Japan, America's top Asian ally, seems adrift. But it's not time to panic
Wednesday, July 28, 2010
WHEN THE Democratic Party of Japan swept into power last summer, a new era was proclaimed. The DPJ had turned out a conservative party that had run the country since the U.S. military ended its occupation after World War II. The newcomers to power, with a huge majority in the lower house of parliament, promised to build a European-style social democracy while letting fresh air blow through the long-sealed corridors of power. There would be more openness, less corruption, more straight talk.
But for the DPJ, the first year has been a very long one -- and it's not over yet. Plans for a new welfare state collided with Japan's stagnant economy and mammoth debt. Some of the party's leaders were dogged by corruption charges that sounded a lot like the old days. The party's leader, Yukio Hatoyama, proved indecisive as prime minister and had to step down after less than a year. In elections on July 12, voters delivered a sound spanking, depriving the DPJ of a majority in the parliament's upper house and providing a modest comeback to the conservatives who had been so soundly trounced last year. And the latest prime minister, Naoto Kan, must stand for reelection within the party in September. At the moment he seems likely to prevail, but if he does not, his defeat will lead to the sixth change of prime ministership in Japan in the past five years.
All of this has left many Japanese, and some of Japan's overseas friends, wondering if Japan's problems are simply too big for its politics. Such pessimism is understandable but wrong, or at least premature. Japan remains a wealthy, productive, stable society with the world's second-largest economy. The instability of its politics reflects a healthy debate on what is, after all, a daunting problem, and one humans have never had to face in this way: how to maintain economic prosperity while declining birthrates and increasing longevity produce an older and older population. If Japanese voters are unsure about whether it's better to raise taxes or cut spending, well, join the club.
The challenge for U.S. officials is to manage day-to-day relations while safeguarding what remains a hugely important alliance in the shadow of China's growth. The bad news is that the issue that bedeviled the relationship throughout the past year, a realignment of U.S. forces in Okinawa, is likely to get kicked down the road yet again. The more important good news is that the past year's turmoil has only reaffirmed the importance of the alliance for most Japanese. Mr. Hatoyama, who came into office flirting with a more China-centric foreign policy, found little appetite for that among his compatriots. Americans should keep that in mind as the U.S.-Japan alliance bumps along in the coming months.
Stock Buying Hits Bull Market Record at Mutual Funds
July 26 (Bloomberg) -- Mutual funds, pensions and endowments are spending more on stocks than at any time since the start of the bull market, just as individuals grow the most pessimistic in a year.
Institutions pushed equities up to 68 percent of their holdings in July, the highest level in 15 months, from 63 percent in April, a Citigroup Inc. survey showed. The ratio of bullish to bearish respondents in a survey by the American Association of Individual Investors has fallen to 0.68, the lowest level since July 2009, based on a four-week average.
The last time money managers and individuals were this far apart was in March 2009, before the Standard & Poor’s 500 Index began its 63 percent rally, according to data compiled by Bloomberg. It may signal another buying opportunity after concern the U.S. economy will fall into a recession wiped out $1.6 trillion from American equity values since April, according to Fritz Meyer, a Denver-based senior market strategist at Invesco Inc., which oversees $558 billion.
“That’s good news,” Meyer said. “The retail guy has gotten it wrong more than gotten it right. The odds favor a continued, reasonably healthy economic expansion.”
The U.S. equity benchmark has posted an average return of 8.8 percent in the 12 months after individuals’ skepticism rose this high in the past 20 years, according to data compiled by Bloomberg. Bulls are betting that forecasts for the fastest U.S. profit growth in 15 years and economic expansion averaging 3 percent through 2012 will help equities recover after the S&P 500 fell 13 percent in May and June.
Bonds are a better investment than stocks, Jamil Baz, who helps oversee $23 billion as chief investment strategist for the New York-based hedge fund GLG Partners Inc., told Bloomberg Television’s “Inside Track” on July 22. Government reports this month showing private employers in the U.S. added fewer jobs than forecast in June and the lowest level of housing starts in eight months raised concerns that the economic recovery will falter.
