The Guest Blog

Farrell: We Don't Need Another Rahmbo


The Financial Times described Rahm Emanuel's management style as 'capricious', meaning arbitrary, subject to whim or prejudice. That's the FT. I have always thought that he was pugnacious and overly aggressive.

I also thought he has ill-served the President.

The Chief of Staff never should have allowed the terms of the health care debate be determined by Nancy Pelosi or Harry Reid. The President's agenda should be the President's agenda. Word is he is going to leave to run for Mayor of Chicago. I have been expecting his departure, along with his obsession of managing the very short term news cycle, for some time.

The most talked about candidates are very different.

Apparently the leading contenders are Peter Rouse, former Senator Obama's chief of staff; Tom Donlon, deputy head of the National Security Council, and described by the FT as "the most powerful man in the White House whose name isn't widely known"; and Ron Klein, Joe Biden's chief of staff, a position he held for Al Gore as well.

White House Chief of Staff Rahm Emanuel
Nicholal Kamm | AFP | Getty Images

The common characteristic is that all three are to some extent self effacing, approachable, and skilled at managing process.

Very different from Mr. Emanuel.

I think if Rahm when leaves, the tone of the next few years will be telegraphed by this selection. President Clinton was bashed in the first mid-term election and heard the message. Ex personal peccadilloes, six pretty good years followed. It looks baked in the cake that the House goes Republican, I don't think the Senate does, and a different tone is needed from the White House.

There is no chance of a wave of 'retribution' type legislation after the November elections if the House does go Republican. Some ousted Democrats might want to. I think most of us would want to get last licks. But the Senate would block anything that was proposed. This question has come up and my good pal, Greg Valliere of Potomac Research Group, reminded me that a newly elected Senator can be immediately seated. Different rules. So even if it looked close the shuffling would prevent anything from happening.

Politics is so much fun!

I thought the European bank stress test was supposed to put financial worries to rest for at least a brief period. But the test was a joke and, lo and behold, Ireland, Spain, and Portugal are back in the headlines. The Allied Bank in Ireland is being bailed out(again) and it looks like the situation is at least momentarily in hand. But Ireland's deficit will be approaching 30% of GDP and I don't think that is manageable. Credit spreads when compared to German debt have widened again, Yet the market seems sanguine about it all. Maybe those economies are too small to bring down the throne, but I remember it was the Thai baht that started the 1998 crisis, and who knew what a baht was.

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And speaking of Chicago, the Chicago Purchasing Managers index registered a very nice surprise Thursday with a solid 60.4 reading when something like 55 -56 was expected. 50, remember, is the dividing line between expansion and contraction. Production and new orders reported strong gains. The only fly in the ointment was a thing called order backlog which fell below 50 to 49.1. Initial unemployment claims fell a bit when most thought they would rise a bit. But they are still at discouraging levels. Second quarter GDP was revised up .1% and the markets Thursday took on a nice tone. Then they took on a lousy tone. Then I had to leave for client meetings in Connecticut so I'm going to finish this well before the market is finishing for the day. But my guess is that the 1100 to 1130 level on the S&P needs to weather a few storms before an all clear can be sounded.

Vincent Farrell, Jr. is chief investment officer at Soleil Securities Group and a regular contributor to CNBC.