Risk Rap

Rapping About a World at Risk

Economic Recovery Gathers Steam

Private-sector employment increased by 217,000 from January to February on a seasonally adjusted basis, according to the latest ADP National Employment Report released today. The estimated change of employment from December 2010 to January 2011 was revised up to 189,000 from the previously reported increase of 187,000. This month’s ADP National Employment Report suggests continued solid growth of nonfarm private employment early in 2011. The recent pattern of rising employment gains since the middle of last year was reinforced by today’s report, as the average gain from December through February (217,000) is well above the average gain over the prior six months (63,000).

The fears of a jobless recovery may be receding but the US economy has a long way to go before pre-recession employment levels are achieved. As we stated previously the economy needs to create over 200,000 jobs per month for 48 consecutive months to achieve pre-recession employment levels. The six month average of 63,000 is still well below the required rate of job creation for a robust recovery to occur. The Unemployment Rate still exceeds 9%.

The February report is encouraging because it points to an accelerating pace of job creation. The post Christmas season employment surge represents a 30,000 job gain over January’s strong report that triples the six month moving average. The service sector accounted for over 200,000 of the job gains. The manufacturing and goods producing sector combined to create 35,000 jobs. Construction continues to mirror the moribund housing market shedding an additional 9,000 jobs during the month. The construction industry has lost over 2.1 million jobs since its peak in 2008.

The robust recovery in the service sector is welcomed but sustainable economic growth can only be achieved by a robust turn around in the goods producing and manufacturing sectors. Service sector jobs offer lower wages, tend to be highly correlated to retail consumer spending and positions are often transient in nature. Small and Mid-Sized Enterprises (SME) is where the highest concentration of service jobs are created and the employment figures bear that out with SMEs accounting for over 204,000 jobs created during the month of February.

Large businesses added 13,000 jobs during the month of February. The balance sheets of large corporations are strong. The great recession provided large corporates an opportunity to rationalize their business franchise with layoffs, consolidations and prudent cost management. Benign inflation, global presence, outsourcing, low cost of capital and strong equity markets created ideal conditions for profitability and an improved capital structure. The balance sheets of large corporations are flush with $1 trillion in cash and it appears that the large corporates are deploying this capital resource into non-job creating initiatives.

The restructuring of the economy continues. The Federal stimulus program directed massive funds to support fiscally troubled state and local government budgets. The Federal Stimulus Program was a critical factor that help to stabilize local government workforce levels. The expiration of the Federal stimulus program is forcing state and local governments into draconian measures to balance budgets. Government employment levels are being dramatically pared back to maintain fiscal stability. Public service workers unions are under severe pressure to defend employment, compensation and benefits of workers in an increasingly conservative political climate that insists on fiscal conservatism and is highly adverse to any tax increase.

The elimination of government jobs, the expiration of unemployment funds coupled with rising interest rates, energy and commodity prices will drain significant buying power from the economy and create additional headwinds for the recovery.

Macroeconomic Factors

The principal macroeconomic factors confronting the economy are the continued high unemployment rate, weakness in the housing market, tax policy and deepening fiscal crisis of state, local and federal governments. The Tea Party tax rebellion has returned congress to Republican control and will encourage the federal government to pursue fiscally conservative policies that will dramatically cut federal spending and taxes for the small businesses and the middle class. In the short term, spending cuts in federal programs will result in layoffs, and cuts in entitlement programs will remove purchasing power from the demand side of the market. It is believed that the tax cuts to businesses will provide the necessary incentive for SME’s to invest capital surpluses back into the company to stimulate job creation.

The growing uncertainty in the Middle East and North Africa is a significant political risk factor. The expansion of political instability in the Gulf Region particularly Iran, Egypt and Saudi Arabia; a protracted civil war in Libya or a reignited regional conflict involving Israel would have a dramatic impact on oil markets; sparking a rise in commodity prices and interest rates placing additional stress on economic recovery.

