Farrell: Go Get 'Em Mr. President

Barack Obama
Barack Obama

Pulling out all of the stops the President will appear on five news shows this Sunday and then guest star on Monday's Letterman.

Having laid back for so long on the health care debate and then falling somewhat flat in his Wall Street appearance calling for financial reform, there is a lot of ground to make up.

The health debate has been beaten to death but some sort of bill will be produced and victory declared, but it will be a weak sister compared to expectations when it all started.

In his recent speech calling for financial reform the President recommended a consumer finance protection agency and a systemic risk regulator. The objectives may be noble and necessary, but they are coming late. Rahm Emanuel, Chief of Staff to the President, said that a crisis should never be wasted. But as the financial crisis ebbs and the markets heal, the feel for urgent action dissipates. It is going to be very hard to muster the troops for any focused action as political inertia overcomes all. The arguments that we have enough regulation on the books and that it needs to be enforced more rigorously, or that we have an alphabet soup of regulators now and what good will more do will gain adherents, especially if the stock market keeps climbing.

The news flow on Wednesday included a report on Industrial Production. It registered a decent advance of +.8% and even taking out autos, IP was up .4%. This would confirm the strong Empire Manufacturing report the day before and also provide support to Uncle Ben's statement the other day the recession is over.

The Consumer Price Index for August was up an expected .4%. The "core" advanced .1% and the year over year headline loss was -1.5%. That compares to the prior month's decline on a year on year comparison of -2.1%, although the last three months showed an annualized gain of +1.4%. Capacity utilization was also announced for last month and while off the bottom reached in June at 68.1%, it is still more than 10 points below its five year average and well below the longer term average of 81.2.

The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage
The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage

The current account deficit (which is the combined balance of goods, services, and income flows) declined for the fourth quarter in a row to $99 billion.

This is about 2.8% of GDP but a huge improvement from the first half of 2008 when the current account deficit was 6.5% of GDP.

Net inflows into financial assets increased by $16 billion after a $68 billion decline last month. This shows a continued demand for Treasury paper despite the persistent weakness in the dollar.

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We have talked some about the hoped for end to inventory liquidation and the resulting pop that GDP could experience from just an end to the liquidation let alone a move to restock. Steel inventories in North America fell last month by 148,000 tons to 6.6 million tons. That is off 48% from the last peak in August, 2008, and off 7.2 million tons compared to the 10 year average of 13.8 million tons kept in inventory. There are now about 2.2 months of stock on hand and there are usually 2.6 months worth. You could do the same overview for any number of industries and the "coiled spring" appears in many of them.

Home sales in Southern California, one of the hardest hit housing markets in the country, rebounded 11% last month compared to a year ago. Prices were down an average of 17% for the same period. Foreclosures accounted for 39% of the sales and that is a lot, but better than the peak last February when foreclosures were 57% of sales. That relatively good piece of news was echoed by the National Association of Homebuilders Index which registered a 19 compared to 18 in August and 17 in July. This is a measure of builders sentiment and 50 is the break point between feeling good or not. We still have quite a ways to go but the numbers look like they are turning.

We'll get initial unemployment claims first thing Thursday morning and I have no idea what the number might be. It would be nice if we could break out of the 550,000 to 600,000 range we have been stuck in for some time. Housing starts could move above 600,000 but I would prefer a small number since we have so much existing home inventory for sale. After a strong Empire Manufacturing Index and a reasonable Industrial Production report, it's hoped Thursday's Philadelphia Manufacturing Index will be as robust. It was 4.2 in August and -7.5 in July. Last estimates were for a reading around 8.