Follow us on
       

Most Popular Articles

Most Popular Commentaries

Most Popular Articles

Most Popular Commentaries

More by the Same Author

2013-02-25 Fed Will Make Excuses About Inflation by Brian S. Wesbury and Robert Stein of First Trust Advisors

Inflation is tame. For now. The CPI was flat in January and is up only 1.6% from a year ago. The PPI rose a small 0.2% in January and is up just 1.4% from a year ago. And even though energy prices spiked in February, the year ago comparisons are likely to stay tame. The consensus expects the February CPI to rise 0.6% - the largest in 44 months. Nonetheless, it would still show just 1.9% inflation in the past year, which is still below the Federal Reserves target of 2%. This wont last. With the Fed loose; we expect consumer prices to rise toward 3% during 2013.

2013-01-28 Defending Mickelson by Brian S. Wesbury and Robert Stein of First Trust Advisors

Top golfer Phil Mickelson became a social-media whipping boy last week for saying high taxes were forcing him to consider drastic changes, in his life. We suppose these could include moving away from California, or possibly quitting golf. Liberal bloggers had a field day, with some sarcastically saying we should all chip in to help the poor guy out with his burdens. But this criticism masks the facts.

2012-12-03 Temporary Weakness Won't Last by Brian S. Wesbury and Robert Stein of First Trust Advisors

Hurricane Sandy knocked out electricity all over and is now causing some flickering in the economic data. Real consumer spending fell 0.3% in October, the steepest drop since cash-for-clunkers ended in 2009, while real income slipped 0.1%. The ISM manufacturing index fell to 49.5 in November. Considering that Sandy smashed the eastern seaboard and affected roughly 25% of the US population with the brunt hitting New Jersey and New York the economic damage will be spread out. Timing helped limit the impact on October data, given that the storm struck very late in the month.

2012-07-09 Unemployment a Secular Problem by Brian S. Wesbury and Robert Stein of First Trust Advisors

Last Fridays employment report was a Rorschach test for economists. (You know, show an inkblot and find the obsession.) Its not a surprise that the response to the report was pessimistic. We heard all kinds of rhetoric, including a new one - Zombie Economy.

2012-07-02 Freedom and Health by Brian S. Wesbury and Robert Stein of First Trust Advisors

Lets be absolutely clear: the health care system in the United States is excellentjust inefficient. No one lacks care. Stories of people being kicked out in the street have proven to be fabrications. Nonetheless, the system is politically untenable. Its a patchwork of third-party payers both private and public and the population is aging. The result is rapidly rising costs, surging anxiety, and a desire to do something.

2012-06-29 Step Two - Going Backward - Election More Important Than Ever by Brian S. Wesbury and Robert Stein of First Trust Advisors

In one of the least likely outcomes in Supreme Court history, Chief Justice Roberts, who was widely considered a conservative voice on the Court, proved to be the swing vote in one of the largest expansions of US government involvement in the economy ever.

2012-06-25 The Second Step: Supreme Court by Brian S. Wesbury and Robert Stein of First Trust Advisors

Step Two of our Four Steps to Recovery will happen sometime this week. The wait for the Supreme Court to issue its decision on whether President Obamas health care reform law is constitutional is almost over.

2012-06-20 Fed Does the Least by Brian S. Wesbury and Robert Stein of First Trust Advisors

In the past few days, news outlets have breathlessly reported that the Federal Reserve would today launch into another round of quantitative easing, probably including major purchases of mortgage backed securities. Instead, the Fed did the least that was expected, extending Operation Twist until the end of the year, but not altering the size of its balance sheet at all and not as some analysts suggested it might changing when it thinks it will start raising rates (still late 2014).

2012-06-18 Should Germany Leave the Euro? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The weekend victory for the center-right keeps the Greek austerity plan alive and makes it less likely Greece will try to leave the Euro. Leaving the Euro would be an unmitigated disaster for Greece and a problem for the Eurozone, but the odds of this happening are priced into the Euro already. What isnt priced into the Euro is the exit of another country. No, not Spain, Portugal, or Italy. Were talking about the inner-most core of the Euro-zone: Germany.

2012-06-11 Bet Against QE3 by Brian S. Wesbury and Robert Stein of First Trust Advisors

Since the financial crisis in 2008 the Federal Reserve has done extraordinary things lowered interest rates to essentially zero, increased the size of its balance sheet by $2 trillion and announced Operation Twist. With unemployment still relatively high and real GDP growing at a 2% rate in the past year, there are many on (and off) the Fed who think more should be done. If we thought liquidity was a problem, we might agree, but its not.

2012-06-04 Speeding Up the Plow Horse by Brian S. Wesbury and Robert Stein of First Trust Advisors

We call it a Plow Horse Economyit aint gonna win the Belmont, but it aint gonna keel over and die, either. And there is nothing in the latest data or market action that changes our mind; the economy is not in recession and we highly doubt it will fall into one anytime soon.

2012-05-14 Let's Stress Test Governments by Brian S. Wesbury and Robert Stein of First Trust Advisors

Several years ago, Treasury Secretary John Snow was testifying to Congress about the federal budget. He worked for President Bush and, after a long career of opposing deficits, was trying to justify a deficit of about 3% of GDP. Representative Barney Frank was incredulous. He asked Snow how he could now justify deficits. Frank then came up with a theory: He said Snow was opposed to deficits when the president was a Democrat, but didnt care about them when the president was a Republican. Frank was being sarcastic, but he had a good point.

2012-05-07 Dead Cat Bounce for Socialism by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Social Welfare State is dying. Like the Berlin Wall and the Iron Curtain, the cradle-to-grave social welfare experiment must eventually collapse. A system of taxing work and profits, while subsidizing leisure, sloth, and retirement, must eventually fail. The end of the Social Welfare State is painful for many, and it will not end quickly or quietly as the elections of this past weekend prove. Francois Hollande, a Socialist, was elected president of France, while Greece saw a surge in votes for anti-bailout political parties in parliament.

2012-04-30 Here We Go Again by Brian S. Wesbury and Robert Stein of First Trust Advisors

We are not saying the negative data is meaningless. Its not. But some of the reaction is, once again, overdone. Debating the worry-warts has become a full-time job and we cant prove them wrong until the future becomes the present. So, lets look back to last year when we said in a few months we will be looking back at recent reports as just statistical noise. Sounded good then, so lets not mess with success. The more things change, the more they stay the same.

2012-04-23 The Plow Horse Economy by Brian S. Wesbury and Robert Stein of First Trust Advisors

Like a plow horse, the US economy just puts one hoof after the other. It aint gonna win any races, but it aint gonna keel over and die either. After slogging through the mud last year, and slowing down to just 1.2% annualized growth in the first three quarters of 2011, things have improved. In the fourth quarter last year, real GDP grew a solid, work-horse-like, 3%. We expect that continued in the first quarter of 2012. If anything, other indicators suggest real GDP growth might be even stronger. Nonfarm payrolls rose 635,000 in Q1, the largest gain since 2006.

2012-04-09 "On Your Own" Economics by Brian S. Wesbury and Robert Stein of First Trust Advisors

The genius of capitalism is that it harnesses self-interest to get people to cooperate. Most observers, including us, describe capitalism as a system of competition. But on a day-in, day-out basis, this competition is not direct hand-to-hand combat to find a victor; its a race to see who can provide the best products at the best price. Its about service to others, not finding ways to force others to bow to our will. More importantly, we work in cooperative effort with others to accomplish these tasks. Government has a role, but economic growth is always strongest where it governs least.

2012-04-02 Supremes Hear No Limiting Principle by Brian S. Wesbury and Robert Stein of First Trust Advisors

Those who followed last weeks Supreme Court arguments on President Obamas health care law got a primer in Constitutional Law. The scope of the three-day hearings was breathtaking. While legal issues dominated the conversation, economics also came into play. The question: Is the market for health insurance so unique that the federal government can penalize someone for not buying it.

2012-03-26 Heard the One About a "Fiscal Cliff"? by Brian S. Wesbury and Robert Stein of First Trust Advisors

For three years the market has suffered from a severe case of economic hypochondria. Headline after headline proclaimed that this time, for sure, the recession would return. All of these have come and goneand yet the recovery is three years old. Now, some doomsayers are pointing ahead to a fiscal cliff in 2013. Bottom line: expect to hear more about the fiscal cliff for the next several months. Then, when it doesnt cause a recession, youll never hear about it again.

