hot topic.

Today I read that "Laura Pendergest-Holt, Stanford Financial Group’s chief investment officer, is likely to be indicted on Tuesday on criminal charges" at FoxBusiness.com. The total scope of the indictment is unknown at the time of this writing, but the article points out that "At minimum, the indictment will be on a charge of obstruction of justice, though her legal team thinks there could be a number of other charges brought against her as well." Knowing the way the government has pursued these type of cases, we can expect more, maybe many more. It is through the leveraging of these charges that the government gets pleas and information on others involved.

Pendergest-Holt is joining the firm’s founder, Chairman and CEO Robert Allen Stanford in the brewing hot water. Stanford, and three of his companies, have been charged by the Securities Exchange Commission (SEC) of orchestrating an $8 billion fraud related to a Certificate of Deposit program. Although he has not yet been charged with any crime at this point, accusations are flying and it seems to be a question of "when" and not "if" he will be facing charges. The indictment of Pendergest-Hold cannot bode well for Stanford.

In fact, the focus on Pendergest-Holt first, could be a part of the government's efforts to make sure that the bigger penalties fall on Stanford. It is not at all unusual for the government to go after the underlings in criminal cases first in order to assure a conviction and to get a heavy sentence for the ring leader.

Pendergest-Holt is the youngest of the Stanford senior executives and, at 35, may seem to be an unlikely central character in this story, but her knowledge of the inner workings of the firm and the relationships that drive it, makes her a very connected personality in this drama and a potentially attractive target to the government indeed.

Historically, an $8 billion fraud case would be considered massive and virtually unheard of; but thanks to the era of Bernie Madoff and his $50 billion Ponzi scheme, the Stanford story has largely been under the radar screen. Fortunately, Fox Business is being serious in its due diligence. Fox's prowess is a story in itself. Increasingly the new cable business network is becoming the leading network and is putting its older competitors (CNBC and Bloomberg) on notice, on the importance of being first.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. Eric Bolling of Fox News and Fox Business says that Price’s Blog “is very influential and moves the blogosphere.” Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Madoff Stays Free

If you listened to the business pundits, you knew Madoff was going to jail. After all, he is accused of stealing over $50 billion from his victims. To make matters worse, FBI agents discovered checks made out in Madoff's apartment to family members in what appears to be an attempt to hide his wealth. To the surprise of pundits, neighbors, victims, and more, Madoff is not going anywhere. He remains in his comfortable New York City apartment.

It seems odd that a person who is in such a terrible mess would find any day to be a "good one." But considering the pressure he is currently under, he probably feels as giddy as a kid at the amusement park. This was a close one. Fox News is reporting Madoff could stay in this apartment for years as they proceed through the legal process, but I wonder how he can afford to do such. His apartment is very expensive, he is under house arrest (making it difficult for him to "get a job"), and he doesn't strike me as the type that would start a home business.

Bloomberg reports that "U.S. Magistrate Judge Ronald Ellis in Manhattan today said Madoff, arrested last month for running an alleged $50 billion Ponzi scheme, may continue to live under house arrest in his Manhattan apartment on the Upper East Side. Ellis imposed new conditions, ordering Madoff to compile an inventory of all items in his home and barring him from transferring property." So although he remains far more free than he would be in jail, he is far from off the hook and, in fact, he has additional requirements on his release.

Everything from a TV remote to every spoon in his kitchen will have to be made accounted for, put on the records, and stay in his possession until the issues surrounding his case are settled. He will be spending months getting this job done. Furthermore, he has every incentive to drag this process on in order to delay the judicial process.

What I find odd about Madoff is that he is so incredibly cool. He acts as though he was slapped with a parking ticket and not the type of crime that could keep him in jail for the rest of his life. Don't get me wrong, I'm not impressed. In fact, I think that his apparent detachment from this reality may be an indication of serious mental health issues. Imagine if he wins his case due to being not guilty, due to insanity. Anything is possible and it would make quite a news day.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Fox Business and News Breaks Bailout Agreement

I just received an email from Jessica Rice of Fox Business who was telling me a story that will most likely be missed by most in the media -- the role of the Fox networks in breaking the federal bailout story, and of Fox Business in particular. She wrote that "this afternoon, FOX Business Network’s senior Washington correspondent Peter Barnes was the only one to obtain the Senate Banking Committee agreement of principle outline that Senator Democrats and some Republicans had agreed upon to propose to the President today at the big economic meeting."

She added that "Barnes... had the first concrete piece of paper we saw on this outline. Additionally, this afternoon at 12:54 PM ET, after a fundamental, initial deal had finally been reached between Democrats and Republicans on Secretary Paulson’s $700 billion bailout plan, FOX Business Network beat all the major cable news networks" with this information.

