Farrell: Got Nowhere to Run to, Baby

Nowhere to run to, baby, nowhere to hide.

Got nowhere to run to, baby, got nowhere to hide.

It's not stocks I'm running from,

It's the heartache that I know will come.

Cause I know you're no good for me, but you've become a part of me.

Everywhere I go, your price I see,

Every step I take your charts with me, yeah.

Martha and the Vandellas deserve an apology (as do all of you), but the economic news is getting bad enough you have to remember it's not life or death. The bad news continued Wednesday with a surprisingly downbeat durable goods report. Expectations were for a 3% rise and we got a .3% uptick, despite a 75% jump in aircraft orders. Without that the number would have been a -3.8%. And aircraft orders have years to go before they are actually put into production. What had been a very clear "V" shaped recovery in the production-manufacturing side of the economy has noticeably cooled.

New home sales took a big slump as well falling to a record low of 276,000. Some will still blame the expiration of the tax credit as having brought forward sales to qualify for the credit, but I think that is getting a little old to use as an excuse. With high unemployment, tight credit, sluggish wage growth, and the continued desire and need for the consumer to reestablish a balance sheet, I don't think we will see housing turn anytime soon. The existing home sales number the other day and the stack up of homes in inventory for sale effectively kill the prospects for new home sales in my opinion.

The domestic news is discouraging, I don't think recessionary, but discouraging. I heard talk that because there isn't anything to point to here at home, the Democrats will try to put some foreign news on the front burner. Perhaps that is part of the reason for the call on the Israeli's and Palestinians to sit down September 2nd in Washington. I do think the start up of a Iranian reactor had some bearing, though.

The President will be giving a speech on Iraq when he gets back from vacation (I can't imagine how you relax from that job). But in my humble opinion it won't work. Not that I wouldn't try it. When domestic issues hurt, turn overseas. I call it the "Invade the Falkland Islands" syndrome. I have mentioned this before, but when the Argentine generals had severe domestic rumblings in 1982, they invaded the Falkland Islands. Divert attention with a war. The crowds rallied round for a while but Maggie Thatcher had other ideas and that ended it all, including the Argentine generals. History is jammed with similar examples of domestic trouble causing the ruling party to turn outwards.

I think regardless of whether Sarah Palin's candidate, Tea Party favored Joe Miller, beats incumbent Lisa Murkowski (who succeeded her Father in the Senate ) for the nomination (vote too close to call at this writing - which is earlier in the day because I am on Nantucket and it's starting to clear and there are things to do), the fact that it was so close spells trouble for the Democrats in November. More and more pollsters are saying the Republicans are a slam dunk to take the House (39 seats needed) and the Senate is seriously in play (10 seats needed). It's awfully early to make that prediction and it is dangerous to be that far ahead with this much time to go. I'm simply reporting the buzz and offering the opinion I would rather trail at this point than be too far ahead. We'll see.

GDP for the second quarter gets a revision this Friday. Right now it looks perilously close to +1% reading or a little more. A positive surprise in that number or an unexpected and large drop in unemployment claims Thursday morning could all of a sudden change attitudes. But I'm thinking I am too optimistic with my 2% GDP guess for the second half of the year and want to inch in down to 1.5%, and 1.5 to 2% for next year. I believe the consensus for the rest of this year is +2.8% so I am way off that. But as I have been saying, estimates will come down and stocks will struggle. I still hope and pray that the 1040 mark on the S&P holds.