2012-03-19 The Fed's March Madness by Brian S. Wesbury and Robert Stein of First Trust Advisors

The best currency to be in over the next year or so is the US dollar. Yes, the Fed is loose, but everyone already knows that. Its priced in. The issue today is whether the Fed tightens policy faster than investors previously thought. And that looks increasingly likely. Momentum is now shifting toward the US, with some global investors looking at equity returns sweetened by currency gains. Add higher US bond yields and emerging markets should be even more willing to buy US assets. A self-sustaining, virtuous cycle is emerging, the kind that often forms in long-term bull markets.

2012-03-12 The Bears' Five Stages of Grief by Brian S. Wesbury and Robert Stein of First Trust Advisors

The economic bears have had it rough the past few years. They keep bashing the economy, but it keeps recovering. Watching them fight through the five stages of grief is educational. First there was denial, then anger (some are still in this stage), now its bargaining.

2012-03-05 Viva La France? by Brian S. Wesbury and Robert Stein of First Trust Advisors

Its not happening just in America. France will also elect a President this year. The two top candidates are current president Nicolas Sarkozy and Francois Hollande. Last week, Hollande announced he wants to raise Frances top income tax rate to 75% from the current peak of 41%. He said patriotism and justice should convince French citizens to support his candidacy and his tax hike. We are not friends of higher tax rates. Nonetheless, we see Hollandes proposal as a win-win for global supporters of small government and free market capitalism. Ether through repudiation or bad example.

2012-02-27 Don't Bet on a Correction by Brian S. Wesbury and Robert Stein of First Trust Advisors

There may be a trader who can capture all of this, but in the end, the history of America is clear. Bears make money every once in a while, but its the long-term bulls, who believe in the steady progress of technology and wealth creation, that make money most consistently. Dont bet on a correction.

2012-02-21 Stocks Rising, But Still Cheap by Brian S. Wesbury and Robert Stein of First Trust Advisors

The rise in equities so far this year is not just a sugar high. The Fed has done nothing new, while Keynesian pump-priming is on the wane. Federal spending peaked at 25.3% of GDP back in 2009. Its still way too high, but has fallen to 23.7%. Meanwhile, despite shenanigans like the temporary payroll tax cut, federal revenue has risen from 15.1% of GDP to 15.4% in the past year. Spending is down and taxes are up. Fiscal policy is contractionary. Yes, the Fed is loose and is holding interest rates down. But even if we assume normal interest rates and stable profits , stocks are very cheap.

2012-02-13 Be Confident in the Recovery by Brian S. Wesbury and Robert Stein of First Trust Advisors

Two prominent measures of consumer confidence dropped unexpectedly in recent weeks. This provided plenty of fodder to those who still think the US economy is teetering on the brink of a long awaited double-dip. But when it comes to the consumer confidence data, the only thing were confident about is that confidence doesnt matter. Not one bit.

2012-02-07 Despite Naysayers, The Recovery Is Real by Brian S. Wesbury and Robert Stein of Euro Pacific Capital

The US economy is far from perfect. Economic growth has been positive, but mediocre over the past year and a half. The unemployment rate, at 8.3%, is still elevated, higher than it ever was from 1984 through 2008. When it comes to bashing government policies, from either party, we do not take a back seat to anyone. What we cant do, because it makes no sense, is allow our dislike of current government policy to influence our view of the actual economic data. There really is a recovery underway. If it quacks like a duckit must be a duck.

2012-01-31 Fed Forecasts Depend on Data by Brian S. Wesbury and Robert Stein of First Trust Advisors

Last summer, the Fed promised to hold rates down through mid-2013. Headlines from last week suggest that the Fed now thinks 2014. But, how committed is the Fed to this strategy? What will it take to change course? Some analysts argue that this is an ironclad commitment and there will be no course changes. We believe this is a misreading of the Feds intentions. There are 19 potential economic views that are important at the Federal Reserve 7 are on the Board of Governors and 12 are Presidents of regional banks. There is more disagreement at the Fed than meets the eye.

2012-01-26 Fed Language Goes Dovish, But Policy Unchanged by Brian S. Wesbury and Robert Stein of First Trust Advisors

Investors should take note that at his press conference today Chairman Bernanke made it clear that if the Feds economic forecast proves either too optimistic or too pessimistic, that it would change its forecast and alter its policy expectations for the funds rate as well. The importance of this statement cannot be underestimated. We anticipate faster economic growth, lower unemployment, and higher inflation than the Fed projects over the next few years. As result, we believe the Fed will start raising interest rates well before late 2014.

2012-01-23 Rally Not Built on Complacency by Brian S. Wesbury and Robert Stein of First Trust Advisors

No matter how we make our argument, and no matter how consistently the economy grows, the doubt and fear and disbelief just wont go away. We noticed this recently, when conventional wisdom started to say that investors were being complacent these days. In other words, when the equity markets go down, investors are living in reality and accepting that the economy and financial markets just arent in great shape. But when the equity markets go up, they are being schizophrenic, overly optimistic, and now some are saying complacent.

2012-01-17 Q4 GDP - No Recession In Sight by Brian S. Wesbury and Robert Stein of First Trust Advisors

Three months ago, we added up the major components of real GDP for the third quarter and predicted a solid annualized growth rate of 3.5%. Instead, the advance report came in at 2.5% and was later revised down to a tepid 1.8%. We were too high on inventories as well as government purchases, and that made our overall forecast too high. However, our estimates of consumer spending, business investment, home building, and the trade balance were all pretty darn close to the mark. Final sales (GDP excluding inventories) grew at a 3.2% annualized rate.

2012-01-09 Nonsense Arguments About Jobs by Brian S. Wesbury and Robert Stein of First Trust Advisors

The better the employment reports get, the more ridiculous the assertions from those who deny the improvement. Fridays report, was the best since the recovery started. Private payrolls rose 212,000, while the number of hours per worker and earnings per hour went up as well. As a result, total workers earnings are more than keeping pace with inflation. Even the unemployment rate went down again and is now at 8.5%, almost a full point below where it was a year ago. Our observation is that most of these arguments against optimism are driven by politics and border on the ridiculous.

2012-01-03 We Were Too Optimistic by Brian S. Wesbury and Robert Stein of First Trust Advisors

When government tilts toward redistribution, the growth rate of potential GDP slows down.This hurts job creation.We should have more fully accounted for this in our forecast last year. Some will ask: Then how can you forecast 3% growth in 2012?The answer is relatively simple.1) The Fed is even more accommodative today than it was last year.2) Government spending will be basically flat in 2012 for the third consecutive year.3) Technology continues to advance. These developments mean the tailwinds are stronger at the same time the headwinds are diminishing.

2011-12-28 Was the 2011 Economy a Miracle? by Brian S. Wesbury and Robert Stein of First Trust Advisors

Government spending may be falling as a share of GDP, but it is still very high. This limits job creation and holds back real GDP growth from its potential. Excessive regulation does the same.And while an easy Fed boosts growth, it also creates inflation, which will become more of a problem in the years ahead. Netting all this out, the scale is still tilted toward growth.New US technologies and the productivity that they create are so powerful that they are overwhelming the drag from bad government policies.Compared to forecasts of recession, its a miracle.Look for another one in 2012.

2011-12-19 Greedy Innkeeper or Generous Capitalist? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Bible story of the virgin birth is at the center of much of the holiday cheer at this time of the year. The book of Luke tells us Mary and Joseph traveled to Bethlehem because Caesar Augustus decreed a census should be taken. Mary gave birth after arriving in Bethlehem and placed baby Jesus in a manger because there was no room for them in the inn. Over the centuries, people have come to believe that because Jesus was born in a stable, and not in a hotel room, Mary and Joseph must have been mistreated by a greedy innkeeper.

2011-12-12 Obama's 8%: Sounds Right by Brian S. Wesbury and Robert Stein of First Trust Advisors

Given his advisers track record, you would think President Obama would be very cautious when making predictions about the unemployment rate. As we all now know, even though the stimulus bill was fully implemented, the jobless rate kept heading north, peaking at 10.1% in October 2009 and never once falling even remotely close to 8%. Nevertheless, President Obama is doing it again and predicting unemployment will be 8% around Election Day. This time, we think hes right.

2011-12-05 Economy Improving, Stocks Cheap by Brian S. Wesbury and Robert Stein of First Trust Advisors

Remember the big fat zero jobs reports back in August? The US was supposedly teetering on the brink of another recession, or maybe depression. Democrats wanted more government spending stimulus. Republicans said President Obama was the equivalent of a zero. With all this negative sentiment, the Dow fell 250 points that day. But something happened on the way to the bank. One month later, that big fat zero was revised up to a +57,000, the next month it was revised up again to +104,000. All that recession talk in early September was highly misleading.