Finally, Rice indicated that Fox Business "was the first to report news of the deal at 12:54pm ET, followed by Bloomberg, FOX News Channel, CNBC, MSNBC, and CNN."

Some have argued why there was a need for an additional business network and others, because of their ideological agendas, have suggested that Fox wouldn't be taken seriously. News Corp has always been a leader in innovation and journalism. From the creation of a television business news network that pursues the interests of Wall Street to Main Street in Fox Business or in its purchase of the Bible of the financial world, The Wall Street Journal.

The thing I have enjoyed in working with the network is the sense of family I have seen that is so contrary to journalism today. I have had Alexis Glick, David Asman, Jonathan Hoenig, and others from the network on the program and their genuine love for their network is seen in the way they perform their jobs and how they represent the company.

In addition to providing a sense of understanding in its concerns about Main Street it also maintains a commitment to being "fair and balanced" that is similar to its sister station, Fox News. Because we have become so accustomed to a media bias with a driven agenda, we often see Fox as "Conservative." Honestly, it is only in the context of how blatantly liberal much of the rest of the media remains.

I congratulate Fox Business on these firsts as it approaches its very first anniversary. I am expecting even more from the network in the years to come.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

What Will Global Warming Advocates Do with Coldest April Ever?

Bloomberg is reporting that this April in New York is the coldest in recorded history. The agriculture industry is reporting the same thing nationwide. Such news is having a chilling effect of the global warming campaign. Well, at least it should. But the common belief among the global warming crowd is "please don't bore us with facts."

The facts are is that weather has shifted in different directions for years. In the 1970s, when I was a young person in school, the fear was global freezing. Every serious weather scientist has told me that these changes have been cyclical and have serious doubts about global warming. The current extreme weather in April is indicative of this fact.

Why are conservatives and many libertarians suspicious about global warming warnings? Here's just a few reasons:

• Environmentalists need to produce negative reports in order to get more money. The alarmism fuels a very lucrative industry called "scientific research"


• The real issue for environmentalists is control. They are not nearly as interested in stopping pollution as they are in controlling the economy. For example, if the rain forest is so important in preventing climate change, environmentalists should buy large portions of the land, rather than try to force the Latin American governments to do what they demand. The ten largest environmental organizations have more money than the two major political parties in the US combined. They could certainly afford to preserve much of it.


• The best way to improve the environment is technology, not regulation. I visited Poland and found it almost impossible to breath. While there I found out it had the toughest regulations of any country in the world and that they existed for decades. Another example is the Super Fund, which was designed by the EPA to clean up waste from factories and other environmental disasters. The vast majority of that fund goes to lawyers, according to the National Center for Policy Analysts.


• The safety of such reforms are questionable. For example, every time fuel mileage requirements goes up, auto safety goes down because cars are not as safe when they face such difficult fuel mileage requirements (they reduce the weight in order to improve the mileage).

I can go on, but the theme is the same. The science is suspicious and the consequences to dramatic reforms could be huge and devastating on the economy. Freedom and economic prosperity could be victims of the global warming hysteria.

Fox Prepares for the New Business Channel

It has been recently announced by Fox News that is was creating the new Fox Business Channel, which is scheduled for launch later this year. Fox News has already enjoyed the most popular block of business programming with its "Cost of Freedom" shows between 9 to 11 AM on Saturdays (Central Time), now it hopes to provide quality business content 24/7.

To me it makes perfect sense for Fox to move in this arena. Unlike its chief competitor in this genre, CNBC, Fox is making it perfectly clear that it intends to be overtly pro-business. This has been the case on the Fox News channel from the beginning, I would only expect it to continue on in its channel for business.

The signs of the preparation are obvious as the impressive slogans "The Most Powerful Name in News" and "Fair and Balanced" are being seen less, while "Fox Means Business" is seen more frequently. They seem to be getting ready for their big play.

My question, as Fox gets ready for the move, is what businesses are going to get attention? CNBC and Bloomberg are clearly about big business and investing. Not that these are not important, but the vast majority of businesses in this country are actually quite small. I think there is a theory that small businesses simply wing it and the owners are too busy to spend time consuming business news. I disagree and believe that with the rise of content on the web that mirrors TV and the explosion of mobile devices that makes such easily accessible, Fox would do well providing content that appeals specifically to the small business audience. In addition to potentially winning the war on the editorial front, Fox could also win by providing a genre of business information on cable that no one else is doing. Obviously it is imperative for Fox to lead in the big business and investment areas -- after all big business audiences attract big advertising dollars -- but it also makes sense to go where others in TV have demonstrated very little interest, but the huge numbers of potential audience clearly deserves attention.

Which States Are Hot? Which States Are Not? And Most Importantly, Why?