Futures on the S&P 500 dropped 0.3 percent to 1,097.20 as of 4:36 p.m. in Hong Kong. The gauge, which closed at 1,102.66 last week, is poised for the biggest monthly increase since July 2009. Companies from Atlanta-based United Parcel Service Inc., the world’s largest package-delivery company, to Dallas-based AT&T Inc., the biggest U.S. phone company, climbed after increasing profit forecasts.
The rally trimmed the index’s loss since April 23 to 10 percent. Equities slid the most since the bull market began in May and June on concern Europe’s debt crisis would derail the global economic recovery. Shares rebounded in the past three weeks as 85 percent of the 149 S&P 500 companies that have reported earnings topped the average analyst estimates, Bloomberg data show.
Profits may rise an average 34 percent in 2010 and 17 percent in 2011, the fastest two-year growth since 1995, according to forecasts tracked by Bloomberg. More than 160 S&P 500 companies are scheduled to post quarterly results this week, including Irving, Texas-based Exxon Mobil Corp., the biggest U.S. oil producer.
Confidence among smaller investors was shaken by the May 6 plunge that erased $862 billion from the market value of U.S. stocks in 20 minutes and the last bear market, said Frederic Dickson, chief market strategist at D.A. Davidson & Co.
Professional investors are more likely to base decisions on the prospects for the biggest two-year advance in earnings among S&P 500 companies since 1995, according to Invesco’s Meyer.
‘Getting it Right’
“My money is on the institutions getting it right,” said John Lynch, chief equity strategist for the mutual fund division for Wells Fargo Asset Management, which oversees $465 billion in San Francisco. Smaller investors “are reluctant to get back in until there is a clearer path, and we know that once the path is clear, it becomes a ‘greater-fool’ theory because the institutions will have already anticipated it.”
The AAII measure of pessimism peaked on July 8 at 57 percent, the most since March 5, 2009. Bullishness has averaged 29 percent during the past four weeks, compared with 45 percent who were bearish, according to the weekly survey.
The last time optimism fell this low relative to pessimism was July 24, 2009, two weeks after the S&P 500 began a 38 percent rally, data compiled by AAII and Bloomberg show. The Chicago-based group asks a few hundred people each week through its website whether they are bullish, bearish or neutral on the stock market in the short term, according to editor Charles Rotblut.
“Individual investors were spooked by the May 6 flash crash and they’re wondering if the stock market is a fair game,” said Dickson, chief market strategist at Great Falls, Montana-based D.A. Davidson, which oversees $25 billion. “Professionals realize there have been changes in the market to prevent a repeat of that. I don’t think that’s been communicated broadly to the retail investor.”
The May 6 selloff briefly sent the Dow Jones Industrial Average down 9.2 percent, its biggest intraday loss since 1987, before paring the drop to 3.2 percent. A “mismatch of liquidity,” selling in exchange-traded funds that fed into stocks, and the use of market orders turned an orderly decline into a rout, a report by federal regulators said May 18.
The Securities and Exchange Commission is testing a program through December that pauses trading for 5 minutes when an S&P 500 stock rises or falls 10 percent or more in less than 5 minutes. U.S. exchanges also offered rules last month to standardize the process for canceling erroneous stock trades.
Individuals may limit gains in the S&P 500 as concerns about the economy and Europe’s debt crisis keep them out of the market, said Leo Grohowski of BNY Mellon Wealth Management. Federal Reserve Chairman Ben S. Bernanke said the economic outlook remains “unusually uncertain” in testimony to the Senate Banking Committee on July 21.
Investors have withdrawn $22.9 billion from mutual funds that hold U.S. stocks since April 2009, while piling more than $350 billion into bond funds, according to data compiled by the Washington-based Investment Company Institute. Individuals accounted for the majority of U.S. mutual fund assets in 2009, owning 84 percent, the data show.
Hedge funds that wager on both gains and losses in equities have boosted speculation shares will fall, according to Bank of America Corp. The lightly regulated private pools of capital have on average 27 percent more money in bets on rising prices than falling prices, below the historical average of 35 percent to 40 percent, based on data from the Charlotte, North Carolina- based bank.