Political uncertainty tends to heighten risk aversion in credit markets. The financial rescue of banks with generous capital infusions and accommodating monetary policies from sovereign governments has buttressed the profitability and capital position of banks. Regulatory uncertainty of Basel III, Dodd-Frank, and the continued rationalization of the commercial banking system and continued concern about the quality of credit portfolios continue to curtail availability of credit for SME lending. Governments are encouraging banks to lend more aggressively but banks continue to exercise extreme caution in making loans to financially stressed and capital starved SMEs.

Highlights of the ADP Report for February include:

Private sector employment increased by 217,000

Employment in the service-providing sector rose 202,000

Employment in the goods-producing sector declined 15,000

Employment in the manufacturing sector declined 20,000

Construction employment declined 9,000

Large businesses with 500 or more workers declined 2,000

Medium-size businesses, defined as those with between 50 and 499 workers increased 24,000

Employment among small-size businesses with fewer than 50 workers, increased 21,000

Overview of Numbers

The 202,000 jobs created by the SME sectors represents over 90% of new job creation. Large businesses comprise approximately 20% of the private sector employment and continues to underperform SMEs in post recession job creation. The strong growth of service sector though welcomed continues to mask the under performance of the manufacturing sector. The 11 million manufacturing jobs comprise approximately 10% of the private sector US workforce. The 20 thousand jobs created during February accounted for 10% of new jobs. Considering the severely distressed condition and capacity utilization of the sector and the favorable conditions for export markets and cost of capital the job growth of the sector appears extremely weak. The US economy is still in search of a driver. The automotive manufacturers have returned to profitability due to global sales in Latin America and China with a large portion of the manufacturing done in local oversea markets.

The stock market continues to perform well. The Fed is optimistic that the QE2 initiative will allay bankers credit risk concerns and ease lending restrictions to SMEs. A projected GDP growth rate of 3% appears to be an achievable goal. The danger of a double dip recession is receding but severe geopolitical risk factors continue to keep the possibility alive.

Interest rates have been at historic lows for two years and will begin to notch upward as central bankers continue to manage growth with a mix of inflation and higher costs of capital. The stability of the euro and the EU’s sovereign debt crisis will remain a concern and put upward pressure on interest rates and the dollar.

As the price of commodities and food spikes higher the potential of civil unrest and political instability in emerging markets of Southeast Asia, Africa and Latin America grows. Some even suggest this instability may touch China.

The balance sheets of large corporate entities remain flush with cash. The availability of distressed assets and volatile markets will encourage corporate treasurers to put that capital to work to capitalize on emerging opportunities. The day of the lazy corporate balance sheet is over.

Solutions from Sum2

Credit Redi offers SMEs tools to manage financial health and improve corporate credit rating to attract and minimize the cost of capital. Credit Redi helps SMEs improve credit standing and demonstrate to bankers that you are a good credit risk.

For information on the construction and use of the ADP Report, please visit the methodology section of the ADP National Employment Report website.

You Tube Video: John Handy, Hard Work

Risk: unemployment, recession, recovery, SME, political

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March 3, 2011 Posted by | commerce, credit, Credit Redi, economics, government, lending, manufacturing, recession, risk management, SME, taxation, Tea Party, unemployment, unions | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Thank You Tea Party

America wakes up this morning to a new political reality.  America has decidedly turned a  shade of reactionary red.  We thank the Tea Party for showing us the way back to a dead past.

We thank you for your activism and energy.  We thank you for the passion. We thank you for your professed love of country.  We thank you for showing us how to spend the piles of corporate money on disgusting attack ads in service to our great democracy.  We thank you for reminding us that the US Constitution is America’s most precious asset even if you sometimes miss the point about what it actually says.

We thank you for returning the country back into the hands of the GOP.  After two years of living under the fascist hell of the dictatorial regime of Barack Obama the endurance of the people could suffer it no longer.  We long to enjoy the freedoms that tax cuts for the rich, corporations freed from regulatory shackles and the old time religious revival of laissez-faire capitalism offers as the only way to assure the social uplift of all citizens.

