Baltimore — (TFN): Want to know when a specific trend has no legs? Simple, when the government backs it, you know its DOA.

Just ask the folks that dumped millions into the biofuels industry. I have never seen an industry fall off the map as quickly as ethanol, except maybe clean coal, but that’s a whole different story.

Now that Cash for Clunkers is in the history books and the economy appears to be in worse shape despite jaw-dropping levels of government prodding, the Obama administration has moved on to the next vote getter, er, I mean, stimulus package, er, I mean, jobs program.

It’s a kiss of death for the “green” initiative.

If you loved Cash for Clunkers, you’re going to flat-out be infatuated what the press has dubbed Cash for Caulkers.

It includes the same market-bending incentives. It gives your hard-earned tax dollars to somebody that likely doesn’t deserve a penny of it, plus it allows immense room for corruption and deceit.

But best of all, it isn’t limited to just $4,500. Nope, this time Uncle Sam’s writing checks for up to $12,000.

Fall in line, folks.

It’s a buy-one-get-one-free extravaganza at the White House. For every dollar you spend on “weatherizing” your house, Obama wants to hand you fifty cents in return.

If the first stimulus created scores of jobs in previously unrecorded political districts, imagine what this program will do.

I think I’ll install a high-tech “man cave” in the basement and label it as “internal carbon sequestration.” The former Acorn thugs rummaging through the reams of paperwork will never know the difference.

I’ll thank you in advance for the hard-earned tax dollars.

More seriously, we’ve got another politically motivated Ponzi Scheme on our hands here. It may send a well-tuned shockwave through the economy at a politically sensitive time for Obama, but it will do nothing for the nation’s failing attempt to pull up our boots and strut out of this mess.

What it will do is have much the same effects as the ill-planned Cash for Clunkers program. (I wonder if all those car dealers got their rebate checks yet.)

As mentioned above, just about anything will fall under the cloud of “weatherization.” We’ll see taxpayer funded swimming pools, sunrooms, outdoor kitchens, sprinkler systems… you name it.

Before you know it, Obama will be calling this thing a bigger success than he imagined and Congress will shove another sticky hand in our back pockets to fund some more votes.

Meanwhile, the price of just about everything you need to pick up at Lowes this weekend will surge in value.

Want to insulate your attic? It’ll cost you plenty more if Obama gets his way.

Want to replace the window Lil’ Johnnie broke with an errant foul tip? Get out your checkbook.

But the news should be good for McCain’s favorite campaigner, Joe the Plumber. His business is going to be through the roof… for about a month. Then just like we’re seeing at the nation’s car dealerships, he’ll be lifting his phone checking for a ring tone.

As for consumers, this is a great deal if you were already planning a new kitchen or some renovations.

But for the out-of-work father of two with a drafty house and a leaking roof, it’s going to do little more than incentivize him to break out the credit card and go even further in debt.

By why deal with that now? Just like national debt, that’s something the future can deal with.

*** Really, why should I complain? We’re making money hand over fist thanks to this political pandering.

I should be more specific. TFN Strategic Trader members are making money hand over fist.

Just today, we sold the second half of a position for gains of 100%. If you recall, we sold the first half for whopping gains of 400% just a couple of weeks ago.

All of our recent gains forced me to run some calculations today. It turns out, we’re kicking some serious behind.

Out of the 35 positions we closed since our debut in March, 26 of them have been breakeven or better.

Thanks to 14 trades with 50% gains or better (yes, you read that right), we’ve got a batting average of 0.743.

Nearly 75% of our trades have led to gains. That’s nearly unheard of for an options-trading service.

Let’s just say I can’t wait to see what next year brings.

*** It’s been a strong year for TFN Strategic Trader and it’s been a strong year for the biotech sector. As I told TodaysFinancialNews.com readers this morning, if the year would end now, biotechs would beat the market by a two-to-one margin.

The S&P 500’s up by about 18%. The biotech sector is up by 39%.

That’s good news for one biotech player, Fact Biotech (NASDAQ:FACT) as it searches for a deep-pocketed buyer.