“You’re seeing equities struggle because valuations and fundamentals look pretty good to the institutional investor, but the policy headwinds, the questions around sovereign debt, the macro concerns, are really worrying individual investors,” said Grohowski, who oversees $157 billion as chief investment officer at BNY Mellon Wealth Management in Boston. “There’s not one right and one wrong. We think the market is pretty reasonably valued.”
The S&P 500 trades at 14.9 times annual earnings, compared with an average of 16.5, according to data compiled by Bloomberg that dates back to 1954. The index is cheaper relative to estimated earnings for the next 12 months, with a multiple of 11.7, the data show.
Mutual funds, endowments, hedge funds and pensions say they’re preparing for a rally, according to Citigroup’s questionnaire from 120 respondents among those groups. Fifty- four percent said U.S. equities may gain 10 percent to 20 percent, compared with 50 percent in the previous reading.
Bill Miller, chairman and chief investment officer of Legg Mason Capital Management, said in a letter to investors last week that this is a “once in a lifetime opportunity” to buy stocks of large U.S. companies. BlackRock Inc., the world’s largest asset manager, is “overweight” U.S. equities, said Bob Doll, vice chairman and chief equity strategist of the New York- based firm in a July 19 interview on Bloomberg Television’s “Morning Call with Susan Li.”
“It’s been the individual investor that’s been a good contrarian indicator,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $50 billion in Philadelphia. “The stock market will continue to advance. It may be a grinding process, but it will continue to advance, ultimately pulling along retail investors that are notorious for buying high and selling low.”
Deficits Don’t Matter as Geithner Gets Lowest Yield
財政赤字への非難の真っ最中、米国債・二年もののプレミアムが最低である。つまり、よく売れているわけです。ガイトナー財務長官は“財政赤字は問題じゃない”と強気である。これを受けて、オバマ政権は、STIMULUSの住宅購入者への税金控除（８０００ドル）を続行するだろう。HOUSING ほど重要な経済要因はないからだ。米経済は、来たる二年で大きく拡張する公算が高い。伊勢平次郎 ルイジアナ
July 26 (Bloomberg) -- For all the criticism of record budget deficits, President Barack Obama can take comfort knowing that for the first time in half a century, government bond yields are declining during an economic expansion and Treasury Secretary Timothy F. Geithner is selling two-year notes with the lowest interest rates ever.
The combination of record-low yields on two-year notes, 10- year rates below 3 percent and a deficit projected to surpass $1.4 trillion for a second consecutive year is a signal that the bond market is less concerned with government spending than with getting the economy back on track.
“The U.S. has been granted more time,” said Anthony Crescenzi, a portfolio manager and strategist in Newport Beach, California, at Pacific Investment Management Co., which oversees more than $1 trillion in assets. “Because of the concerns in Europe, money has flowed to the U.S., and so it does allow the U.S. to play the game for longer, and kick the can down the road on deficit reduction.”
Yields on two-year notes fell to 0.5516 percent on July 23, the lowest since regular sales of the securities began in 1975, on signs the expansion that began in the third quarter of 2009 is losing steam. Ten-year yields dropped to a 15-month low of 2.85 percent on July 21 as Federal Reserve Chairman Ben S. Bernanke said the economic outlook is “unusually uncertain” and the central bank is prepared to take more policy actions.
Highest on Record
While investors forced European governments to cut spending and grapple with their sovereign debt crisis and pushed yields on two-year Greek debt to 18 percent, demand at Treasury auctions is the highest on record. By keeping borrowing costs near record lows, investors are providing the Obama administration with the opportunity to pursue additional stimulus measures before demanding a reduction in the deficit.
Yields on 10-year notes rose 7 basis points last week to 2.99 percent as higher-than-estimated corporate profits reduced concerns the economy may drop back into recession. Rates on the notes are still down from a high for the year of 4 percent on April 5, according to BGCantor Market Data. Two-year yields ended last week at 0.58 percent. The 10-year yield fell one basis point to 2.98 percent as of 10:35 a.m. in London.
