When I wrote last, I stated that investors are looking at the actions in Washington most keenly but that soon they would start looking at earnings. The stage is being set as I write for that to happen.
First, let us look at Washington. Several recent actions were positive.
• In late January, President Barack Obama signed an executive order lifting a ban on sending U.S. government funds to organizations that provide family planning that include abortion in the conversation.
• Earlier this month, Interior Secretary Ken Salazar pulled the plug on 77 disputed federal oil and gas leases in Utah. He rejected leases for some 103,000 acres of public land several national parks.
• The Environmental Protection Agency has set a date of March 5 for a public hearing on the issue of the California waiver. California and 13 other states wish to impose a 30 percent reduction in tailpipe emissions by 2016 -- a measure that would require automakers to dramatically boost the efficiency of light trucks and passenger cars.
• This week the Securities Exchange Commission has taken an important step toward restoring confidence in their oversight. They won a settlement in which the companies have agreed to pay $579 million in fines, the biggest fines ever paid by U.S. companies in a foreign corruption case. The SEC had alleged that Halliburton and KBR were part of a joint venture that spent $182 million to bribe Nigerian government officials over a 10-year period to win more than $6 billion in construction contracts.
Other actions are not encouraging.
• Utterly disgracefully a Justice Department lawyer sent by the new attorney general, Eric Holder, appeared at a case involving five men who were seized and transported to American facilities abroad or to countries known for torturing prisoners. The new administration's lawyer continued the Bush administration's position that state-secrets privilege held and that the lawsuits ought to be tossed out of court.
• Then there was Thomas A. Daschle's nomination. Former U.S. Senator Daschle has served as a lobbyist, no matter what he calls it, for the health care insurance industry over the past few years. He had no business being nominated to reform health care. Thankfully, public outrage ran him out of town, though the Republicans were fine keeping him, as was President Obama, apparently.
• Treasury Secretary Timothy F. Geithner has continued to disappoint. However, in fairness, the answer is, as Nicholas D. Kristof stated in his column in the New York Times, to tar and feather the 100 leading bankers. This would vent the anger we all feel and allow us to spend money stabilizing the mess they made. Mr. Geithner is surprisingly obtuse as to the need to castigate the titans of investment banking. The result is that the resulting outcome will either be far more modest than what he seeks or will be completely different from what he seeks.
So it is not all good. Nonetheless, I am of the opinion that the view from 10,000 feet is pretty comforting. The President and his team are reaching out to Republican party members in a number of ways. The result is legislation that is less than perfect but still robust enough to have meaning. The pursuit of environmental objectives will be strong. With fingers burnt over Daschle, President Obama will avoid being cozy with corporate insiders.
Now I can finally, after months of Washington watching, start Wall Street watching. Although the reforms we need to dampen volatility have not been set yet, we can see some indications that the beast is spent. The London interbank offered rate (Libor) stands at about 1.23% today. During the peak of the credit crisis last October, it was 4.82%. For the non-wonks, this means credit is easing somewhat. The stock market, while not charging forward, is still above its lows of November 2008 by 9.4%. Consumer confidence numbers are stable. They are at recessionary figures, but not worsening since October. Finally, retail sales actually rose by about 1% in January over the previous month.
You may argue that these figures are at a miserable level and you would be right. However, the rate of decline has slowed in all indicators, stopped without rising in others, and actually risen here and there. The stock market looks ahead of economic conditions. A month or two of improvements in a few corporate earnings or a few economic indicators will give street analysts all they need to start tiptoeing back into stocks.
In summary, the actions of Washington are not impeding a stock market recovery, the economy is miserable but stalled, some economic indicators are staring to firm or even rise. We now await earnings that are better than prior quarters.