Recently, Bloomberg announced which states are hot -- in terms of population growth and decline -- and which states are not, but there is not a great deal of explanation as to why. The top 10 states for increasing population (between July 2006 and July 2006) are:

Arizona 213,311 3.6%

Nevada 83,228 3.5%

Idaho 37,098 2.6%

Georgia 231,388 2.5%

Texas 579,275 2.5%

Utah 59,729 2.4%

North Carolina 184,046 2.1%

Colorado 90,082 1.9%

Florida 321,697 1.8%

South Carolina 74,316 1.7%

There are several unique characteristics about these population shifts:

* They are often huge. Texas gained over 500,000 in one year! This is absolutely significant. This is not only due to the horrible affects of Katrina that hit in the summer of '05, but because of the huge number of businesses that have relocated to the state.

* All of these states lean Republican or are very Republican. Republican strategists lips salivate when they think of these population shifts to their state. This means more Congressional seats moving to their states and away (as you will see later) from Democrat states. However, they may be surprised by the long term results, as I will explain later.

* They are all in the West or (even more so) the South. This has been a trend that has persisted for decades and continues to be the case. Politically, the implications of this are significant. All of our Presidents since John F. Kennedy have been from Texas, California, Georgia, and Arkansas. The only exception to this trend was Gerald Ford, who was from Michigan. But remember, he was not elected.

What about states that have seen decline?

Connecticut 4,108 0.1%

Mississippi 2,044 0.1%

Ohio 7,321 0.1%

Massachusetts 3,826 0.1%

New York -9,538 0.0%

Michigan -5,190 -0.1%

District of Columbia -519 -0.1%

Rhode Island -5,969 -0.6%

Louisiana -219,563 -4.9%

So what can we observe about the decline of these states?

* They are in predominantly Democratic states. Five of these bottom 10 are strong Blue states. Only two are consistently Red (Louisiana and Mississippi) whose decline can be attributed to Katrina, which hit in the summer of 2005. This, again, makes Republicans excited and Democrats concerned, but the long term implications could prove different.

* They are on the East Coast and Midwest. With the exception of Louisiana and Mississippi, all of these are in the East Coast and Midwest, which have also suffered when it comes to political prestige.

What are the lessons learned?

I believe that the political and economic environment of many of these states have become so hostile to entrepreneurship and economic growth, people are voting with their feet in a quest to find better jobs and opportunities. Michigan has taken a pounding for decades (my family was among the "Michiganders" who flew South to flee the rust belt in the 1970s) and continues to face economic pressures due to unions that international competitors never have to encounter. New York and Connecticut are noted for their constant regulatory pressures they apply on business, forcing many to have little choice but to leave. The list goes on, people are leaving these states on the quest for economic freedom and they feel as though they are finding them in the above top ten states.

I believe Republicans, who appear to be the winners in these shifts, should be cautious in their enthusiasm. I remember when I worked as an aide for US Senator Gordon Humphrey (R-NH). That state had become extremely Republican by the 1980s and was enjoying growth as people fled the disastrous political and economic situation in Massachusetts just to the South. Eventually New Hampshire became Democratic as people moved who knew there were things wrong with their home state -- taxes, crime, etc. -- but didn't realize that the people they were voting for was the source of their problems. So once they moved to a new promise land, they brought the same terrible policies with them.

The future looks bright for Republican states on paper, but this will only be the case if new voters support the very policies that have made these states so attractive in the first place.

A Few Interesting Headlines

The news was full of interesting news stories today and I wanted to reflect on a couple of them.

Robert Rubin Calls for Tax Increases

It didn't take the Democrats long to announce their intent to pursue a tax increase and one of their more credible spoke persons, former Secretary of Treasury Robert Rubin, is leading the charge. He indicated that he believed a tax increase wouldn't do any harm and would reverse harmful "revenue shortfalls." The problem is there are no shortfalls and revenues are at record highs because of tax cuts. So, the question I ask, is why raise taxes if not to raise money? The Democrats believe in "equality" and they believe that the redistribution of wealth is important for "fairness," no matter how counterproductive. Rubin and the Democrats shouldn't propose a tax increase because they wouldn't hurt, but because they would actually help. But they cannot make such an argument with any intellectual honesty.

al Qaeda Praises Democrat Win and Says they Will Destroy the White House

It also didn't take long for the terrorists to announce what many Republicans were quiet saying all along about the terrorists view of the elections.

• al Qaeda has declared, in recent chatter, that they are pleased that the Democrats have won the election (when Bush alluded to such, it was described as "irresponsible").
• They declared their intentions to destroy the White House -- literally.
• They have said that the US will soon surrender because the Democrats are naive and don't understand al Qaeda objectives.

The good news for us who support a war on terror is that this kind of insult on the Democratic party will likely force them to stay in the game longer and move them to come up with more realistic solutions. To cut and run now could eliminate their chances in '08 if it is interpreted as a Democratic failure.

Interesting news stories indeed.