Lowest Since 1955
The last time yields were this low as the economy expanded was in 1955, when Ray Kroc founded McDonald’s Corp. and Bill Haley’s ‘Rock Around The Clock’ topped the music charts. The 10- year note yield averaged 2.65 percent that year, according to monthly data compiled by the Fed, while the economy grew 6.4 percent, consumer prices for the year declined 0.4 percent and the government ran a fourth consecutive budget deficit.
That period has similarities with today in that bank demand for the most easily traded assets helped hold 10-year yields below 3 percent for most of the 1950s, said David Jones, 72, who rose to vice chairman during his 30 years at Aubrey G. Lanston & Co., one of the original primary dealers that trade with the central bank.
It differs in that “we’re coming out of this great crisis,” said Jones, who serves as a consultant from Denver. “You can contrast that with the post-World War II period where economic potential seemed limitless.”
Investors are concerned that the recovery will falter more than a year after Obama signed the $787 billion stimulus package and the Fed cut its target interest rate for overnight loans between banks to a range of zero to 0.25 percent. The Obama administration so far has pushed for targeted additional aid, and some economists anticipate the government will be required to enact further stimulus measures.
“Expectations of growth over the next couple of years have indeed come down,” Alan Blinder, former Fed vice chairman, and economics professor at Princeton University, said in a telephone interview. “There is still plenty of fear out there in the world financial markets, which has investors all over the world scurrying into Treasuries, even though they get paid very little.”
Average increases of 100,000 private sector jobs a month this year has been “insufficient to reduce the unemployment rate materially,” Bernanke said before the Senate Banking Committee July 21. The Fed cut its growth outlook as Europe’s fiscal crisis has led to “a broad-based withdrawal from risk- taking in global financial markets,” he said.
Blinder joined Nobel prize-winning economist Joseph Stiglitz and Mark Zandi, chief economist at Moody’s Economy.com, in signing an open letter calling on the government to increase spending to bolster the economy, published July 19 by the Daily Beast website.
“There’s definitely room in the economy” for more stimulus, said Blinder, who worked with Bernanke when he was chairman of Princeton’s economics department from 1996 to 2002.
Critics of U.S. spending plans, such as Wall Street financier Peter G. Peterson, say debt is the biggest threat to Americans’ future well-being. Peterson has committed $1 billion of the fortune he made as co-founder of the New York-based private-equity firm Blackstone Group LP to raising the alarm about the $13 trillion national debt.
The U.S. economy grew at a 2.5 percent annual rate in the second quarter, down from the 2.7 percent in the prior three months, the Commerce Department will report July 30, according to the median estimate of 68 contributors in a Bloomberg survey.
Equity investors are more optimistic. U.S. stocks rose last week, almost wiping out the Dow Jones Industrial Average’s 2010 loss, after better-than-estimated earnings at companies from United Parcel Service Inc. to Apple Inc. and Ford Motor Co.
Treasury investors would accept more stimulus without driving yields higher “if there’s a credible longer-term plan to cut the deficit,” said Christopher Bury, co-head of fixed- income rates in New York at Jefferies & Co., one of the 18 primary dealers that are also required to bid on Treasury sales.
“The populist view is that the government has essentially saved the banking industry, saved Wall Street, but at what cost,” Bury said. “If they’re going to come back with more stimulus it’s got to be targeted more towards Main Street.”
The Obama administration has said it will target assistance to state governments and small business lending. So far, there are no plans for a broader stimulus program, like last year’s, whose cost the Congressional Budget Office revised to $862 billion in January.
Treasury said in May that it had “flexibility” in financing a budget deficit the Obama administration projected would reach $1.47 trillion this fiscal year, which ends on Sept. 30. In a survey provided to the Treasury before the May auctions, bond dealers predicted a $1.38 trillion shortfall in fiscal year 2010 and a $1.18 trillion deficit in 2011.
The U.S. has already begun scaling back debt auctions, and will end July having sold $173 billion of fixed-coupon notes and bonds compared with $192 billion in April. Demand has risen 18 percent this year to a record high, with bidders offering $2.95 for every dollar of debt sold compared with $2.50 last year, Treasury data compiled by Bloomberg show.
