October 4, 2011

Stephen Moore, well-known economic writer and policy analyst, continues his webinar series with WealthVest Marketing. Stephen addresses the current status of the presidential race, the effects of China’s currency sanctions and three free trade agreements, the problems in Washington and the implications of the Federal Reserve’s new “twist strategy”.

October 4, 2011 – Stephen Moore Webinar

Wade: It’s the first week of October, and that means we have Mr. Stephen Moore with us today. Stephen, are you there?

Stephen: I am here, Wade. Great to be with you.

Wade: It’s great to have you. I don’t know where you’d like to start, but I have my ticker tape open, and it appears that the Governor from New Jersey has decided not to run for President; that seems to be the news. Do you have any thoughts on that?

Stephen: Yes, that’s a big deal, Wade. I think this is an important story. Obviously, everybody is following so closely the Presidential race, and this is a very significant development. There are going to be a lot of Republicans whose hearts are broken by this news that Chris Christie is officially out of the race. He’s giving his press conference within minutes right now. So, I’ll wait until we actually hear the words from his lips that he is out of the race, but that’s what all the reports are from the news agencies.

For the last several months, Wade, Republicans and conservatives, especially, around the country and big money people on the Republican side of the isle have been waiting for Christie to get in this race. A lot of the traditional money that gets in the Presidential race on the Republican side had been sitting on the sidelines waiting for Chris Christie to make his decision. It now looks like he is officially out for good. That means this race will now take a sharper focus.

There’s no question in my mind right now that things are looking really positive for Mitt Romney. Romney, in fact, I would say the last three months has just gone ideally for him. You’ve had the situation where he’s continued to do pretty steadily, rise pretty steadily in the pools.

Then you had the phenomenon of Rick Perry, and the joke is Rick Perry is the strongest the day that he announced his candidacy. Since then, it’s just been a downward slope for him. In fact, the latest polls, after the disastrous debate they had ten days ago in Florida, he’s continued to slide. He fell again in the overnight polls that were released this morning. Whether he can recover from that is a big question mark. I think he can, but at this point, it is improbable. His performance in the debates, and his performance on the stump have been underwhelming to people. He hasn’t looked Presidential. That’s partly because if you’ve never gone through this process before, you’re at a disadvantage. Most guys who are successful in this process and win these primaries, with a few exceptions like Barack Obama, have gone thorough it before and they faced the media firing squad.

The point that I think is really interesting about where this race is headed right now is if Rick Perry continues to falter, I do think this race shapes up to Mitt Romney versus someone. Someone will emerge as the challenger to Mitt Romney for the nomination. The big question is who will that be.

I would suggest to you, the guy who obviously is coming on really strong in the last two weeks has been Herman Cain, the businessman, the former Godfather’s Pizza CEO, who is an incredibly powerful speaker, very charming. He had that moment in the debate, if you didn’t see it, where he talked about overcoming cancer and conquering his fight against cancer, which was a real heart-thumping moment for people, and it really tugged at your heartstrings. He is very attractive to conservative voters. He’s got this 999 plan: nine percent sales tax, nine percent income tax, nine percent business tax. That seems to be catching on with people. He may emerge as the alternative to Mitt Romney.

The other person to keep an eye on, by the way, is Newt Gingrich of all people. Newt is also rising in the polls. He’s now at about 12 percent. That’s still significantly behind where Mitt Romney is, but I do see him right now in solid fourth place. What people are going to want to pay attention to is whoever wins Iowa is going to be – if Mitt Romney wins Iowa, he’s in very strong shape. If he doesn’t and it’s someone else, that person is likely to be the person who emerges as the challenger for Mitt Romney. But right now, I would say the odds are about 60 to 70 percent that Romney is going to be the Republican nominee.

The only other thing I’ll say about the Presidential race now is Barack Obama’s numbers continue to fall. This weekend they fell. He is extremely vulnerable right now. That doesn’t mean he can’t recover. He certainly can if the economy gets better. He is not looking strong right now. There is a little boomlet, a mini boomlet on the Democrats side for Hillary Clinton. I don’t take that too seriously, but I wouldn’t rule it out completely. If things continue to go poorly for Barack Obama, that you might see a movement to try to draft Hillary as the alternative if Obama looks completely unelectable. I don’t think that’s likely, but I want to let your callers know that it is a possibility. I’ll stop there. That’s the current state of affairs in the Presidential race.