Here’s some of what I told investors this morning:

“To be certain, if your goal was to beat the markets in 2009, the biotech sector was the place to do it. Unless something dramatic happens between now and the end of the month, biotechs will have outpaced the broader markets nearly two to one over the past twelve months.

“The S&P is up 18% year-to-date, while the biotech sector (according to the AMEX Biotech Index) is up by a whopping 39%.

“That kind of figure is good news for Fact Biotech as it mulls its future.

“Since September, Biogen Idec has had its eye on a Fact takeover. Its first offer of $14.50 per share was promptly rejected. And now we are receiving word that the company’s second tender offer of $17.50 has been unanimously rejected by the company’s board.

“According to the letter released to shareholders this morning, Fact’s top brass believes Biogen’s offer significantly undervalues its product pipeline and overstates its liabilities.

“What’s even better for investors, however, is the fact that the board is essentially putting a for sale sign on the company’s shares. “Beat this price and we’re yours,” their actions say.

“The news is good for share price. As I write the stock is up by nearly three percent, surpassing Biogen’s tender price by nearly forty cents.

“What comes next?” Keep reading to find out.

*** What am I watching for tomorrow? You should know by now. It’s all about the dollar and its sudden strengthening. The greenback’s up again today.

Gold bugs managed to stop a week’s worth of bleeding this morning, but if the dollar rises again tomorrow, don’t expect today’s gains to hold.

What’s more, next week is the final expiration date of the year. All sorts of crazy things will happen as those big institutional buyers shore up their books for an end-of-the-year review. It won’t be good for bullion hoarders.

In the near term, we think the prospects for job growth look incredibly bleak. Banks aren’t lending. Companies aren’t hiring or investing heavily in R&D, and corporate profits are up only because of cost cutting measures, like layoffs, rather than bottom line revenue growth.

In the long term, however, certain industries look primed to blossom like plastics did in the 70s and semiconductors, personal PCs, and telecom did in the 80s and 90s. Barry Ritholtz at The Big Picture points out ten niche industries he thinks will fill in the gaps and push the world economy forward. Here are his top ten (listed in order of biggest near term potential.)

1. Nano Technology

2. Green Energy

3. Battery technology

4. Genomics/Stem Cell Research

5. Web 2.0/3.0

6. Robotics

7. Life extension Technologies

8. Bio-Agriculture

9. Atmospheric Engineering

10. Terra forming/Extra Planetary Colonization

Another one we’d add to his list is human computer interaction technology (HCIT). HCIT is a new breakthrough technology that is set to change the way we interact with computers. It works by using tiny chips installed under the surface of electronic devices. When activated, the chips deliver a “touch” response that you can actually feel.

So let’s say you had an HCIT-enabled computer mouse – and you moved the cursor over the picture of a beach. Even though you’re actually touching a flat mouse button, this technology makes it feel like you’re touching sand… or even rolling waves. The chips send the message to your fingers like a speaker sends a message to your ears.

It’s pretty incredible technology. Microsoft, BMW, Sony and Samsung have already jumped on board. So how can you make money in this emerging multibillion dollar market. Karim Rahemtulla of Mt. Vernon Research outlines exactly how to profit from the coming boom here.

U.S. gross domestic product (GDP) shrank 1% in the second quarter, following the first quarter’s 6.4% drop. The $787 billion Obama stimulus package, smaller decreases in business spending and slowing erosion of the housing market all helped to slow GDP contraction, according to the Bureau of Economic Analysis. A poll of 78 economists surveyed byBloomberg News showed a median estimate of a 1.5% decline in GDP.

“The recession is slowing but we still need to get households and businesses to start spending again,” said Joel Naroff, president of Naroff Economic Advisors, Inc.

With such a dramatic drop in the rate of contraction, the third quarter could sport the first expansion in more than a year. The last time the GDP grew was the second quarter of last year, thanks in large part to the $112.4 billion in stimulus payments to taxpayers.

Despite rising unemployment and a looming jobless recovery, Naroff is optimistic about consumer spending.

“Vehicle sales were actually up from the first quarter and are likely to be even better this quarter, so consumer weakness should not be a major concern,” Naroff said, adding that he’s optimistic that strong growth isn’t far off. “[GDP growth] could be either the third or fourth quarter and could approach 5%.”