Government debt has returned 5.7 percent this year, the best performance at this point since 1995, according to Bank of America Merrill Lynch indexes. The rally has been led by investors seeking longer-term securities as inflation excluding food and energy prices held at a 44-year low since April. The difference between yields on two- and 10-year notes narrowed to 2.42 percentage points last week from a record 2.94 percentage points in February.
Fed policy makers trimmed their forecasts for growth and raised unemployment projections at their June 22-23 meeting. For 2011, officials expect growth ranging from 3.5 percent to 4.2 percent, down from 3.4 percent to 4.5 percent, and a fourth- quarter unemployment rate of 8.3 percent to 8.7 percent, up from 8.1 percent to 8.5 percent.
“If we continue to see weaker data I think we can continue to see yields go lower,” said Michael Materasso, co-chairman of the fixed-income policy committee at Franklin Templeton Investments in New York, which oversees $215 billion of bonds. “The concern is if reports come in too weak that it really upsets the equity markets as well as the credit markets. You may have a risk-off trade and it becomes more solely a Treasury rally.”
Geithner said low interest rates show markets want the U.S. to focus on growth instead of agonizing over short-term spending. In his meetings with Group of 20 policy makers this year, the Treasury secretary has pushed for global growth to take priority over concerns in all but the most cash-strapped nations.
The U.S. will eventually need to rein in its deficit, Geithner said in a July 21 interview on the Charlie Rose show. Because that fact is so accepted, markets are not pressuring the U.S. to make the kinds of immediate cuts required in Spain, Portugal and Greece.
“If you look at financial markets, say, look at how much the Treasury is paying to borrow today, there is a lot of confidence, not just of Americans but investors around the world, that we’re going to find the political way to do it,” Geithner said. “There’s no alternative for us. We’ll be able to do that.”
To contact the reporters on this story: Daniel Kruger in New York at firstname.lastname@example.org; Rebecca Christie in Washington at email@example.com.
Last Updated: July 26, 2010 05:39 EDT
Beware the lame duck
By Charles Krauthammer
Friday, July 23, 2010
Barack Obama's considerable political capital, earned on Election Day 2008, is spent. Well spent, mind you, on the enactment of a highly ideological agenda of Obamacare, financial reform and a near-trillion-dollar stimulus that will significantly transform the country. But spent nonetheless. There's nothing left with which to complete his social-democratic ambitions. This would have to await the renewed mandate that would come with a second inaugural.
That's why, as I suggested last week, nothing of major legislative consequence is likely to occur for the next 2 1/2 years. Except, as columnist Irwin Stelzer points out, for one constitutional loophole: a lame-duck Congress called back into session between the elections this November and the swearing-in of the 112th Congress next January.
Leading Democrats are already considering this as a way to achieve even more liberal measures that many of their members dare not even talk about, let alone enact, on the eve of an election in which they face a widespread popular backlash to the already enacted elements of the Obama-Pelosi-Reid agenda.
That backlash will express itself on Election Day and result, as most Democrats and Republicans currently expect, in major Democratic losses. It is still possible for the gaffe-happy Republicans to blow it. When the ranking GOP member of the House Energy and Commerce Committee publicly apologizes to the corporation that unleashed the worst oil spill in American history, you know the Republicans are capable of just about anything.
But assuming the elections go as currently projected, Obama's follow-on reforms are dead. Except for the fact that a lame-duck session, freezing in place the lopsided Democratic majorities of November 2008, would be populated by dozens of Democratic members who had lost reelection (in addition to those retiring). They could then vote for anything -- including measures they today shun as the midterms approach and their seats are threatened -- because they would have nothing to lose. They would be unemployed. And playing along with Obama might even brighten the prospects for, say, an ambassadorship to a sunny Caribbean isle.
As John Fund reports in the Wall Street Journal, Sens. Jay Rockefeller, Kent Conrad and Tom Harkin are already looking forward to what they might get passed in a lame-duck session. Among the major items being considered are card check, budget-balancing through major tax hikes, and climate-change legislation involving heavy carbon taxes and regulation.
Card check, which effectively abolishes the secret ballot in the workplace, is the fondest wish of a union movement to which Obama is highly beholden. Major tax hikes, possibly including a value-added tax, will undoubtedly be included in the recommendations of the president's debt commission, which conveniently reports by Dec. 1. And carbon taxes would be the newest version of the cap-and-trade legislation that has repeatedly failed to pass the current Congress -- but enough dead men walking in a lame-duck session might switch and vote to put it over the top.