Wade: I have a hard time seeing that Clinton would be a Teddy Kennedy and take on the incumbent President, but anything is possible. Let’s go back to Mitt for a second. I’m confused a little by the Republicans. Here’s a guy who won the Republican Governorship in a blue state by all intents and purposes, and had a very successful legislative period. He had several pieces of major legislation, tax legislation. They can deride it now, but he got health legislation that came out of the Republican think tanks passed. He has had a distinguished business career. And by the way, half of the population thinks he’s pretty damn handsome. I am a little confused, what’s the waiting for?

Stephen: That’s a great question, and let me try to flush this out a little bit. First of all, everything you said about Mitt Romney is right. Although, some people think he looks like a Ken doll, his hair may be too blow-dried.

Wade: Only when he stands with his wife.

Stephen: Exactly. You’re right. He’s had an incredibly distinguished and successful business career. He turned around the Olympics in Salt Lake City. He’s a turnaround artist, and that’s something a lot of people think the country needs right now is a turnaround artist to turnaround the nation’s economy. Those are his assets, no question about it. He’s a businessman; he knows how to run things. His problem with conservatives is a couple of things. One is that – you mentioned the healthcare bill, the conservatives hate that bill. They see Romneycare and Obamacare as almost identical. That’s a big, big problem for him. Probably not too big to overcome, but it is certainly a deficiency as Republicans look at his record.

Wade: But Stephen, the mandatory aspect of it came out of the conservative think tank, so I’m confused.

Stephen: You’re right about that Wade. I think a lot of conservatives are having second thoughts about the mandatory aspect of it. A lot of the Tea Party people who elected Republicans in the 2010 elections, are not enthralled with the idea of a mandate. As you know, by the way, the mandate is what is being challenged in the courts. A lot of conservatives, Republicans, think the mandate is unconstitutional. You’re right on the facts, Wade, but in politics, remember, the most important thing about politics is perception is reality. The perception is that that bill was a liberal bill that did for Massachusetts what Obama wants to do for the country and that doesn’t play well with Republican voters.

Everywhere I go when I talk to non-ideological Republicans, Republicans who are middle of the road and independent, they’re very attracted to Mitt Romney because they do see him as a successful businessman. On the Hillary thing, let me say, you’re exactly right. The only way the Hillary thing could ever happen, Wade, is if Obama’s numbers look so poor that the Democrat leaders went to Obama and said look, you can’t win. We need somebody else. If he voluntarily said okay, I’m not going to run and hands it to Hillary. There would not be a brutal primary against an incumbent President like we saw with Ted Kennedy running against Jimmy Carter. That’s not going to happen.

Wade: So, you’re saying Johnson and Humphrey?

Stephen: Exactly. Something like that. Again, that’s a long shot; I’m just saying it’s a possibility.

Wade: We’ve talked about this twice now, but I’m going to ask the question and I’ll try to phrase it properly. Obviously, Senator Obama had his particular glass ceiling to break through. Of course, the base of the Republican Party was positive about that. Mitt has a different ceiling. The base of the Republican Party is evangelical Christian. From the surveys I read, Mitt’s faith is a big problem with them. Is that one of the problems or not?

Stephen: It’s interesting you bring that up because it was a much bigger –

Wade: Everybody else is.

Stephen: Well, not so much, though. In my opinion, it was a much bigger problem for Mitt Romney in 2008 than it is right now. It is because of two things. One, I think the kind of – I don’t know if bigotry is the right word to use – but the backlash against Mormonism has died down a little from where it was in 2008. I think the more important issue is that people just aren’t focused on that right now. They’re not focused on abortion. You’re right, they’re not focused on cultural issues right now. They are focused on the economy and the Republicans are focused on beating Obama. So, I think those issues like Mormonism or the fact, as you know, Mitt Romney has flip flopped three or four times in his political career on the issue of abortion.

Go back and look if you want to see something funny, YouTube Mitt Romney versus Ted Kennedy debate, which I think was back in 1994 where Mitt Romney says many, many times in that debate I’m pro-choice, I believe in a woman’s right to choose, and of course, he’s not saying that now. That’s a bit of a problem except it’s not a big of a problem as you might think, Wade, because of the economy and because of Republicans being so focused on beating Obama.

Wade: The out party when they’re replacing one of their own party, they can afford to be fixated on purity. When they’re trying to regain power, purity goes out the window.

Stephen: Well put. I agree.

Wade: It’s interesting, I saw yesterday perking up on the legislative agenda is the issue of the trade bills, the three countries. I think it was Krugman wrote today or yesterday on the China – the senate action against China. Trade is a complicated thing politically because you and I might be free traders, and we may be from different parties, but free trading is never popular with either party in a recession. How do you read these things?