Still, until there is real growth in consumer spending, any recovery will be difficult to sustain.

“We’ll get more support from government programs in the second half, but if you want a strong recovery, you need a strong consumer, and we are not seeing that,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. told Bloomberg.

A recovery may have to rely on business and government spending. Business investments, while still falling, slowed to a rate of 8.9% in the second quarter, a far cry from the first quarter’s 40% drop. The decline equipment and software purchases also slowed, falling a modest 9% compared to 36.4% in the previous quarter.

On the government side, federal officials – including U.S. President Barack Obama – say less than a quarter of the stimulus package has been spent so far.

“You just can’t push [funding] out that quickly, partly, not just because the federal government has to process applications but also because states and local governments have to gear up to get these projects going,” President Obama said in an interview with Fox News earlier this month.

Without consumer spending, which makes up more than two-thirds of the economy, any recovery will likely be agonizingly slow.

“We’re going from recession to recovery, but at least early on, it’s not going to feel like one,” said the chief economist at Moody’s Economy.com, Mark Zandi in an interview with The New York Times. “For economists, this is a seminal part in the business cycle, but for most Americans, it won’t mean much.”

Indeed, the unemployed or the underemployed struggling to make ends meet it’s hard to be optimistic, even as the markets, corporate profits and other economic data show improvement.

“At some point it becomes Obama’s economy, not Bush’s economy anymore,” said Dean Baker, co-director of the liberal research group Center for Economic and Policy Research told The Times. “He made a big mistake in overselling the first stimulus, and then in celebrating all the ‘green shoots.’ That just opens the door for people to say, ‘Where are my green shoots? I still don’t have a job.’ ”

Source: U.S. GDP Contraction Slows, but the Road to Recovery Will Be Rocky

The President’s man at the Treasury, Tim Geithner, is also towing the party line. On Friday Turbo Timmy spoke of “substantial improvements” in trying to beat back the “worst recession globally we’ve seen in generations.”

Why the defensive posturing? Because the White House is feeling touchy and irritable as the polling numbers sink. The rotten jobs market, it seems, has cut into Mr. Obama’s popularity. A poll of Ohio voters showed approval numbers falling from 62% to 49% in a mere two-month span.

If the stimulus is “working,” then, heaven forbid how things might look had there been no stimulus at all.

Or hold on, wait a minute. How might things have looked really and truly with no stimulus? What would have been different?

Heads I Win, Tails You Lose

This is one of the challenges in dealing with a very sick patient (i.e. the U.S. economy). Sometimes the patient gets better all by himself. Other times, the medicine that is supposed to be helping actually makes things worse. Without the proper diagnostic tools, though, there’s often no way to tell.

And not all deeply ill patients die, of course. Some really do make a self-powered comeback. Shamans and faith healers often rely on this simple binary outcome to set up a “heads I win/tails you lose” type deal for themselves.

That is to say, if the sick patient gets better, then clearly it was the shaman’s powerful medicine that made it happen.

But there are other alternatives, each tailored to the situation at hand. If the patient fails to get better but still lives, then the shaman can take credit for keeping him from death’s door. And if the patient up and dies, well… then the shaman was called in too late. Or the family members did not have enough faith. Or there was a hidden mortal sin, or some other exculpatory thing.

That’s the trouble with big decisions and messy historical turning points. There’s no way to rewind the tape, so we can’t always be sure what helped or what hurt – or even which actions were justified in the first place.

The weight of history does suggest at least one thing. When it comes to intervention, the government’s track record isn’t so hot. In fact, not to put too fine a point on it, it stinks. And when you think about it, the logic as to why is fairly straightforward.

Take the whiz-bang idea of creating jobs, for example. Creating jobs – real, sustainable productive jobs – is no easy task. Just ask any hard-working entrepreneur. So why should the government be any good at it?

And if the government possessed half a clue when it comes to creating jobs, why wouldn’t that capability be rolled out in good times as well as bad? If the jobs genie is all he’s cracked up to be, why wait for history’s darkest hour to rub the magic lamp?

Quantitative Wheezing

And then there is quantitative easing, or QE for short. What does the historical record say about quantitative easing? Basically two things. “Japan tried it… didn’t work.”