2011-11-28 Occupy The Shopping Mall by Brian S. Wesbury and Robert Stein of First Trust Advisors

No one knows exactly what the near future holds for Europe. We still think the odds favor tough austerity programs that reduce the size of government a long-term plus. But more sovereign defaults are entirely possible and problems with European banks have yet to be thoroughly addressed. What we do know is that US consumers are ignoring the experts, appear more confident about their future and want to spend their hard-earned income. Instead of panic, weve seen a lot of joy,on both sides of the cash register.

2011-11-22 What's So Special About America by Brian S. Wesbury and Robert Stein of First Trust Advisors

Thanksgiving is about the bounty of this great land, and the plenty that ingenious and hard-working people have been able to create. Other countries have been around longer, but none has been as generous, or had a more positive impact on the world, than America. So, pardon us when we express shock about some recent polling by Pew Research that showed only 38% of Americans believe the United States stands above all other countries in the world. We are stunned by the difference among age groups. Only 27% of people aged 18-29 agreed, while 50% of those over 65 agreed.

2011-11-14 Don't Fret the Foreign Stuff by Brian S. Wesbury and Robert Stein of First Trust Advisors

Guess what? Japans real GDP grew at a 6% annual rate in the third quarter, a sharp snapback from the downturn following that awful earthquake and tsunami. Much of the rebound was auto-related, as manufacturers overcame problems with electricity and the supply-chain. While the swings in Japan are more dramatic, US economic data shows the same pattern. Real GDP accelerated in the US to a 2.5% annual growth rate in Q3. If we exclude the large drag from an inventory slowdown, real final sales grew 3.6%.

2011-11-07 Time to Raise the "Natural Rate" by Brian S. Wesbury and Robert Stein of First Trust Advisors

We think the jobless rate is headed down in the next few years and think it will decline a bit faster than the Fed believes. But the only way to get it down to 5.6% is to dramatically reduce the size of government or to push so much money into the economy that it artificially pushes unemployment below the natural rate. But that second method can only work for a short period of time. Eventually, a monetary policy loose enough to lower the unemployment rate that much would create a 1970s-style inflation. That would make todays inflation problem look minor in comparison.

2011-10-31 What's Going Right? by Brian S. Wesbury and Robert Stein of First Trust Advisors

Everyone knows housing is still weak. And, everyone knows jobs are growing, but not fast enough to seriously lower the unemployment rate (9.1%). Everyone also knows real GDP has expanded for nine consecutive quarters, at an average annual rate of 2.5%. No one is satisfied with this; but it is a recovery, not a recession. So, how can real GDP grow when housing and employment are so weak? Well, it turns out that the strongest part of the economy has been business investment. Equipment and software investment has grown five times faster than GDP-12.9% over the past nine quarters.

2011-10-24 The Consumer Is Not Dead by Brian S. Wesbury and Robert Stein of First Trust Advisors

Not a day goes by where we dont hear a talking head say something like, the consumer is weak. A headline from the WSJ was more specific. It said, Spenders Become Savers, Hampering Growth. The WSJ based its theory on some interesting anecdotes, but the authors missed some very basic facts. Organic changes in consumer behavior are not responsible for any lack of rapid economic growth. Instead, the economy would be growing much faster if we had a better set of policies coming from DC the past few years, focusing on restraining the size of government rather than expanding it.

2011-10-17 Solid 3.5% Growth in Q3 by Brian S. Wesbury and Robert Stein of First Trust Advisors

When real GDP growth barely budged in Q1 (0.4%) and sputtered in Q2 (1.3%), conventional wisdom became convinced that a recession was on its way. Many argued that unless the US stimulated the economy with more spending, temporary Keynesian tax cuts, or another round of quantitative easing, it was in for another recession. With the Fed accommodative, and productivity strong, we never believed the pessimistic narrative. Conventional wisdom has been wrong. With most monthly data in, it looks like real GDP grew at a 3.5% annualized growth rate in the third quarter of 2011.

2011-10-11 The Economic Twilight Zone by Brian S. Wesbury and Robert Stein of First Trust Advisors

The pessimists say, we will scare ourselves into recession. And they ask; what about Europe? We dont ignore either of these possibilities. It might be possible to scare ourselves into recession. But true panics are very rare. And Europe could theoretically take us out, but mark-to-market accounting no longer can cause a contagion like it did back in 2008. Some investors say they wont invest until this episode of the Twilight Zone ends. But, the market is cheap and the economy is growing. Accumulating assets, with values so battered down is successful long-term investing.

2011-10-03 Forecasts, Confidence and Facts by Brian S. Wesbury and Robert Stein of First Trust Advisors

When fearing recession, investors can rely on three different sets of information forecasts, confidence and facts. These days, forecasts and confidence are both very negative. Recession fears have been on the rise. But, the facts dont back up all these fears. The economy is not contracting. Fear overlooks these facts and fear has driven stock prices to undervalued levels. When the facts win and thats what we expect equity markets will get over the fear and move significantly higher.

2011-09-26 A Whiff of Volcker by Brian S. Wesbury and Robert Stein of First Trust Advisors

Equities will soon shrug off last weeks news. The economy is not in a recession and while European problems are a real issue, US banks have plenty of capital to sustain the system in case of further crisis. Despite all the dour language and the volatile market reaction, we like the downward move in gold. What it says is that the Fed will no longer follow a path of policy that seemed to print money with no regard for any historical lessons. As Paul Volcker showed us, tighter money can be in a countys best interest. Gold investors should look out below. But, for equities, this is a good sign.

2011-09-19 No Recession, No Panic by Brian S. Wesbury and Robert Stein of First Trust Advisors

Online markets (at Intrade) put the odds of a recession in the next year at 40%. The consensus of economists (in a Wall Street Journal poll) has the odds of recession at one in three. These elevated fears are hitting consumer confidence, creating political pressures and causing volatility in financial markets. We think the actual odds of a recession are much lower than the consensus thinks. We place them at 20%, barely above the 15% that history tells us exists in any year.

2011-09-12 The Long Run is Now by Brian S. Wesbury and Robert Stein of First Trust Advisors

President Obama delivered his long-awaited economic address Thursday night and Fridays reaction in equities was a major Bronx cheer. Obviously the news from Greece, with that country teetering on the edge of a default, was also a big negative. But we believe the lions share of the problem is that, once again, a president is proposing policies that are both primarily oriented toward the short-run and unlikely to succeed at lifting the pace of economic growth.

2011-09-06 Want Jobs? Have Faith by Brian S. Wesbury and Robert Stein of First Trust Advisors

The private sector created 17,000 new payroll jobs in August and the government lost 17,000. The net was zero. Nadazipzilchnothing. Some would say that this is a perfect metaphor for the economya big fat zero. The stock market is getting drilled, politicians are frothing at the mouth, the Fed is having longer meetings, and investors are scared. So, whats going on? First, let us say that we have been overly optimistic. We expected better growth in jobs and the economy. We have been wrong, but we still dont expect another recession.

2011-08-29 Stocks Undervalued by 65% by Brian S. Wesbury and Robert Stein of First Trust Advisors

Market turmoil and a cycle of shrill headlines and worrisome breaking news convinced many to evacuate the equity markets. That was a mistake. The odds of recession are low, but the stock market seems to have priced one in, anyway. We use a capitalized profits model to value stocks, dividing corporate profits by the 10-year Treasury yield. We compare the current level of this index to that from each quarter for the past 60 years to estimate an average fair-value. Not only are 10-year yields low (2.2%), but corporate profits are growing strongly.

2011-08-23 Europe, Not a Repeat of 2008 by Brian S. Wesbury and Robert Stein of First Trust Advisors

Some are drawing parallels between todays European debt problems and the sub-prime problems of 2008. We dont think European debt problems will cause a recession in the US. However, there are clearly similarities between the two events. Those similarities result from the role of government. Both the 2008 panic and todays European debt crisis result from policy mistakes. In the US politicians of all stripes decided that using subsidies and regulations to boost homeownership was a legitimate goal. All of these policies came together in a perfect storm of over-investment in the early 2000s.

2011-08-15 Fed Looking in Wrong Tool Shed by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Fed made history again last week when it specifically committed to near-zero short-term interest rates through at least mid-2013. This commitment was a first for the Fed, and while it can always renege, the bar for doing so is now very high. The Fed also said it had discussed a range of policy tools to strengthen the economy. If theyre the ones the Fed has been leaking to the media, count us as unimpressed. One option would be to launch QE3, modeled after round two that ended in June. Trouble is, other than boosting commodity prices, QE2 had little visible affect on the real economy.

