Baum's View on Money
Happy Friday, all. I hope you enjoy some of today's selected readings.
At least the Federal Reserve is still buying
Private foreign investors sold a net $67 billion of Treasuries in June, which was both a record and the second consecutive monthly outflow. Foreigners were equally unenthused with other U.S. assets, selling agency securities, corporate bonds and equities. Unless the spike in long-term interest rates in response to Fed tapering talk is a case of sell the rumor, buy the news, the U.S. Treasury is looking at much higher borrowing costs. That's what happens when 41 percent of the debt has to be rolled over in the next two years.
Where's the new news?
For all the hoopla over the monthly employment report, there's a lot less there than meets the eye, according to Goldman Sachs chief economist Jan Hatzius. He finds the market reaction isn't commensurate with the incremental information. For insights into the economy, it's better to focus on the Philly Fed's business outlook survey -- the oldest of the regional manufacturing surveys -- and the ISM's monthly manufacturing survey. It shouldn't be a mystery why these reports are more insightful. Manufacturers' new orders are a leading economic indicator. Employment is a coincident indicator. And the unemployment rate is a member in good standing of the index of lagging indicators.
Don't uncork the Champagne just yet
Austen Goolsbee tells Reuters that his biggest worry about the U.S. economy right now is…Europe. He says the problems the European currency union faces, including a lack of labor mobility and southern countries that are "locked in at the wrong exchange rate," aren't going away anytime soon. While euro-zone real growth of 0.3 percent in the second quarter was a welcome relief after six consecutive quarterly contractions, it's still close enough to zero for government work.
Thanks, but no thanks
The U.S. economy may be improving, but the public isn't giving President Obama the credit. Only 35 percent of Americans surveyed by Gallup this month approve of the president's handling of the economy, down seven points from June. Gallup says Obama's pivot to the economy shows "his focus is in the right place," but until the economy makes more impressive gains, ultimately reflected in improved economic confidence, Americans may not reward him with higher approval." That seems like an editorial leap. The University of Michigan consumer sentiment index hit a six-year high last month. (The mid-August report comes out today.) Consumers seem to think the economy is getting better. They just aren't giving credit to the guy in the White House.
You do the math
The latest Obamacare rule-suspension -- a delay in the cap on out-of-pocket health-care costs -- has opponents in a lather. "You see, it doesn't work." Or, "there goes the president fiddling with the rules again." The focus on Obamacare is misplaced, according to the Urban Institute's Gene Steuerle. He says there's a "disconnect between our nation's health care policies" -- take your pick which one -- "and the simple, unavoidable arithmetic of health care costs." Cost shifting doesn't mean cost-less. Someone pays. Just something to keep in mind when you read the political back-and-forth on Obamacare.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)