Hugh Hendry, co-founder of London-based Electica Asset Management, had this to say about QE in a recent Financial Times interview:

…There is no precedent, no precedent, that says quantitative easing succeeds. None. I’ll give you one actually, there is one, because there was some quantitative easing exercised by the Federal Reserve in 1933-34, and it did initiate a dramatic economic recovery without inflation. But I hesitate to say that was actually a success of quantitative easing, because it was preceded by a 46% collapse in nominal GDP.

So perhaps if you’re telling me that nominal GDP will collapse by 46% next year, then I would believe, and I would come back to you and I’d say then quantitative easing might have a chance in succeeding.

For the record, U.S. GDP (gross domestic product) was an estimated $14 trillion to $15 trillion in 2008. A nominal 46% collapse would nearly cut that in half, taking us back to 1996 levels. The Dow was around 5,000 back then.

So What’s Worked Before?

This leads to an important question. What can history teach us about getting out of jams? The last economic jam we faced of comparable size and scope was the Great Depression. How did we beat it once and for all?

There are many different theories as to how America finally beat the Great Depression. Some give credit for the comeback to FDR (Franklin Delano Roosevelt) and his far-reaching policies. Others say no, FDR really didn’t help much at all (or even made things worse) – it was World War II that finally pulled us out. And still others say, simply, that “time heals all wounds,” even economic ones, and we simply had to slog our way through.

History rarely obliges historians by providing neat, packaged answers. Most sea-change type events have many factors involved, not just one. But still, your humble editor suggests there is one very powerful, yet generally overlooked element that brought us out of the Great Depression. That element was consumer savings.

Here is a statistic that will make you blink. According to journalist-historian William Greider, personal savings levels hit a whopping 25 percent of income in 1943 and 1944.

World War II played a clear role. As Greider writes, “with so many millions conscripted for war, unemployment vanished and scarcity became the problem.” Those who were not drawn into the WWII effort saw their income levels rise. Women saw as much demand as men, a new development for the times. And because the country was on a war footing, a sort of forced saving effort was in place. Families had to make do on an “austerity budget,” and wound up banking much of what they earned.

This huge build-up of savings – 25 cents out of every dollar earned – set the stage for an explosion of consumption in the years to follow. After the war, an era of new products came rushing in. And consumers had both the pent-up savings and pent-up desire to spend, spend, spend.

A Long, Long Road

So what does history have to say about our current predicament? Mainly that, when it comes to getting an economy back on track, there is little that the government can do (case in point Japan).

And secondly that, short of starting a new World War and railroading the nation into a forced austerity program, the country’s best hope probably resides in the U.S. consumer getting his fiscal house in order.

As Tom Petty once sang about love, “it’s a long long road.” That lone dip on the chart above shows where consumer savings rates actually went below zero at the height of the bubble. The impressively tall bar on the far right – representing one of the fastest savings upswings in more than a decade – tops out at just 4%.

U.S. consumers will probably never again save twenty-five cents out of every earnings dollar. There is too much financial innovation and benign leverage built into the system to dial back the clock that far. (And a little bit of leverage, like the kind that lets a young couple make affordable car payments, is a good thing.)

But could the consumer once again save at double-digit savings rates, as we saw not 20 years ago? Could the savings rate more than double from here, even as a hefty chunk of income goes towards paying off a serious overhang of debt? Absolutely.

And that’s why the U.S. economy is never, ever going back to “the way it was” – if by “the way it was” one means the gross runaway excesses of the past two decades. There will be new mistakes, new insanity, new bubbles… but for now and the foreseeable future, we’ve got a hell of a lot of saving to do.

Source: Guess What Really Brought Us out of the Great Depression?

Treasury Secretary Timothy Geithner is once again traveling abroad to assure foreign nations that their investments in the United States are safe But this time it’s not China he’s trying to assure; it’s another large supporter of the dollar: Saudi Arabia.

While inflation has held steady in the face of increasing budget deficits, the purpose of Geithner’s multinational tour will be to repeat assurances that such deficits will not trigger a strong bout of inflation and in turn sink the value of the dollar and foreign holdings. Last month, Geithner was in China – the largest holder of U.S. treasuries – to make the same assurances.