2011-08-09 Focus on the Economy by Brian S. Wesbury and Robert Stein of First Trust Advisors

Investors remain on edge and stocks are down about 2% around the world today. Combine last weeks sell-off, the debt ceiling debate, financial instability in Europe, the recent soft patch, and a downgrade by S&P and this fear is understandable. Short-sellers and pessimists are in their glory. And for the umpteenth time, Nouriel Roubini said that a double-dip recession is on its way. We understand the uncertainty. What we dont get is why it's so hard for economists to look at economic data. There was a soft patch but, it is not getting worse. In fact, data has been improving.

2011-08-09 US Debt: Moody?s AAA / S&P AA+ by Brian S. Wesbury and Robert Stein of First Trust Advisors

If this move by S&P helps the US get more serious about cutting spending, then it will have been a very positive development. If it influences the political environment by pushing the US to a more conservative set of fiscal values it will be even more positive than that. There is a titanic battle of economic and political philosophy taking place in the US today. S&P wants to be a player in this battle, but in the end it will have a relatively minor role.

2011-08-05 Dow Down 500, But Fundamentals Still Strong by Brian S. Wesbury and Robert Stein of First Trust Advisors

Major stock market indices are down 4-5% today as investors move into panic mode. There is no single piece of news driving the sell-off; rather the market seems to be gathering downward momentum on its own. Selling is creating more selling. Like 1987, the sell-off does not appear to be driven by fundamental factors. In fact, the fundamentals suggest the market is undervalued and getting more so as it drops. Many investors assume (or wonder) if the sell-off is indicating deep economic problems. However, there is no evidence that this is true.

2011-07-25 Hysteria and the Debt Debate by Brian S. Wesbury and Robert Stein of First Trust Advisors

Contrary to popular belief, the debt ceiling has turned into the investors best friend. Professional politicians dont like it, because they dont want to limit their degrees of freedom. But the limit on debt, forces a debate about the size of government before a country gets to the point of no return. In other words, the debt ceiling is a good thing. Moodys has said that the US should get rid of the debt ceiling altogether, but this is backward. Greece never had this debate and spent its way into oblivion. The debt ceiling could very well keep the US from that fate.

2011-07-18 Looking Past a Weak Q2 by Brian S. Wesbury and Robert Stein of First Trust Advisors

While some economists are reducing their projections for second half growth, we remain confident in a relatively strong rebound from a weak first half. We forecast that real GDP will grow at a 4% to 4.5% average annual rate in Q3 and Q4 2011. Productivity is strong, monetary policy is loose and fiscal policy is getting no worse. Jobless claims are falling again and auto production is set to surge. In addition, with full expensing allowed for tax purposes this year, record levels of both profits and cash will fuel growth in business investment.

2011-07-11 Jobs Versus Government by Brian S. Wesbury and Robert Stein of First Trust Advisors

After the very strong ADP employment report on Thursday, many economists marked-up their forecasts for Friday’s official payroll report. We moved ours up 5,000, and went into the report at 140,000 net new private sector jobs. Ouch…the official report showed just 57,000 new private sector jobs and equities immediately headed south. For bulls, this data was a huge disappointment. But employment is a lagging indicator. Other data have already been into, and out of, a “soft patch.” Moreover, as a forecasting tool, employment data has not always been perfect.

2011-07-05 Hasta La Vista, Soft Patch by Brian S. Wesbury and Robert Stein of First Trust Advisors

The big report this week will be on employment for June, to be released early Friday morning. Private sector payrolls only expanded 83,000 in May. But, given the drop in unemployment claims, we think the job market re-accelerated in June. It’s no surprise to us that the Dow has now fully recovered back to where it was when the soft patch started to materialize. Despite the end of QE2, the economy is going to surprise the consensus to the upside. Monetary policy is loose, tax rates are relatively low, and the technological revolution continues.

2011-06-20 Inflation Now and Later by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Fed believes with all its heart that inflation only occurs in economies that are producing at or above their potential. As a result, with unemployment above “normal” and growth below “trend,” the Fed sees little threat of inflation. As far as the Fed is concerned, any increase in commodity prices is temporary and any increase in the consumer prices due to commodities (like energy) is transitory. We wish we could be as sanguine about inflation as the Fed, but we heard all the same arguments back in the 1970s. The Fed was wrong then, and we think it is making the same mistake(s) today.

2011-06-13 Soft Patch Already Fading by Brian S. Wesbury and Robert Stein of First Trust Advisors

The soft patch is nothing more than a temporary and superficial blow to the economy. If it was anything more than Japan’s disasters and the tornado season, the good numbers we’ve been seeing lately – on lending, tax revenue, trade, hours-worked, ex-auto sales, and commercial building – wouldn’t be happening.

2011-06-07 Is It Really a Soft Patch? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The idea that the soft patch could be due to one-off events, like the tsunami in Japan is bothering quite a few people. A good question came from one of our readers and we thought it was important to post the answer. We remain convinced that the economy will accelerate in the second half of this year. The question: "Id like to believe you when you write "Never mind that much of the slowdown is so obviously tied to temporary Japan-related disruptions in manufacturing and tornado-related dips in home building." But where's the evidence of negatively affecting the U.S. economy and/or GDP?"

2011-06-06 Economic Rapture? by Brian S. Wesbury and Robert Stein of First Trust Advisors

Harold Camping predicted the "end of the world" on May 21st. Let’s imagine that the world really did end. Let’s imagine that we’re now living in an artificial world. Ben Bernanke is making the sun rise with monetary policy. Federal spending is generating oxygen and enormous increases in federal debt are making water. Everything seems relatively normal, but it’s all ultimately just a mirage, created by artificial means, and it can't last forever. This is an extreme example, but that's what it seems many believe about the economy today.

2011-05-31 The by Brian S. Wesbury and Robert Stein of First Trust Advisors

Not since the early 1980s has such widespread pessimism about the US economy been so prevalent. This pessimism – fueled by political demagoguery and an overbuilt short-selling industry – denies and ridicules any upward move in growth or stock prices. Basically, if something moves up, then the pessimists argue that it cannot possibly be “real.” Even smart analysts, like Robert Arnott, have fallen into the trap of looking at the world in a negative way. Mr. Arnott argues that much of our recent GDP growth is “unreal,” because it has been driven by government debt.

2011-05-23 Don't Sweat by Brian S. Wesbury and Robert Stein of First Trust Advisors

Some recent reports on the economy have been tepid and that’s likely to continue for at least a few more weeks. For example, back in early March the four-week average for initial unemployment claims hit a recovery low of 389,000; now they’re 439,000. Manufacturing production dropped the most in April for any month since the start of the recovery. Meanwhile, for May, we witnessed declines for both the Empire State index and Philly Fed index, which are measures of manufacturing activity in their regions. Both were still in positive territory but not as rapid as earlier this year.

2011-05-16 Public Policy Looking Better by Brian S. Wesbury and Robert Stein of First Trust Advisors

We think there are five (5) reasons to be bullish about the US economy. First, monetary policy is loose and likely to remain so. Second, the financial panic is over, thanks to the end of mark-to-market accounting rules. Third, technological advances continue to boost productivity growth. Fourth, our free market economy is incredibly resilient, more so than the pessimists believe. And fifth, the policy environment is improving. Despite what Bernanke might say (that quantitative easing lifted stock prices), we think the return in the S&P 500 has to do with a positive shift in government policy.

2011-05-10 Bulls Versus Bears, Again by Brian S. Wesbury and Robert Stein of First Trust Advisors

The big news last week was the execution of Osama bin Laden. It was both the end and the beginning of an era. It provides closure on at least some part of 9/11. However, terrorism is still with us, just with a different face. The same is true for the economy and markets. Last week real GDP was released for the first quarter of 2011 and was up for the seventh consecutive quarter, hitting a new all-time high. Even though unemployment is elevated, US economic output has recovered from the Panic of 2008. Nonetheless, investors remain nervous, even bearish, about the economy and financial markets.

2011-05-02 Bernanke and the Teflon Fed by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Fed acts like an academic institution, but it operates in a political environment and it is really good at navigating the landscape. Alan Greenspan (Chairman 1987-2006) was one of the most successful politicians ever to set foot in Washington DC. He never won an election, but was called the “maestro.” His critics could not scratch his Teflon coating. Lately, he has come under attack for the housing bubble. And even though it is clear that 1% interest rates back in 2004 had a huge role in causing over-investment in housing, the Fed and Greenspan have once again come through unscathed.