Stephen: You’re exactly right about that Wade. That’s true that free trade, I think almost all economics with a few exceptions, maybe Paul Krugman, believe that trade is something that makes everyone richer and makes our economy more prosperous and makes China and India and the countries we trade with. That’s a given except for Paul Krugman. You know that trade is good because Paul Krugman is saying it’s bad, and Paul Krugman is always wrong.

The politics of this are really interesting. I think investors should be paying close attention to this. I really do. If you look at the editorial in the Wall Street Journal today, it’s about what we call the Obama Romney tariff. What’s going on is a background of the three trade deals, three free trade deals, the one with Korea, the two with South America, is a bigger issue about this trade retaliation against China. I do find this to be somewhat dangerous because it has the potential of really escalating. And what the Chuck Schumer bill does, and I think it’s the South Carolina Republican Senator, I’m blanking out on his name, is also onboard that bill, a co-sponsor.

Wade: Lindsey.

Stephen: Lindsey Graham, right. What that bill would do is put tariffs on Chinese goods if they don’t meet certain conditions. Like they don’t get their currency in line with where Chuck Schumer wants it to be. There’s this attitude that China’s currency has been too weak and they need to strengthen their currency to reach over the trade balance. That is a very dangerous bill. It is picking up political momentum, and I think there is an outside chance this week that it could pass in the House. I would say it’s not likely, but it could. That would be a very, very bad sign.

What we’ve seen for the last ten days, two weeks, is a very bear market. I think the reason the market is so bearish is because Washington is so bearish right now. Think about the context of what’s going on in the grand scheme of things. You’ve got Congress moving in the direction of this Schumer bill, which is very much like, as people know, one of the things that caused the Great Depression was the Smoot-Hawley tariff back in 1931, and then you think about what else is going on. You’ve got President Obama who is really focusing on this kind of class – we’re going to raise taxes on the rich, we’re going to have a trillion and half dollar tax increase in 2013. It doesn’t matter whether you’re a Democrat or Republic, conservative or liberal, that’s not a bullish market message to say we’re going to raise taxes on investors, we’re going to have this Buffett rule, and the top tax rate is going to go up. I don’t think that’s the kind of message investors want to hear right now. I do believe that’s one of the things, in addition to what is happening in Europe, something that is holding back the market.

I guess to punctuate this point, don’t just pay attention to the votes that are upcoming on these pro-trade deals, which I hope pass, but pay very close attention to what happens with this China bill in the House and Senate because it is very dangerous and I think it’s very misguided. We need President Obama because for the very reason you mentioned, if you think about it, every President since Herbert Hoover in this country, from Franklin Roosevelt through George W. Bush, has been a free trader. The President needs to be for free trade because if the President isn’t for free trade, Congress never will be because Congress protects parochial interests whether it’s the corn interest in Nebraska and Iowa or the steel interest in Pennsylvania, you’re going to always have parochial interest that trump the general interest, which is a trade regime that has few impediments to free trade as possible.

Wade: Let’s go back to my first point where these are never clear-cut. If I’m correct, these three trade agreements were completed prior two years prior to Obama’s election. Am I right?

Stephen: That’s right.

Wade: And they weren’t put forward because the Republicans in the House and Senate said they weren’t going to pass them, is that correct?

Stephen: It’s a little more complicated than that. What has held these up is that President Obama wants these trade adjustments assistance, which is a very offensive way to provide way to workers. Republicans are saying, and I’m not taking a side here, I do think we should pass these free trade deals without trade adjustment assistance, but the hang up is right now is the President saying I’ll only sign them with trade adjustment assistance. Republicans are saying we don’t want trade adjustment assistance, so that’s what is holding this thing up from getting passed. In my opinion, we should have done this two or three years ago. This should have been done right out of the gates.

Wade: These were negotiated prior – President Bush decided not to put these to Congress. Am I right or wrong about that?

Stephen: I’m not a trade expert. I don’t cover trade, so I don’t know the whole history of this. I do know what President Obama has added to the trade agreements has been to create trade adjustment assistance. Again, I’m not saying whether they should or shouldn’t have the trade adjustment assistance or whether the bill is worth passing that President Obama insists on having, I’m just saying that’s the hang-up right now. This may drag on for another year or so and may not even get done in this President’s term.

Wade: These are incredibly difficult issues across parties.