Geithner reiterated the Obama administration’s commitment to protecting the value of the dollar and maintaining investor confidence in the U.S. financial system in an interview broadcast on CNN’s“Freed Zakaria GPS.”

“A strong dollar is in the interest of the United States. Of course, I deeply believe that,” Geithner said. “Our commitment … to the world and of course, the American people, is to make sure we’ll put in place the policies that can sustain confidence in this economy and this financial system.”

While rising unemployment – well beyond what the Obama administration expected – is prompting talk of a second stimulus package, Geither said it’s too soon for that. Only 11% of the $308 billion stimulus funds allocated to discretionary programs will be spent in the current fiscal year, and only half by the end of fiscal 2010,Money Morning reported last week.

“I don’t think that’s [deciding on a second stimulus is] a judgment we need to make now,” Geithner said Sunday on the CNN program. “We can’t really make it prudently or responsibly.”

Assurances from the man in charge of the world’s largest economy are important to those whom have invested in it, but several economists believe the Obama administration needs to do more to address worries about U.S. deficits.

“We have a fiscal policy that will ultimately undermine the value of their holdings and that has got foreign investors nervous,” said Mark Zandi, chief economist at Moody’s Economy.com told The Associated Press. “They are seeking assurances that the U.S. is committed to dealing with its long-term deficit problems.”

Geithner will also discuss with officials from Saudi Arabia and the United Arab Emirates the lack of stability of oil prices, which rallied about 115% to $73 a barrel after falling below $34 a barrel in February. The Commodity Futures Trading Commission (CFTC) last week said it will hold a series of hearings this month and in August to determine whether or not it should place new limits on energy futures contracts.

There’s a good chance that the United States and other economies will start growing again, Geithner said in a Reuters interview.

“In my view there are significant risks and challenges ahead,” he said. “We have a very powerful set of policies in place, coming on stream. I think there is a very good chance we will see the U.S. economy and the world economy get back to recovery, get growing again, over the next few quarters.”

Source: Geithner Takes Dollar Assurances to Mideast ]]> http://www.contrarianprofits.com/articles/geithner-takes-dollar-assurances-to-mideast/19081/feed 0 http://www.contrarianprofits.com/articles/blood-in-the-streets-2/19072 http://www.contrarianprofits.com/articles/blood-in-the-streets-2/19072#comments Tue, 14 Jul 2009 17:00:55 +0000 Chris Gaffney http://www.contrarianprofits.com/?p=19072 Red ink flows…  Japan suggests diversification for their reserves…  Commodity currencies rebound…  Data galore for the rest of the week… And Now… Today’s Pfennig!
Good day… Chuck had a late night down at the ballpark watching the home run derby, so he asked me to take the helm of the Pfennig this morning. I’m going to try to get this one out a bit earlier than I did last Friday, so I’ll get right to it.

The biggest news to hit the markets yesterday was the Treasury Department’s report that the deficit in June totaled $94.3 billion. This monthly deficit pushed the deficit for the fiscal year to over $1 trillion dollars for the first time, and we still have another quarter to go until the…

• The U.S. Federal Reserve has opted to hold the federal funds rate at 0% to .25% and “continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” the central bank said in a statement yesterday (Wednesday). Information the Fed received since its last meeting in April suggests “the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months.”

• As unemployment in the United States is expected to keep rising, the world’s largest economy may need another stimulus package, billionaire Warren Buffett said in a Bloomberg Televisioninterview. “It looks like we’re going to need more medicine, not less,” Buffett said. “We’re going to have more unemployment. The recovery really hasn’t got going.” Buffett, who like many economists sees the unemployment rate surpassing 10%, said the economy “hasn’t turned yet. There’s no telling how long it will take. It will happen.”