2011-04-25 The Greatest Speculators by Brian S. Wesbury and Robert Stein of First Trust Advisors

It’s as predictable as birds flying south in the winter. When gas prices rise, politicians (most recently, President Obama), feign outrage and then threaten to “investigate” the “speculators.” The irony is that these politicians are the real speculators – making a bet that they can use government to create wealth. No government in the history of the world has made it work, but they keep on trying – with other people’s money. In one sense, this is all about economic and financial literacy. Of course there are investors who speculate on energy prices. Thank goodness.

2011-04-18 GDP at 2%: Seventh Consecutive Quarter of Growth by Brian S. Wesbury and Robert Stein of First Trust Advisors

Anyone forecasting first quarter real GDP growth with a high degree of confidence needs to have their head examined. On the positive side industrial production grew at a 6.1% annual rate in the first quarter. Manufacturing output was up at a stellar 9.2% rate – the most rapid increase since 1997. Unemployment claims fell sharply, another sign the economy was growing at a robust rate. Meanwhile, total hours worked in the private sector climbed at a 2% annual rate. Add 2% increases in productivity to that increase in work effort and a 4% growth rate in private sector output is easily reachable.

2011-04-04 The Taylor Rule Is Wrong by Brian S. Wesbury and Robert Stein of First Trust Advisors

The working hypothesis of just about every forecaster or Fed-watcher in the world has been that the Fed would not tighten at all until 2012. That meant no interest rate hikes this year. And to avoid putting on any brakes at all, the Fed would even think about QE-III. But this view is now coming under fire, not just from the private sector, but from inside the Fed itself. Stronger gains in employment, along with some relatively hot inflation reports have pushed many regional Fed presidents to make hawkish statements.

2011-03-28 The Shorts Get Whipsawed by the VIX by Brian S. Wesbury and Robert Stein of First Trust Advisors

Getting to fair value would require the US equity markets to rise 31% from Friday’s close. That assumes no further gain in profits after Q1. These results are pretty robust. If we stress test for rising rates, the 10-year Treasury yield would need to rise to 6.5%, with no intervening increase in profits for the model to show equities are at fair value already. We stand by the forecast we made at the start of the year that the Dow should hit 14,500 by year-end 2011, while the S&P 500 strikes 1575. In other words, short the shorts – equities are still cheap. And watch out for the VIX, too.

2011-03-21 Japan, by Brian S. Wesbury and Robert Stein of First Trust Advisors

While the news coverage of problems at Japan’s nuclear power plants was sensationalized and misleading, the death toll from the Japanese earthquake and tsunami is horrendous. Moreover, the economic damage to the affected areas is substantial and will require a large re-direction of resources. Japan’s economy will not gain from this shift in resources because the cost of repair only replaces what was lost. That said, after the initial economic blow is fully absorbed, Japan’s economy may accelerate for a time because people change their labor-leisure trade-off.

2011-03-16 Fed Pays Lip Service to Better Economy and Higher Inflation by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Federal Reserve made several changes to the language of its statement today, acknowledging an improving economy andhigher overall inflation. However the Fed also made it clear it does not think any of this warrants a change in the stance of monetary policy. The Fed was more bullish on the economy, saying it was on a “firmer footing” and that the labor market was “improving gradually.” Previously the Fed had said economic growth was not enough to generate “improvement” in the market. The Fed recognized faster growth in household spending and finally omitted language concerning restraints

2011-03-14 It's A Natural Disaster, Not A Black Swan by Brian S. Wesbury and Robert Stein of First Trust Advisors

At times of natural disaster and personal tragedy, it can be difficult to focus on economics. However, there is an economic component to the Japanese earthquake as there is with any disaster. In Haiti, for example, decades of awful leadership have created deep-seated poverty and corruption, which amplified the size and scope of its recent earthquake. In Kobe (1995), Chile (2010), San Francisco (1989), Katrina (2005), mostly free markets, accumulated wealth and a disdain for corruption helped overcome those disasters relatively quickly. In Japan today, the same will be true.

2011-03-07 Who Gets Credit For the Recovery? by Brian S. Wesbury and Robert Stein of First Trust Advisors

What’s the opposite of a double dip? Whatever it is, that’s where we are. Remember commercial real estate, re-setting ARMs, foreclosures, muni-bond defaults, Greece, Ireland, Egypt, Tunisia, Libya, high unemployment, more savings, or just plain old government debt? At least one of these, or maybe all of them, was going to make recovery impossible, or end any recovery prematurely. But none of it happened. The double dip turned out to be a figment.

2011-02-28 Stay Positive - It's The Right Thing To Do by Brian S. Wesbury and Robert Stein of First Trust Advisors

The gloom is hard to miss: Libya, oil prices, budget battles, a pull-back in stock prices, or downward revisions to GDP…and about how these will cause weaker growth (or even a recession) ahead. But the world is always full of potential events that could cause a panic, recession, even a depression. The world is never perfectly “safe.” If nuclear war broke out or if Saudi Arabia got into a nasty civil war, the risks to the US economic environment and the stock market would rise immeasurably.

2011-02-22 Debt Limit Brinksmanship by Brian S. Wesbury and Robert Stein of First Trust Advisors

Don’t get us wrong. The budget is a total mess. The equivalent of a financial root canal is necessary. We fully support newly elected lawmakers who want to maximize the political leverage created by the debt limit issue to move in this direction. In fact, we’d like to see only short-term increases so the issue can be revisited time and time again, to hold the spenders’ feet to the political fire. But ripping all the teeth out at once is not the answer.

2011-02-15 The Federal Budget: It's a Mess by Brian S. Wesbury and Robert Stein of First Trust Advisors

If the US federal government were a bank, the FDIC would close them down this Friday night. Earlier today, President Obama submitted next year’s budget. The new budget, despite “cutting” the deficit by $1.1 trillion, will require Congress to pass a large increase in the “debt ceiling.” Claiming budget savings by freezing spending at today’s levels is like an alcoholic who says he’s sober because he’ll never drink more than yesterday’s bender. Trouble is, this alcoholic doesn’t even pay his own tab.

2011-02-07 FASB Surrenders - America Wins by Brian S. Wesbury and Robert Stein of First Trust Advisors

The good news, which went virtually un-reported on January 25, 2011, was that FASB surrendered on fair value accounting for loans. In the face of overwhelming opposition, banks will be allowed to carry loans on their books at amortized cost, reflecting cash flow (payments), as well as reasonable estimates of likely loan losses. This decision is a huge win for the markets and the economy.

2011-02-01 Egypt, Dollars and History by Brian S. Wesbury and Robert Stein of First Trust Advisors

When the Fed prints too many dollars, the inflation that results often shows up in commodity prices first. When it lifts energy commodities, countries and regions of the world which export oil typically benefit and have largesse to throw around. Egypt is an oil producer and a large refiner. So, rising energy prices are neutral to slightly positive for the nation’s economy. Food prices are a different story.

2011-01-26 Bring Back Hoenig by Brian S. Wesbury and Robert Stein of First Trust Advisors

Get out your carbon paper. No matter how much evidence there is that both real economic growth and inflation are accelerating, the Federal Reserve is determined to issue policy statements that read like the pessimistic ones from prior meetings.

2011-01-24 US Politics - Cage Match Or Pillow Fight? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The good news is that because of the elections last November, the politics have changed. Politicians in Washington, of both parties, are being forced to consider more free market solutions to problems and to address the growth in government. Time will tell whether a new leaf has really been turned, but for now, the direction of policy is much better for markets and the economy than it has been in many years. Politicians have pulled out their pillows and are now debating how to shrink government, not expand it.

2011-01-18 China and the Dollar by Brian S. Wesbury and Robert Stein of First Trust Advisors

The US should not take this week’s visit as an opportunity to lecture the Chinese about the yuan. If we do, Fed Chairman Ben Bernanke may find himself on the receiving end of a lecture about the importance of price stability and how to run a central bank. And he would deserve it.

2011-01-10 Government, the Anti-Stimulus by Brian S. Wesbury and Robert Stein of First Trust Advisors

After a strong ADP jobs report last Wednesday (297,000 new private jobs in Dec.), we raised our jobs forecast. Going into Friday, we expected the official report to show a net gain of 220,000 new jobs in December. When added to the weak November report (+39,000 jobs), the December rebound would bring the two month average back to about 130,000 per month.