It's a target-rich environment. The only thing holding the Democrats back would be shame, a Washington commodity in chronically short supply. To pass in a lame-duck session major legislation so unpopular that Democrats had no chance of passing it in regular session -- after major Democratic losses signifying a withdrawal of the mandate implicitly granted in 2008 -- would be an egregious violation of elementary democratic norms.
Perhaps shame will constrain the Democrats. But that is not to be counted on. It didn't stop them from pushing through a health-care reform the public didn't want by means of "reconciliation" maneuvers and without a single Republican vote in either chamber -- something unprecedented in American history for a reform of such scope and magnitude.
How then to prevent a runaway lame-duck Congress? Bring the issue up now -- applying the check-and-balance of the people's will before it disappears the morning after Election Day. Every current member should be publicly asked: In the event you lose in November -- a remote and deeply deplorable eventuality, but still not inconceivable -- do you pledge to adhere to the will of the electorate and, in any lame-duck session of Congress, refuse to approve anything but the most routine legislation required to keep the government functioning?
The Democrats could, of course, make the pledge today and break it tomorrow. Call me naive, but I can't believe anyone would be that dishonorable.
Treasury Two-Year Yields Drop to Record Low as Economy Weakens
July 17 (Bloomberg) -- Treasury two-year note yields fell to a record low as reports showed that consumer confidence plunged to the lowest level in a year and retail sales declined, heightening concern the economic recovery is stalling.
Yields on 10-year notes traded near a 14-month low this week after minutes of the Federal Reserve’s June meeting showed policy makers noted that risks to the recovery increased. Housing starts and sales of existing homes declined last month, reports next week are forecast to show.
“The economic data just keeps coming in softer,” said James Combias, New York-based head of Treasury trading at Mizuho Financial Group Inc., one of the 18 primary dealers that trade with the central bank. “The bond market is pricing in the real possibility of slower growth.”
The benchmark 10-year note yield fell 14 basis points, or 0.14 percentage point, to 2.92 percent yesterday in New York, from 3.06 percent on July 9, according to BGCantor Market Data. It touched 2.88 percent on July 1, the lowest level since April 2009. The price of the 3.5 percent security due in May 2020 rose 1 5/32, or $11.56 per $1,000 face amount, to 104 29/32.
The two-year note yield dropped for the seventh straight week, falling 4 basis points to 0.59 percent and touching its lowest level ever, 0.5765 percent.
‘Diet of Bad News’
Ten-year yields touched 4.01 percent on April 1, the highest level since October 2008.
“We’ve moved a long way in a short period of time,” said Tom Roth, senior Treasury trader in New York at Mitsubishi UFJ Financial Group Inc. “To maintain these low levels, we need a diet of bad news. Some days we get it.”
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment tumbled to 66.5 this month, from 76 in June, data showed yesterday. The forecast in a Bloomberg News survey was for a decline to 74. U.S. retail sales fell in June more than forecast, 0.5 percent, after a revised 1.1 percent drop in May, a Commerce Department report said on July 14.
The consumer price index slipped 0.1 percent in June, the third straight monthly decrease, a Labor Department report showed yesterday. The 0.9 percent year-over-year gain in core consumer prices, which excludes food and energy, matched the smallest since 1966, it showed.
“Inflation is very low and consistent with the idea that the Fed is continuing to shift their broader concerns to a potential disinflationary environment,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “It’s all part and parcel of the same underlying theme of a low-inflation story, which suggests the Fed leaves the zero interest-rate policy in place for longer.”
‘Risk of Deflation’
Central bank policy makers at last month’s meeting lowered their outlook for inflation this year to a range of 1 percent to 1.1 percent, from 1.2 percent to 1.5 percent in April. They cut an estimate for 2010 growth to a range of 3 percent to 3.5 percent, from 3.2 percent to 3.7 percent in April. A few officials expressed concern at about “some risk of deflation,” according to minutes released July 14.