• The Methodist University Hospital Transplant Institute in Memphis, Tenn. confirmed a weekend Wall Street Journal reportthat said Apple Inc. (Nasdaq: AAPL) Chief Executive Officer Steve Jobs had a liver transplant. The confirmation came with the permission of Jobs, who has an “excellent prognosis.” The hospital did not say when the transplant took place, but The Journal puts the procedure at sometime in April, citing an unnamed source. Billionaire investor and Berkshire Hathaway Inc. (NYSE: BRK.A,BRK.B) Chairman and Chief Executive Officer Warren Buffett weighed in on the controversy on whether Jobs should have revealed his condition to investors in an interview with CNBC: “If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American public, the Berkshire shareholders about it. I work for ‘em. Some people might think I’m important to the company. Certainly Steve Jobs is important to Apple. So it’s a material fact.”

• Although gas prices are significantly lower than they were at this time last year, fewer Americans will be traveling on July Fourth weekend, according to a survey by AAA. The auto club expects 37.1 million travelers, or 12% of the U.S. population to take a trip of 50 miles or more from home this year, a decrease of 1.9% from last year and a 12% decrease from 2007, months before the recession began. Factors such as the rising unemployment rate and sagging personal incomes are to blame for the drop in travel, AAA said.

• The world’s largest seed maker suffered a 14% drop in profit and disclosed plans to cut 900 jobs, blaming the deteriorating performance of its mainstay revenue source. Monsanto Co.(NYSE: MON) reported a net income of $694 million, or $1.25 per diluted share on revenue of $3.1 billion for the third quarter. That compares to a net income of $811 million, or $1.45 per share on revenue of $3.5 billion in the same quarter last year. Executives were not expecting a drop in performance of the herbicide Roundup, once a primary revenue source for the company. Several generic products hurt the prices for Roundup and profit on the product is expected to drop by half this year, Monsanto said. Shares for the company closed yesterday (Wednesday) at 76.16, down 3.9%.

• The Securities and Exchange Commission (SEC) voted unanimously to institute tough new rules for money market funds to help avoid a repeat of what happened when the collapse of the Reserve Primary Fund triggered a flurry of redemptions in the $3.6 trillion market. The proposal will prohibit money market funds from buying illiquid securities and requiring them to hold at least 5% in liquid securities such as cash. “These proposals are designed to increase the ability of money market funds to weather future economic storms,” said SEC Chairman Mary Schapiro. “The stability of money market funds in times of turmoil is enormously important both for investors and for the securities markets. The proposals also would improve the operations of money market funds and oversight of their investments during calmer times, which can further protect funds and increase public awareness of potential risks.”

• The worst recession in 60 years has taken its toll on everyone, including the millionaire’s club. According to a report from Merrill Lynch Global Wealth Management and consulting firm Capgemini, the number of people with assets of between $1 million and $30 million fell by 14.9%, BusinessWeek reported. The drop in millionaires represents the largest decline in the report’s 13-year history, said Ileana van der Linde, a principal with Capgemini. “We’ve never seen such a decline in all the years we’ve been doing the report,” she said. The recession has now reduced the cumulative wealth of the world’s millionaires by 19.5% to $32.8 trillion.

Source: Investment News Briefs Thursday, June 25, 2009

Assets like iron ore and copper would suddenly look bullish. Countries like Australia, Brazil and Canada would suddenly have brighter prospects. Asia as a whole would be more attractive to investors.

China’s voracious appetite for commodities drove the second-biggest monthly haul of crude oil and tripled aluminum imports, but very little steel, aluminum and coal went the other way.

“Industrial production is coming online and demand is rising. But sentiment may be tempered by the view that some of the material is being stockpiled and… consumption hasn’t risen as quickly as imports,” Ben Westmore, commodities economist at National Australia Bank, told Reuters.

Copper imports jumped 6.6% from March to April, to 399,833 tons; iron ore imports soared 9.4% to 57 million tons, and crude oil imports hit 3.93 million barrels per day, a 2% rise, customs data showed.

But China’s exports fell more sharply than most analysts had expected in April. The value of goods and services leaving the country was down 22.6% compared to last year, whereas economists had expected an 18% drop.

The drop in exports is leading some experts to speculate that China’s economy is being sustained solely by the $585 billion stimulus package the government is quickly deploying throughout the country. The stimulus program is heavily laden with infrastructure projects, explaining in part China’s huge demand for raw materials.