2011-01-03 2011: Dow 14,500, S&P 1575, 10-Year 4% by Brian S. Wesbury and Robert Stein of First Trust Advisors

Seven weeks ago our Monday Morning Outlook was titled “Stocks Are Cheap, Bonds Are Not.” We said, “the bull market is still young….and bond yields are headed higher.” Since then, the S&P 500 is up 6% and investors in the 10-year Treasury note have lost more than 4%. Our models tell us to expect more of the same in 2011. We use a capitalized profits model to value stocks. We divide corporate profits by the 10-year Treasury yield, compare the result to each quarter for the past 60 years and use it to find an average fair value for stocks.

2010-12-27 First Trust Sees 4% Real GDP Growth in 2011 by Brian S. Wesbury and Robert Stein of First Trust Advisors

In 2011, we expect 4% real GDP growth. The biggest difference between the First Trust forecast and the conventional wisdom is deleveraging. We do not view the deleveraging process in as negative a light as the conventional wisdom. Once deleveraging begins to slow, it will not hurt the economy. If a consumer (or a business) pays down debt but pays down less than she did the prior year, then her spending can go up faster than her income (or profits). Higher saving is not going to be a negative for the economy.

2010-12-20 Greedy Innkeeper or Generous Capitalist? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The story of baby Jesus reminds us why it’s important to favor economic and political systems that limit the use and abuse of power over others. 

2010-12-13 It's a Good Deal by Brian S. Wesbury and Robert Stein of First Trust Advisors

Some analysts are trying to tie rising Treasury bond yields to fears about a bigger deficit and the “cost” of the tax deal. This is a misreading of the markets. Treasury bond yields are rising because a tax hike has been avoided and economic growth is likely to be robust. The bottom line is that stocks remain cheap, while bonds are certainly not.

2010-12-06 Elections Have Consequences by Brian S. Wesbury and Robert Stein of First Trust Advisors

Congress and the President are going to agree to extend all the income tax cuts enacted in 2001 for all earners, including the ones with the highest incomes. Washington has not yet become a bastion of libertarian thought, but elections have consequences and there is a huge shift in the direction of government policy underway right now. This shift is not yet as dramatic as the one following the 1994 elections, but it could become so given some time. This is great news for the economy and financial markets.

2010-11-15 Stocks Are Cheap, Bonds Are Not by Brian S. Wesbury and Robert Stein of First Trust Advisors

Stocks are still cheap and the bull market is still young. Bonds are expensive and bond yields are headed higher. Quantitative easing is under attack and better fiscal policy is on the way. Put it all together and the bearish (or “risk aversion”) trade of recent years is losing ground.

2010-11-08 No Soft Patch, No Excuse for QEII by Brian S. Wesbury and Robert Stein of First Trust Advisors

The bottom line here is that QEII – which we believe is ineffective anyway – was unnecessary, especially when the ball and chain of fiscal policy is under attack. Not only will current tax rates likely be extended for two (possibly three) years, but the White House has made it clear it is willing to eliminate the 1099-reporting requirement for purchases over $600. This was a part of Obamacare and other parts of that law may also face the knife as well.

2010-11-04 Fed Embarks on QEII by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Fed's new round of quantitative easing will have little to no impact on the larger economy. Banks already hold roughly $1 trillion in excess reserves. Adding to this pile of reserves will not influence the desire of financial institutions to lend, nor will it lead to any near-term increase in the supply of currency in circulation. All it will do is sit idle on the liability side of the Fed's balance sheet and on the asset side for the banks. More importantly, the economy is already accelerating.

2010-11-01 Political Economics by Brian S. Wesbury and Robert Stein of First Trust Advisors

Political spin is ubiquitous these days. But it's important for investors to know that it's still just spin. The underlying economy is doing much better than recent Republican rhetoric suggests. While a 2 percent growth rate in real GDP is not worth writing home about, it certainly masks an underlying strength in demand that investors should not ignore.

2010-10-25 Beating Bridgewater's Big Bear Bet by Brian S. Wesbury and Robert Stein of First Trust Advisors

A prominent investment story in last Friday's Wall Street Journal said that so far in 2010 Bridgewater Associates, a Connecticut-based hedge fund run by Ray Dalio, had racked up a 38 percent return with a 'wager that the U.S. economy would be in worse shape than many expected.' Unfortunately, this entire premise – that it pays to be bearish, especially about the U.S. – is highly misleading. In reality, a 'bullish bet' on the NASDAQ would have provided even better returns than Bridgewater over the past two years. Believe it or not, bullishness has been more rewarding than bearishness.

2010-10-18 Fed Ignores Gold, Targets Higher Inflation, and Plays With Fire by Brian S. Wesbury and Robert Stein of First Trust Advisors

By ignoring rising gold and commodity prices and signaling that it won't quit applying monetary stimulus anytime soon, the Fed is trying to force banks to change their behavior. If it works, look out for inflation to reach multiples of 2 percent in the years ahead. The Fed hasn’t been successful yet when it ignores gold and commodity prices.

2010-10-11 No More Steroids Needed by Brian S. Wesbury and Robert Stein of First Trust Advisors

Three things are lifting the U.S. economy: productivity, easy money and the natural economic healing process. Two things holding back the economy: massive increases in government spending and heavy-handed government interference in economic activity. The U.S. could grow faster if it stopped spending and interfering so much, but it is growing nonetheless.

2010-10-04 Emancipation From What... Capitalism? by Brian S. Wesbury and Robert Stein of First Trust Advisors

In a speech last week, President Obama called belief in capitalism 'blind faith.' The real problem with the economy today, however, is not capitalism, but the fact that we have moved too far away from free markets. As government spending has increased, so has unemployment. This is not a mystery; the bigger the government is, the smaller the private sector gets and the less dynamic the economy will be. If there is any emancipation needed, it's from the government, not from capitalism.

2010-09-27 The Myth and Mistake of Quantitative Easing by Brian S. Wesbury and Robert Stein of First Trust Advisors

Last week the Federal Reserve signaled its readiness to engage in further quantitative easing. This would be a colossal mistake. Quantitative easing does not boost real economic activity or inflation - it is not an injection of new money, like traditional monetary easing. During quantitative easing the Fed borrows money from banks and the Treasury to buy assets. All this does is shift what would have been held in the private sector onto the Fed's books. This does not create new money and therefore does not create inflation or lift aggregate demand.

2010-09-20 Be Careful of the New Normal by Brian S. Wesbury and Robert Stein of First Trust Advisors

The consensus is forecasting 2 percent real GDP growth for the remainder of the year, with some of the 'double-dip' crowd shifting to a forecast of a 'growth recession' - whatever that means. First Trust, by contrast, is predicting an average growth rate of 3 percent in the second half of 2010. This combines a tepid growth rate of 2 percent in the current quarter and a 4 percent rate in Q4.

2010-09-13 Unfunded Liabilities and Cheap Stocks by Brian S. Wesbury and Robert Stein of First Trust Advisors

Despite cries of 'uncertainty' that reverberate through the financial markets, U.S. equities remain grossly undervalued. Risk premiums are exceedingly high. Relative to bonds, stocks are undervalued by a considerable margin. And with profits expected to continue their upward climb, this gap is highly likely to increase even more in the next few quarters. So, what's holding investors back? Why are bond flows continuing to outpace equity flows?

2010-09-07 President Obama's Best Gift to Labor by Brian S. Wesbury and Robert Stein of First Trust Advisors

Under current law, companies that buy plant and equipment have to depreciate these expenses over several years. This depreciation makes investment look less attractive, as inflation and the time value of money erode the value of depreciation year by year. Under a new proposal leaked by the Obama Administration, however, companies would be able to fully expense capital investment. This proposal would make it more attractive for companies to buy capital goods, simplify bookkeeping and make taxable profits more equal to cash flow. It is President Obama's best economic policy idea so far.

2010-08-30 Odds Brightening for Tax Cut Extension by Brian S. Wesbury and Robert Stein of First Trust Advisors

On January 1, 2011, the top income tax rate on ordinary income and dividends will go back to 39.6 percent, the top tax rate on capital gains will revert to 20 percent, and the top tax rate on estates will go back to 55 percent. Some in Congress want to extend the tax cuts for everyone, some want to extend them but not for the 'rich,' and others want to hold the dividend tax rate to 20 percent. Ultimately, all the current tax rates on regular income, dividends, and capital gains will likely get extended for another year, but precisely when this will happen remains a mystery.

2010-08-23 We Knew Reagan... And He's No Reagan by Brian S. Wesbury and Robert Stein of First Trust Advisors

No matter how many of Obama's economists say that stimulus has a positive multiplier, it's simply not true. Stimulus spending does not stimulate, is de-stimulates, because it takes resources from growing sectors of the economy and pushes them to shrinking sectors of the economy. It taxes and borrows from good business models to support bad business models. It’s simple math. The larger the government's share of GDP, the higher the unemployment rate.