Stephen: I think they are of symbolic importance, though, even more than they are important to get – trade with countries like Columbia and Korea, which we obviously have, but to expand it, I think it sends a signal to the markets that Washington is becoming more restrictionists on trade. You look through the history of the stock market the last 100 years, and anytime Congress becomes more restrictive on trade, it’s bearish for markets.

Wade: I agree. These are good deals. The South Korean one, I think you’re going to find very few people who do not think that America got a good deal, or at least say a significant improvement over the previous deal.

Stephen: And by the way, the reason for that is because the Korean tariffs on American goods are higher than American tariffs on Korean goods. We actually come out in the beneficially if you believe that exports are good for America, and you want more manufacturing. We’re going to lower our tariffs less than the Koreans will because we start with lower tariffs in the first place. Those people who say this is going to destroy jobs, I don’t actually see it that way. I think it’s a net plus for jobs. The other advantage of trade is allows for prices to be held down because imports hold prices down.

Wade: We are, now, October 4th and we don’t have a budget again. When is the last time we had a budget passed? Seriously, when is the last time we had a fiscal budget?

Stephen: I’m only laughing because I don’t know the answer. I’ve been in this business for 27 years, and I think there might have been a couple of times during the Clinton administration where we got the budget done. The Clinton years was one of the few periods in my lifetime when we actually had some harmony on the budget between the two parties. There were fights, obviously, over welfare reform and how much to cut the budget, but those were very fiscally conservative years and those were years, for the most part, Clinton and the Republican Congress got along. That’s very different from the environment right now with Obama versus the Republican Congress.

You’re right. This has become a routine thing. We passed a two-week extension on the budget a few days ago, so that means they’re going to have to refight another continuing resolution that in a couple of weeks has become a circus. I think the headline here is we passed another fiscal year with another 1.3 trillion dollars of borrowing, and the numbers just don’t look very good on the budget right now for fiscal 2012, which we just started three days ago. It looks like we’re going to have another trillion-dollar deficit this year.

If you look at what Bernanke said this morning, he said the economy looks jittery. It was as not an upbeat message by any means. If we slip into a double-dip recession or we have sub two percent growth, it’s going to be hard to generate the revenues we need. We need eight percent, ten percent revenue growth to start bringing this deficit down. If you only have two percent growth or less, you don’t get that. You’re probably closer to four percent revenue growth, and we’re not going to see significant progress until we get this economy humming again. It’s just not a pretty picture when it comes to our fiscal situation.

Obviously, everybody knows that in December, the super committee, which is supposed to find a trillion dollars plus in savings, will introduce their package. Right now, what I’m hearing inside Washington from the people I talk to on that committee is they are just not getting along. The Republicans and Democrats are still miles apart. Right now, it doesn’t look like you’re going to see a very happy outcome; although, that could change in the weeks to come.

Washington is dysfunctional right now. That’s my message. Nothing is working right now in Washington, and Republicans and Democrats are at fault for this. They’re at each other’s throats. They’ve already started the 2012 election cycle. It’s 15 months away. They’re not getting things done. They’re fighting this political tug of war to gain advantage in the polls. It’s very dysfunctional and it’s very unsettling for markets, and both parities are to blame.

Wade: They have to be, unfortunately. You’ve mentioned the super committee. I talked to a Congressman yesterday who is a former Congressman. He was defeated in the last election. What’s great about that is you had somebody who can tell you the real truth. His point was the most notable thing about the super committee – is it 12 people on the super committee? I think it’s 12. He said the super committee will be the largest beneficiaries of campaign finance donations that you’ve ever seen in the history of the planet. Is that true?

Stephen: It sounds true to me. I haven’t looked at the numbers, but I think these guys are going to get a lot of money, and that’s going to come from lobbyists and that’s not a good sign. It means that the special interest lobbyists are saying don’t take away the mortgage deductions, don’t take away this deduction or that deduction, don’t kill this program or that program. The problem is in Washington has always been, what I call, the tyranny of the status quo. The default position is always to do nothing. Unfortunately, doing nothing right now is not a very good option given how woeful our fiscal picture is.

I talked about this last week and I’ll mention it again, Europe is a warning about what happens if we stay on the path we’re on. We’re not in nearly the shape that Greece, Portugal, or some of those other European countries are in, but we’re headed in that direction. It breaks my heart that we’re not taking the steps now that need to be taken, so that we don’t have this train crash.

Wade: You alluded to Bernanke a couple of remarks ago; why don’t you spend a little time talking about the twists and what you think he’s trying to accomplish and what will be accomplished.