But some of that spending is spilling over into sales of construction equipment, much of it imported from the United States. Caterpillar Inc. (NYSE: CAT), the world’s largest maker of bulldozers and excavators, is among several companies already pointing an improvement in sales to China.

“March and April were pretty strong months for sales in China,” Caterpillar Chief Executive Officer James Owens said on an April 21 conference call with analysts.  Owens contends China’s stimulus spending for public works projects is working more quickly than in the U.S.

“When they say ’shovel ready,’ they mean nine weeks, not nine months,” he said.

Still, the drop in exports could put a chill on China’s imports of raw materials and construction products if consumption doesn’t pick up in the West.

“Although the downward trend is in line with our expectations the fall in exports is steeper than we anticipated,” Wang Xiaohui, an analyst at Sinolink Securities in Shaghai told Forbes.“Exports are likely to drop further in the near term as economic indicators in the United States and Europe, such as industrial output and retail sales, are not looking up.”

The U.S. trade gap with China increased to $15.6 billion from $14.2 billion from March to April. The gain in imports from China overshadowed an increase in Chinese demand for American-made goods that pushed U.S. exports to the highest level since October.

But the recent stock market surge and other economic data lead Wang to conclude that the lull in U.S. demand for China’s exports will be short-lived.

“In terms of exports, we’re looking at a better second half than first half, with the U.S economy stabilizing, which will provide support to China,” Wang said.

Source: China Imports Record Amounts of Copper and Iron Ore, but Exports Drop on Slack Global Demand

The package of proposed reductions fills in the fine print of a $3.55 trillion budget outline approved by lawmakers in April that contains Obama’s top agenda items, including a healthcare overhaul, a push for renewable, clean-energy sources and changes in education funding.

The President wants to cut or end a number of programs that he feels are wasteful or ineffective to take the first toward getting spending under control. But the administration’s attempt at bringing fiscal discipline to Washington has already been met with skepticism by analysts.

“Every government program – no matter how wasteful – will be defended by its recipients and congressional champions,” Brian Riedl, a budget expert at the Heritage Foundation, a Washington-based research group told Bloomberg News. “Unless Obama puts the weight of the White House behind his spending cuts, Congress will ignore them.”

The cuts are miniscule compared to the overall budget package and deficits that will be ushered in the next few years. The $787 billion stimulus package Obama pushed through Congress combined with the $700 billion Troubled Asset Relief Program (TARP) bank bailout will come on top of the $1 trillion deficit the administration inherited when he took office in January.

Total savings from the cuts, even if they were accepted by Congress in their entirety, would represent a paltry 0.4% of the overall budget. The Congressional Budget Office projects the deficit will be $1.85 trillion this year, about four times the previous record, and $1.38 trillion in fiscal 2010.

“Even if you got all of those things, it would be saving pennies, not dollars. And you’re not going to begin to get all of them,” Isabel Sawhill, a Brookings Institution economist who waged her own battles with Congress as a senior official in the Clinton White House budget office, told the Washington Post. “This is a good government exercise without much prospect of putting a significant dent in spending.”

Only about 80 of the proposed cuts are new – the others had been previously revealed.  And most of the cuts will be from the “discretionary” budget, avoiding the so-called untouchable “third-rail” entitlement programs of Social Security and Medicare.

Those two programs account for more than 40% of government spending, meaning the more difficult work on deficit reductions has been left for another day.
“More serious efforts at deficit reduction are going to require entitlement and tax reform – that’s where most of the money is.” Marc Goldwein, policy director of the bipartisan Committee for a Responsible Budget, a Washington-based research group, told Bloomberg. “To really get the deficit under control, we’re going to have to start thinking bigger,” he said.

But some in Congress defended the administration’s approach, saying the list of program reductions is just the start of a more comprehensive effort to cut spending and pull the reins on the skyrocketing deficit.

“It depends on what it means over the scope of five and 10 years.” Representative John Larson (D-Conn.) told Bloomberg.  It’s a “deep, cavernous hole where we have been left, we’re looking a long way up but it’s a steady climb” using the budget plan agreed to by Obama and Congress, he said.

Source: Obama’s Miniscule Budget Cuts Face Stiff Opposition