2010-08-16 Politics and Pessimists by Brian S. Wesbury and Robert Stein of First Trust Advisors

The forces underlying economic growth have turned positive. At the same time, the Fed is accommodative and unlikely to change its stance. These two factors alone will prove the pessimists wrong. In addition, the political winds are howling toward a divided government. The odds of putting off a tax hike in 2011, and possibly reversing healthcare legislation, cannot be ruled out. Add this to the mix, and the future could bring a sharp boost to the upside that makes short-sellers very uncomfortable.

2010-08-11 The Fed Gives the Treasury a Gift by Brian S. Wesbury and Robert Stein of First Trust Advisors

Tuesday's announcement from the Fed means that the U.S. Treasury will pay even lower interest rates to finance its burgeoning debt levels. By holding rates steady, the Fed will become more accommodative as the year progresses. As a result, Fed policy will cause both growth and inflation to accelerate throughout 2010 and into 2011. The bond market is stuck between a rock and a hard place. Fed policy on one hand is pulling rates down, while growth and inflation will push rates up. Easy monetary policy, however, eventually results in higher interest rates down the road.

2010-08-09 Please - No More Stimulus by Brian S. Wesbury and Robert Stein of First Trust Advisors

Canada has been cutting spending and tax rates for the past decade or so. If Keynesians are right, the U.S. economy should be outperforming the Canadian economy now and Canada should have done better back in the 1980s and 1990s, right? Wrong. It's the opposite. The unemployment rate in Canada is currently 8 percent and has been below the U.S. level since October 2008, when government spending started to go crazy. The lesson is clear: Less spending, less taxing and more freedom work. Let's not stimulate anymore. The U.S. economy just can't take it.

2010-08-02 GDP Data - Better than the Spin Suggests by Brian S. Wesbury and Robert Stein of First Trust Advisors

Even though the economy should be growing faster, to say it’s not growing at all is just wrong. Nor is it responsible to be overtly political about it and say it’s all Obama’s fault. Some are trying to say that the Bush stimulus and TARP were good, but what Democrats have done is bad. What a bunch of partisan malarkey! It's hard to do, but investors need to separate their politics from their economics. Staying positive is as important as fighting for what you believe in.

2010-07-26 The Good, Bad and Ugly of Austerity by Brian S. Wesbury and Robert Stein of First Trust Advisors

It doesn't matter where we look: National, state and local government budgets are in crisis. This cannot continue. Major policy shifts are underway. The time for austerity has come. The only question is what form that austerity will take. There are three types of austerity: Good, bad, and ugly. Good austerity puts the pain on the government sector. Bad austerity tries to spread the pain across the public and private sectors. Ugly austerity tries to put all the pain on the private sector.

2010-07-19 'New Normal' Nowhere in Sight by Brian S. Wesbury and Robert Stein of First Trust Advisors

With GDP scheduled for release next week, Brian Wesbury and Robert Stein's estimate for annualized second quarter real GDP growth is 3.5 percent. While this is a significant reduction from their 5.5 percent forecast made in March, it is still higher than what the 'new normal' camp is predicting. Productivity growth is strong, monetary policy is (and will continue to be) easy, inventories are razor-thin, and corporate profits are growing rapidly. For the next four quarters, ending in mid-2011, Wesbury and Stein thus again anticipate growth at around a 4 percent rate.

2010-07-12 Trade Deficits As Far As the Eye Can See by Brian S. Wesbury and Robert Stein of First Trust Advisors

As the trade deficit increases again in the next few years, and as manufacturing jobs disappear because of productivity increases, protectionism will once again become an issue. This fear about the deficit, however, ignores a major reason for it. Ultimately, the U.S. trade deficit is a by-product of an attractive investment climate. Foreigners, with assets to invest, often need to worry about the risks of exposing those assets to a local banking system that makes ours look like a pillar of strength.

2010-07-07 Get Real - This is Not 1932 by Brian S. Wesbury and Robert Stein of First Trust Advisors

Want to be invited to 'A' list parties? Want people to think you are smart? Then don't smile and don't say anything positive - especially about the economy. Pessimism has become so pervasive that people will believe just about anything, as long as it is negative. The truth is that the U.S. is creating jobs, even if the rate of growth is slower than in previous recoveries. Profits are still rising. In fact, analysts are still raising earnings estimates. The market has so much negativity priced in that it is cheap on just about any basis.

2010-06-22 China Rising by Brian S. Wesbury and Robert Stein of First Trust Advisors

China just decided it will once again let its currency - the yuan - get stronger against the U.S. dollar. Yuan appreciation will do two things. First, it will lower Chinese inflation relative to U.S. inflation. Second, it will raise the living standards of Chinese citizens. Where previously the Chinese government might have wanted the peg in order to encourage export growth, now the political calculus is starting to favor expanding the purchasing power of its workers. This is a sign of maturity for both the economy and Chinese policymakers.

2010-06-14 Disagreeing with Laffer About 2011 by Brian S. Wesbury and Robert Stein of First Trust Advisors

Economist Arthur Laffer recently fretted about the economic impact of the expiring 2003 Bush tax cuts, writing that the tax hikes would lift growth in 2010, but cause a double-dip recession in 2011 when the rates actually went up. The problem with economics, however, is that there are always multiple things happening at once. Back in 1993, the Federal Reserve was holding the federal funds rate at 3 percent - a clear policy of easy money. This helped offset the impact of the tax hikes and kept the economy growing.

2010-06-08 Has America Forgotten the Fruits of Freedom? by Brian S. Wesbury and Robert Stein of First Trust Advisors

Between 1970 and 1979, there were an average of 25 oil spills per year of 700 tons or greater. Between 2000 and 2009, there were just 3 per year on average. Oil companies lose money and soil their image if oil spills. They therefore have a huge incentive to invest in better safety controls. There is no way to take the risk out of life. When government tries, all it really does is transfer that risk elsewhere. And without the growth and advancement that freedom brings, the system breaks down and wealth creation is undermined.

2010-06-02 FASB Fanatics At It Again by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Financial Accounting Standards Board wants to force banks to use 'fair value or 'mark-to-market' rules not only for the securities they own, but also the loans they make. The number one problem with fair value accounting is that market prices for assets are forward-looking. In good times, prices reflect a positive outlook. In bad times, they reflect a negative outlook. And when markets freeze up, financial institutions must use prices that do not reflect actual cash flow. This creates a vicious downward cycle of losses, bank failures, more fear and lower 'observable' prices.

2010-05-24 Dr. Copper and the Pessimists by Brian S. Wesbury and Robert Stein of First Trust Advisors

Government is too big and too intrusive and it will harm the economy over time. But it will not kill the economy today, or even next year. Productivity is booming. New technology is lifting wealth, and living standards are rising. Some might say that it is not the Great Depression we should worry about, but the 1970s all over again. This, Wesbury and Stein can agree with. However, during certain periods of that decade, particularly during 1975-76, the economy and the stock market both boomed. That’s what we are experiencing right now – a boom amidst an uncertain future.

2010-05-17 A Shift in Our Fed Rate Outlook by Brian S. Wesbury and Robert Stein of First Trust Advisors

Early this year, it seemed that the Federal Reserve would start lifting interest rates from their current level of near zero by mid-year 2010. It seemed that zero percent interest rates would be too low, that the economy would be in recovery and that inflationary pressures would continue to increase. Even though all of this is still true, the Fed has made it clear in recent months that they are willing to hold interest rates down for a period of time that is much more 'extended' than people realized. Indeed, the Fed could continue holding rates at current levels through the end of 2010.

2010-05-10 Wall Street Dips, Main Street Turns the Corner by Brian S. Wesbury and Robert Stein of First Trust Advisors

We may never know exactly what caused last week's Wall Street drop, but the lack of an uptick rule didn't help. Nonetheless, at the bottom on Thursday, the market experienced its first true 10 percent correction in 14 months. Short-sellers were basically gleeful and many politically motivated pundits took the drop as a sign of economic trouble. This correction, however, came just when economic data took a very visible turn for the better. Friday's employment report provided a huge 'thumbs up' for the V-shaped recovery. The fundamentals of Main Street are improving.

2010-05-03 Triumph of the Euro? by Brian S. Wesbury and Robert Stein of First Trust Advisors

Because Greece uses the euro, devaluation is not an option to solve the country's budget problems. As a result, Greece’s pain will be concentrated in the sector that is causing most of the problem: government. The conditions of the bailout, decided by the EU and IMF, require Greece to freeze government salaries, eliminate bonuses, and lift the retirement age to 60 for government workers, as well as raise value-added and excises taxes. While the tax hikes are disappointing, the focus on restraining government spending, rather than using devaluation, represents a triumph of the euro.