The GOP thanks the Tea Party for returning the country to their control.  The GOP appreciates the Tea Partys expeditious return to their local districts so Republicans can get on with the serious business of government. The serious business of government is working seriously with serious business people with serious money to address the serious problems of these serious constituents.  In all seriousness the GOP will tirelessly labor to solve the serious problems for these serious constituents.

The nation thanks you for the lively political theater you presented during the election.  Your eccentric cast of characters,dressed like Nazi enacters,wacky witches, militant militiamen, Adolph Hitler lookalikes and long dead patriots in tri-corner hats added some much needed levity to the weighty matters confronting the nation.

We thank the Tea Party by supporting a field of candidates that had the courage to publicly speak their convictions to raise the specter of  prejudice and fear.  The Tea Party’s religio-political fundamentalism raised the fear bar to heights that dwarfed even the three lanterns glowing in the Old North Church.  Like Paul Revere before them, Tea Party patriots road across the land alerting kin and countrymen to the dangers of secularism, recalcitrant Islam, liberal government, homosexuality, Charles Darwin and evolution, foreigners or any Mexican immigrant idling too close to our southern borders.

The Tea Party has given us pause to reconsider our addiction to caffeine fueled government spending and a lavish lifestyle and choice of coffee as national drink.  If you pardon the French, chai is now the preferred brew du jour.  So with pinky up we lift a tiny cup to celebrate the day by swilling a mouthful of Red Rose with the fervor of an Afghani, Ottoman or Brit.

Thank you Tea Party. Thank you.

You Tube Music Video: Sly and the Family Stone: Thank You For Letting Me Be Myself Again

Risk: consensus, political, pluralism

November 3, 2010 Posted by | conservatism, democracy, democrats, elections, government, Tea Party | , , , , , , , , | Leave a comment

We Must Disenthrall Ourselves

lincoln-collage1The wisdom resonating from this voice that now belongs to the ages still begs his countrymen to heed it. Lincoln’s admonition that his countrymen must disenthrall themselves to meet the momentous challenges of the time continues to speak to the dire condition of our nation today. Lincoln asks us to let go of our intransigence and the tired dogmas that we cling too. In a world rife with uncertainty and risk, surrounding us in a whirling maelstrom of existential dread, emotional responses to pressing problems born from fear of a perceived pending doom is insufficient and dangerous. We must mount a constructive response of considered actions to safely land our ship of state in a safe harbor. It is our pathway to becoming whole once again.

The great national hero Captain Sully was successful because he refused to succumb to the quickly deteriorating conditions that were enveloping him and the plane. He disenthralled himself from the emotional distraction of pending doom. He kept the wings level, his nose up and maintained the right speed. Captain Sully landed the plane in the most trying circumstances and became an example of how we must respond get through our national crisis.

Our politicians in Washington can learn much by heeding Mr. Lincoln’s words and studying Captain Sully’s actions. Our elected officials are enthralled with the righteousness of their ideals; contributing to a dreary deadlock of legislative stasis and partisan intractability. Politicians got to get over themselves and begin to serve their largest constituency and not their largest contributors.

Large corporations need to become disenthralled of their self perceived cleverness. Many believe that major investments in applied intelligence create a culture of insularity that hedges all risks and protects every business move. This allows corporate executives to hide behind a wall of opaqueness. They buy the best and brightest minds from our esteemed business schools convinced that this treasure of intellectual capital will protect them. They believe the digital blips of risk models to be sparkling Rosetta Stones containing the secrets that unlock the mysteries of effective risk management. The codified results of these algorithmic exercises are revered as holy Dead Sea Scrolls that offers the protection of an supernatural mojo. This is the thinking of a bankrupt brain trust.