The Fed has kept its benchmark interest rate in a range of zero to 0.25 percent since December 2008. Futures on the CME Group Inc. exchange yesterday showed a 13 percent chance it will raise the target rate for overnight bank loans by at least a quarter-percentage point by December, compared with a 27 percent likelihood a month ago.
“The Fed is on record talking about deflation, which they haven’t in some time,” said Thomas Tucci, head of U.S. government bond trading in New York at primary dealer Royal Bank of Canada. “When the Fed starts to identify things by name, that means it is seriously on their minds.”
Stocks dropped, with the Standard & Poor’s 500 Index falling 1.2 percent.
Housing starts slipped to 2.2 percent in June from a month earlier, economists in a Bloomberg survey forecast before a Commerce Department report on July 20. The National Association of Realtors will say on July 22 that sales of existing homes last month fell 9.9 percent, according to another survey.
Global demand for long-term U.S. financial assets slowed in May from a month earlier as investors abroad sold stocks and accumulated Treasuries at the weakest pace in a year.
Net buying of long-term equities, notes and bonds totaled $35.4 billion for the month, compared with net purchases of $81.5 billion in April, the Treasury Department reported yesterday. Total net foreign purchases of Treasury notes and bonds were $15 billion in May, the weakest level since May 2009 and down from $76.4 billion in April.
The U.S. sold $69 billion of notes and bonds this week: $35 billion in three-year securities, $21 billion in 10-year debt and $13 billion in 30-year bonds.
To contact the reporters on this story: Cordell Eddings in New York at firstname.lastname@example.org; Susanne Walker in New York at email@example.com
Last Updated: July 17, 2010 00:00 EDT
Confidence in Obama reaches new low, Washington Post-ABC News poll finds
By Dan Balz and Jon Cohen
Washington Post Staff Writer
Tuesday, July 13, 2010
Public confidence in President Obama has hit a new low, according to the latest Washington Post-ABC News poll. Four months before midterm elections that will define the second half of his term, nearly six in 10 voters say they lack faith in the president to make the right decisions for the country, and a clear majority once again disapproves of how he is dealing with the economy.
Overall, more than a third of voters polled -- 36 percent -- say they have no confidence or only some confidence in the president, congressional Democrats and congressional Republicans. Among independents, this disillusionment is higher still. About two-thirds of all voters say they are dissatisfied with or angry about the way the federal government is working.
Such broad negative sentiments have spurred a potent anti-incumbent mood. Just 26 percent of registered voters say they are inclined to support their representative in the House this fall; 62 percent are inclined to look for someone new.
Democrats nationally remain on the defensive as they seek to retain both houses of Congress this fall. Registered voters are closely divided on the question of whether they will back Republicans or Democrats in House races. Among those who say they are sure to cast ballots in November, 49 percent side with the GOP and 45 percent with Democrats.
Overall, a slim majority of all voters say they would prefer Republican control of Congress so that the legislative branch would act as a check on the president's policies. Those most likely to vote in the midterms prefer the GOP over continued Democratic rule by a sizable margin of 56 percent to 41 percent.
Economic worries continue to frame the congressional campaigns. Almost all Americans rate the economy negatively, although compared with the depths of the recession in early 2009, far fewer now describe economic conditions as "poor." Only about a quarter of all Americans think the economy is improving.
Recent economic developments -- a declining stock market, problems in the housing industry and an unemployment report showing only tepid job growth in the private sector -- may have bruised the president's ratings.
Just 43 percent of all Americans now say they approve of the job Obama is doing on the economy, while 54 percent disapprove. Both are the worst, marginally, of his presidency. Even a third of Democrats give him negative marks here. And overall, intensity runs clearly against the president on the issue, with twice as many people rating him strongly negative as strongly positive.
At the same time, Democrats generally continue to hold the edge over Republicans when it comes to dealing with the nation's fragile economy. But that Democratic lead is slimmer than it was in 2006 before the party won back control of Congress. And among those most likely to vote this year, 39 percent trust the Democrats more and 40 percent the Republicans. About 17 percent of likely voters put their confidence in neither side.