2010-04-29 Fed Twiddles its Thumbs by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Federal Reserve made no direct changes to monetary policy yesterday, leaving the target range for the federal funds rate at 0 percent to 0.25 percent. Minor changes to the Federal Reserve's statement on Monday, however, show that the central bank is continuing to gain confidence in the economy. These include comments that the labor market is 'beginning to improve,' rather than 'stabilizing;' household spending is 'picking up' rather than 'growing at a moderate rate;' and housing starts have 'edged up' rather than staying 'flat.'

2010-04-27 Steep Auto Sector Recovery to Continue by Brian S. Wesbury and Robert Stein of First Trust Advisors

Both auto sales and auto production have rebounded substantially in the past year. We expect these trends to continue as a major feature of the V-shaped economic recovery. In the first half of 2009, cars and light trucks were sold at a 9.5 million annual rate, the slowest pace for any six-month period since 1974-75, when the US population was about one-third smaller. Then, along came cash for clunkers in July/August 2009 and sales temporarily surged to a 12.6 million annual rate.

2010-04-26 The Danger of Zero Percent Interest Rates by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Fed has become overly involved in financial markets and it is losing sight of its number one job - maintaining price stability. Zero percent interest rates are becoming more dangerous every day. The economy is outperforming the Fed’s forecast, creating a dilemma. Before massive snowstorms, the Fed projected that real GDP would grow 3.1 percent in 2010. First Trust's forecast for Q1 real GDP is 3.4 percent, despite record-breaking storms. And we expect Q2 real GDP growth to approach 6 percent.

2010-04-19 Higher Inflation, Not Hyperinflation by Brian S. Wesbury and Robert Stein of First Trust Advisors

Some analysts have proposed inflating/devaluing our way out of this debt crisis. The theory is that with deficits already so large and no immediate prospects for spending control, the US government may have to resort to an Argentina-style monetary policy to pay for its largesse. Hyperinflation with a side order of devaluation, however, is not a free lunch. That was a lesson learned all too well in the 1970s. And now, with future entitlement spending making the current securitized debt small by comparison, it makes even less sense for the government to pursue.

2010-04-12 All Aboard the V-Train by Brian S. Wesbury and Robert Stein of First Trust Advisors

As the economic data clearly traces out a V-shaped recovery, some previously skeptical pundits are standing on the V-train platform shouting 'all aboard' as often as they can. Others are slowly raising their forecasts of growth, even job growth. Unfortunately, there is a group of people who still haven't arrived at the station. But they will be wrong. Government spending has hindered, but not killed, the recovery. Recoveries happen. This one would indeed be stronger if the government had not wasted so many resources. Nonetheless, the V-train is on the tracks.

2010-04-05 No Double-Dip For Housing by Brian S. Wesbury and Robert Stein of First Trust Advisors

While the end of the Federal Reserve's massive mortgage purchasing program will certainly not help the housing market, it probably will not result in a double dip for housing of the economy. Instead, home building, home sales and home prices should all be up nationwide a year from now versus today. Perhaps the most important reason for this is that the labor market, the last of the lagging economic indicators, has finally turned positive.

2010-03-30 Gary Becker's Optimism by Brian S. Wesbury and Robert Stein of First Trust Advisors

The commentary responds to a recent Wall Street Journal interview with Nobel prize-winning economist Gary Becker. Becker is the founder, with Milton Friedman, of the Chicago school of economics. Becker said the financial crisis did not undermine his belief in free markets, and that he remained hopeful that competing interest groups would protect the country in the long run from a systematic bias toward bad policy. While Becker primarily blames new financial instruments for the economic crisis, however, Wesbury and Stein blame mark-to-market accounting rules.

2010-03-22 Health Care Fallout by Brian S. Wesbury and Robert Stein of First Trust Advisors

The health care bill is no reason to run for the hills. In the short term, there are no policy changes that will derail or noticeably slow the V-shaped economic recovery slowly underway. There are harmful policy shifts, including extra fees on health insurers and the makers of medical devices, but these are sector and not macroeconomic issues, at least in the short term. The biggest macroeconomic effects will stem from tax hikes scheduled to go into effect in 2013. In the meantime, however, Wesbury and Stein retain their bullish stance.

2010-03-17 Fed Still Clinging to Extremely Loose Money by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Federal Reserve made no direct changes to monetary policy, leaving the target federal funds rate at 0 percent to 0.25 percent. Changes to the Fed's statement with regards to the labor market, business investment and housing starts, however, suggest that the central bank is gaining confidence in financial markets and the economy. One member even strengthened his dissent toward keeping interest rates exceptionally for an 'extended period' of time. The Fed also strengthened its commitment to ending special lending facilities for the mortgage market.

2010-03-15 More Solid Growth Ahead by Brian S. Wesbury and Robert Stein of First Trust Advisors

The consensus is forecasting a growth rate of 2.7 percent for the first half of 2010. In contrast, we are predicting 4.5 percent, with faster growth in the second quarter than the first. The tilt toward Q2 is due to unusually harsh winter weather across much of the country. The consensus is still underestimating the resilience and robustness of the US economy and remains stuck on expectations of a 'new normal.' But, productivity is strong, monetary policy is (and will continue to be) easy, inventories are razor-thin, and corporate profits are growing rapidly.

2010-03-09 More on that Federal Pay Cut by Brian S. Wesbury and Robert Stein of First Trust Advisors

Last week, Wesbury and Stein proposed a 10 percent pay cut for all civilian federal workers in order to send a signal to creditors that policymakers were concerned about the deficit. That article generated more responses than any article the two have published. Many comments were supportive, but most were negative. Many critics of the proposed pay cut pointed to the relatively low wages of younger federal workers, while others argued that a pay cut would blunt the multiplier effect. This latter argument is fallacious, because every dollar the government spends must come from somewhere else.

2010-03-04 Bernanke Finally Fingers Mark-To-Market by Brian S. Wesbury and Robert Stein of First Trust Advisors

Mark-to-market ideology is affecting the ability of the Federal Reserve to exit its quantitative easing. The mark-to-market rule uses bids, or exit prices, to value assets. Chairman Bernanke signaled that he recognized the problem in February when he said commercial real estate loans should be valued on income from their property, rather than their collateral value. As long as mark-to-market valuation continues to drag on securitization, the Fed will remain hesitant to withdraw its support of the system.

2010-03-01 Getting Serious About the Deficit by Brian S. Wesbury and Robert Stein of First Trust Advisors

President Obama's proposed 2 percent federal worker pay hikes, unveiled amidst a 9.7 unemployment rate and widespread private sector pay cuts, send a clear signal: The U.S. is not yet serious about the deficit. A 10 percent across-the-board federal worker pay cut would net just $15 billion in net outlay savings, but would permanently shift future wages onto a lower path.

2010-02-22 Don't Be An Economic Hypochondriac by Brian S. Wesbury and Robert Stein of First Trust Advisors

There are always things to worry about in the economy. With an accommodative monetary policy and the end of the panic, however, the economy is heading upward. The consensus forecast for economic growth has grown from 2 percent of real GDP to roughly 3 percent. This forecast may continue to grow to 4 percent or more.

2010-02-20 The Fed Tests the Waters by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Federal Reserve took a big first psychological step toward a tighter monetary policy yesterday when it raised the discount rate to 0.75 percent, from 0.50 percent. The Fed wants to make sure, however, that markets understand that a rising discount rate does not necessarily entail higher federal funds rate.

2010-02-17 Greece is Not Lehman Brothers by Brian S. Wesbury and Robert Stein of First Trust Advisors

Sovereign debt defaults are the most recent fears plaguing investors. If governments refuse to cut spending and markets refuse to finance excess outlays, debt defaults could spread worldwide one-by-one. The current sovereign debt crisis in Greece is more likely to lead policymakers to reduce spending to reasonable levels, however, than to kick off a new financial panic.

2010-02-13 The (Relatively) Bullish Case for Consumer by Brian S. Wesbury and Robert Stein of First Trust Advisors

Wesbury and Stein justify their 4-4.5% forecast for growth in real GDP in 2010 with five factors: rising consumer incomes; deleveraging; higher savings; a pickup in home building; and pent-up demand for autos.

2010-01-28 "Extended Period" of Low Rates Starting to Lose Support by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Federal Reserve made no direct changes to the stance of monetary policy today, leaving the target range for the federal funds rate at 0% to 0.25%. However, one member dissented from the Fed’s comm