As citizens of the worlds greatest military power we must disenthrall ourselves from the conviction that the powers of our armies, superior technologies and well stocked arsenals is our country’s surest way to protect our beloved country. The power of an enlightened citizenry educated in a vibrant public school system is the bulwark of a democratic republic and its surest defense. Our enlightenment will be a lamp to those who value liberty; as will our practice to extend the hand of peace to all nations through considered diplomacy and an honest search for shared interests.

As a people we must disenthrall ourselves from the petty preoccupations, dogmas and prejudices that consume our time and attention. I believe too many of my countrymen are more impassioned about A Rods admission of steroid use then they are about the substances that control and dictate our behaviors and beliefs and the ever present and growing dangers to our democratic way of life.

We’ll end with the words from the great man himself.

Happy birthday President Lincoln.

“The dogmas of the quiet past, are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise — with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”

You Tube Video: George Harrison, Beware of Darkness

Risk: fear, discernment, action

February 16, 2009 Posted by | Civil Rights, culture, gay rights, philosophy, psychology | , , , , , , | Leave a comment

Healing on the Sabbath

There is a wonderful story in the New Testament from the Book of Matthew. It tells about a man Jesus discovers in a synagogue with a withered hand. The Pharisees who were the fundamentalists of their day asked if it was lawful to heal on the Sabbath? Jesus answers that it is always lawful to do the right thing on the Sabbath. Jesus understood that The Divine Healer requires us always to be mindful as to how to respond to those in need even if that means violating supposedly sacred rules to do so.

The Republican Party opposition to the economic stimulus legislation reminds me of this story from the Gospel. The passage of the recovery bill in the congress was accomplished without one affirmative vote from the GOP. Almost every Republican to the last member cited concern about the country sliding into socialism. Taking a cue from lead party shill Rush Limbaugh, the self anointed demagogue and chief has been howling about the government sponsored recovery plan. Speaking for all Republicans, Rush states that government involvement will lead to the corruption of free market enterprise, ballooning administrative bureaucracies and the sure return of the debauchery of erstwhile earmarks splayed about in an orgy of pork barrel spending sprees.

The economy like the man with the shrived hand needs healing. He cannot find work if he is not healed. The doctor is in the house and being faithful to the Hippocratic Oath is compelled to heal despite the incantations of conservative demagogues of damnable results if ideological dogmas are violated.

An interesting historical analogy steeped in realpolitik can be found in a famous statement made by Deng Xiaoping as China’s disastrous Great Leap Forward was concluding. Said Deng: “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.” This was interpreted to mean that being productive is more important then upholding beliefs in communism or capitalism.

The leader of China at the time, Mao Tse-Tung saw this type of thinking as a great threat to his power. To consolidate his power and mitigate the threat Deng’s thinking represented, Mao launched the equally disastrous Cultural Revolution. Deng and his policies were rehabilitated years later only after the damage of the Cultural Revolution became apparent. The adoption of liberalized economic reforms and the eradication of ideological strictures has done wonders for China. Like Mao, the GOP demands ideological purity regardless of the effect. The United States has pursued the policies advocated by the GOP since the Reagan Administration. Those policies and philosophies have brought us to where we sit today. A moribund economy over dependent on a financial services industry, leverage and the availability of cheap credit.

President Obama’s recovery program is classic move taken from the Keynesian economics playbook. It offers a massive capital infusion into the economy that is funded by an increase in Federal debt and a generous tax cuts that should satiate the most rabid Reaganomic raconteur. Obama is not beholden to ideology. The Great Empiricist has proclaimed the death to all ideologies and is not beholden to the stale bread of old dogmas. Obama is willing and most able to craft solutions from tools and systemic loam to effect the cure. He might even resort to a dollop of supply-siderism and sprinkle a bitty bit of voodoo economics on the zombie republicans to get the American economy going again.