Public opinion is split down the middle on the question of whether the government should spend more money to stimulate the economy in a way that leads to job creation. Among those who support such new spending, 18 percent change their minds when asked what they think if such outlays could sharply increase the budget deficit. In that scenario, 57 percent opposed another round of spending.
About six in 10 Democrats say they would be more likely to vote for a candidate who favors new government spending, while 55 percent of Republicans say they would be less likely to do so. Independent voters are divided on the question, with 41 percent more apt to oppose and 35 percent to support.
On at least one issue pending in Congress there is broader agreement: A sizable majority says the government should extend unemployment benefits.
Most Democrats and independents support increasing the time limit on government payments for jobless claims, and they are joined by 43 percent of Republicans. The notion clearly divides the GOP: Sixty percent of conservative Republicans oppose the idea, while 57 percent of moderate or liberal Republicans support it.
Low marks on deficit
On the question of Obama's leadership, 42 percent of registered voters now say they have confidence that he will make the right decisions for the country, with 58 saying they do not. At the start of his presidency, about six in 10 expressed confidence in his decision-making.
Obama's overall job-approval rating stands at 50 percent, equaling his low point in Post-ABC polling; 47 percent disapprove of the job he is doing. For the first time in his presidency, those who strongly disapprove now significantly outnumber those who strongly approve.
Among those who say they definitely will vote in November, 53 percent disapprove of the way he is handling his responsibilities.
The president's approval ratings reached a new low among whites, at 40 percent, with his positive marks dipping under 50 percent for the first time among white college-educated women.
On the issues tested in the poll, Obama's worst ratings come on his handling of the federal budget deficit, where 56 percent disapprove and 40 percent approve. He scores somewhat better on health-care reform (45 percent approve) and regulation of the financial industry (44 percent). His best marks come on his duties as commander in chief, with 55 percent approving.
Obama's overall standing puts him at about the same place President Bill Clinton was in the summer of 1994, a few months before Republicans captured the House and Senate in an electoral landslide.
President Ronald Reagan, who also contended with a serious recession at the outset of his first term, was a little lower at this point in 1982, with a 46 percent to 45 percent split on his approval ratings. Republicans went on to lose about two dozen seats in the House that fall.
Of course, Reagan and Clinton subsequently rebounded and went on to win reelection easily. Obama advisers find some hope from that history, even as the historical record foreshadows Democratic losses this November.
The latest poll was conducted by conventional and cellular telephone Wednesday through Sunday among a random national sample of 1,288 adults including interviews with 1,151 registered voters. The results for the full survey have a margin of sampling error of plus or minus 3.5 percentage points.
Polling analyst Jennifer Agiesta and polling assistant Kyle Dropp contributed to this report.
The Vostok 2010 military drills
The Vostok 2010 military drills started off in the Russian Far East after motorized, missile and artillery brigades were raised on alert on Tuesday, a drills spokesman said.
The spokesman said the brigades had already moved to their designated positions, where they would practice tactical maneuvers including live fire exercises.
He said the Vostok 2010 drills will take place in the Russian Far East training areas from June 29 through July 8, involving as many as 20,000 troops, 2,500 armored vehicles, 70 warplanes and 30 warships.
The drills will also feature the heavy nuclear-powered cruiser Pyotr Veliky of the Northern Fleet and the Guards guided missile cruiser Moskva of the Black Sea Fleet.
As many as 12,500 troops took part in last year's intermediate drills, while the previous large-scale Vostok 2008 drills involved more than 8,000 troops.
Gen. Nikolai Makarov, chief of the General Staff of the Russian Armed Forces, said this year's strategic drills would include the firing of live ammunition, simulated airborne assaults and amphibious assault landings.
As part of the drills, the Armed Forces will practice the deployment of additional troops in Siberia and the Far East to reinforce the existing military contingent in the region in case of a military conflict.
Makarov stressed on Monday that the Vostok 2010 drills were not aimed against any one country.
"This exercise...is not directed against any specific country or military-political bloc. It has a purely defensive nature in ensuring the security and national interests of the [Russian] state in the Far East," he said.
Russia holds Vostok strategic command-and-staff drills every two years.
KHABAROVSK/MOSCOW, June 29 (RIA Novosti)