You Tube Video: Dr. John, Gris-Gris Gumbo Ya Ya

Risk: economy, politics, recession

January 30, 2009 Posted by | economics, heal, Obama, recession, republicans, rock | , , , , , | Leave a comment

McCain’s Know Nothings

Citizen Know Nothing

It was painful to watch Mr. McCain’s last town meeting. An older women took the microphone to speak about her fear of an Obama Presidency. She said that she read that Mr. Obama was an Arab. Mr. McCain took the microphone back from the woman before she could complete her thought. I guess she feared that Michelle Obama would change the Lincoln Room wallpaper to Arabesque patterns to match the architecture of the Grand Mosque of Cordoba and that the Whirling Dervishes would perform at all future White House events.

McCain was forced to give a Marc Anthony soliloquy. “My friends, I must say that my opponent is an honorable man. And he really is an American, Sean Hannity checked his papers. Twice.” McCain’s supporters were miffed and looked on with unbelief as their candidate went on to explain that Obama was actually a family man with two kids and a wife. His supporters shouted “say it ain’t so John. Don’t believe the lies of the liberal media that paint Obama like a regular American. We know the real truth. He doesn’t even like hockey!”

All week we have seen McCain’s supporters express their exasperation because “That One” has a lead in the polls which many fear their candidate may not be able to surmount. With incredulous unbelief they can’t understand how the America of their understanding might elect a terrorist loving closeted Muslim whose deep hatred of America will compel him to quickly raise the White Flag of surrender and preside over the destruction of the Union. Low information voters rely on demagogues to confirm their prejudices and fears with a few well placed words. Cultivating low information voters by speaking down to them with hate speech will yield low returns. So as our country struggles to confront drastic challenges and problems McCain’s Know Nothings implore him to show more courage of his convictions and go negative in his next debate to save America from an Arab President.

Sarah Palin’s masterful use of the rhetoric of division and suspicion “who is Barack Obama?” has stoked the ugly side of America’s political angst. The lipstick wearing attack dog has done her job well. She has skillfully tapped into voter sentiment that is frightened about their economic security, fed up with the self serving lies of our political leaders and furious about their powerlessness to exercise control and stop the radical changes occurring in their lives. The stasis of Bush Republicanism is being washed away in a Tsunami of world events that is accelerating the pace of change and cultural transformation. Palin promises to change our inability to arrest the changes that are overwhelming Americans. Sarah’s minions just want it to stop. They want it to go away. They want it to stay the way things always were. America is on top. God is in his heaven and all is right with the world. They will accept nothing less then our full entitlement to the birthright of our American Exceptionalism. And unlike Easu we will not sell it or be tricked out of it by a fast talking Jacob that goes by the name of Barack.

There are parallels to this story in our short and modest history as a democratic republic. The Know Nothings were a pre-republican party political movement borne in the civic turmoil of New York City. They were Nativists that distrusted the ruling democrats and hated the swelling population of Irish immigrants that was flooding America just prior to and during the Civil War. They felt “the purity of their America” was being lost and diluted by the foreign influence of its new citizens. Martin Scorsese’s “Gangs of New York” character Butcher Bill Cutting yearns to protect an idea of America that shares many of the same concerns that Barracuda Sarah incants with her divisive rhetoric.

The release of the movie American Carol will certainly add to the informed dialog about the pressing issues of the day. To me it looks like a heap of pedestrian clichéd camp. Its purpose will serve to reinforce low information voters political prejudices and misconceptions. The few clips I have seen are anything but funny and its natural audience will liken it more to a chilling documentary then comedy. It will also provide comedic cover to derail attempts for a serious examination of issues which can now be disposed of with a dismissive can’t take a joke tagline.

One reaps what one sows. Spread seeds of obfuscation and one gets confusion. Spread seeds of distrust you’ll get suspicion and division. Spread anger you will reap conflict. Pander to ignorance and you shall cull stupidity.

American politics on the down low this October 11, 2008.

You Tube Video: Shift Happens

Music Video: The Charlatans – The Only One I Know

Risk: democracy, elections, civic participation, enlightenment, civil unrest

October 11, 2008 Posted by | culture, elections, McCain, Obama, Palin, politics, rock, soundtrack | , , , , , , , , , , | 1 Comment