Stephen: The objective of the twist – what the Fed has done, and unofficially we’re calling it the QE3. We have QE1, which is the purchasing of a trillion dollars of mortgages in 2009. QE2 was the purchasing of treasury securities in the first half of 2011. I think they purchased about 600 billion. The QE3 is going to be a smaller program. Mostly, what it’s going to be is the federal government purchasing long-term bonds and taking it’s short-term bonds and trading those in for long-term bonds to increase the demand for long-term bonds in order to, hopefully, lower long-term interest rates.

I have a couple of observations about this. Number one, I just don’t think anybody can say that the problem with the U.S. economy right now is that long-term interest rates are too high. Long-term interest rates, as you know, are lower than they’ve been at any time in our lifetime virtually.

Wade: Seventy years.

Stephen: By the way, seventy years ago was the Great Depression. Sometimes low long-term interest rates aren’t always the blessing that you might think they are. Interest rates plunged during the Great Depression because there was no demand for capital. I’m of a mixed mind about this. I do think it makes sense – let me rephrase this – I’m for the Fed purchasing long-term bonds as in contrast to buying short-term bonds, but not for the reason Bernanke is doing it. Bernanke is doing it to try and hold down long-term rates. By the way, there’s not a lot of evidence that that’s going to have much of an effect except in the very short term.

The reason I actually think it makes sense for the Feds to purchase long-term bonds over a short-term rate bonds – and I think it makes sense for the Treasury Department to be issuing more long-term bonds because the interest rates are so low. Just as a matter as a taxpayer, it makes a lot of sense to me for the Treasury Department to be locking in these historic low interest rates on this debt that we have right now. I am of the belief, and I’ve talked about this in previous calls, that in the next one year, two year, five years, ten years, interest rates are going up. I think it’s a pretty good bet that interest rates are going to head north, they’re not going to head south. That’s not a very bold fact because the rates are so low. So, why not lock into those low rates, and make us much less susceptible to a situation where if interest rates do rise, as the world’s largest debtor, we’re not as fiscally slammed by that event.

Remember, in ten years, by the year 2019, we’re going to be paying very close to 1 trillion dollars a year just on interest on the debt. Just interest payments on the debt will take up 1 trillion dollars of our federal budget. If interest rates go up and we don’t lock in at these low rates right now, we’re not talking about 1 trillion dollars of expenditures; we’re talking about maybe a 1.5 trillion. That’s a big deal, and it’s going to make the deficit worse, so I like the idea of locking in on long-term rates right now.

Wade: I’m laughing to myself because if that proves to be true, any punitive measure the Senate is trying to do against China will pale against what happens to their dollar holdings value.

Stephen: You’re exactly right. In fact, there’s another point to be made which is related to that. All this talk about what the super committee is going to do and all these things where they might save 1 trillion dollars, those savings also will pale in comparison to what happens if interest rates rise. The cost to the federal government of higher interest rates would be in the trillions of dollars over the next 30 years because we have 14 trillion dollars of outstanding debt.

Wade: There’s only one choice and that’s the devaluation.

Stephen: God forbid.

Wade: You’re the economist. You tell me.

Stephen: But you know what? The market is not pricing that in right now. The risk of a devaluation, you don’t see it in – you have to explain to me, and you’re the investment expert, I’m not, but you’d have to explain to me if there’s a fear and there’s a real risk of devaluation, why in the world are people buying Treasury bonds with two or three percent interest rates? And why are rates so low? It’s just not being –

Wade: But you know the answer to that.

Stephen: I don’t know the answer.

Wade: In the last 300 years that they’ve studied reserve currencies, the nation with the reserve currency gets a 30 to 40 percent premium on evaluations or currency, so all of this is a occurring simultaneously. The only currency that has even remotely lifted its head in the post-World War II period, the Euro, is being crushed. Or the economies are being crushed. All this is happening against the backdrop that the only alternative currency is being devastated.

Stephen: That’s true; although, there are other currencies. There’s the Swiss bank and so on. I generally agree with what you’ve just said. It’s just that there is another currency and that is metal. Gold and silver. You can’t use those for trading, but you can certainly hold them as stores of value. We had seen a big huge increase in gold and silver over the last couple of years. Over the last few months, gold and silver have come down in price. It’s not like there’s no alternative to owning paper currencies. You can own commodities and you can own gold, silver, and things like that. Or you can own real estate. You can own property. You can own things that protect you against devaluation. I do think it’s a risk. I agree with you. I’m just surprised that the markets haven’t priced in that risk very heavily at this point.

Wade: We just have one question, and I’d like to take it before – a couple of my questions have been from our advisors, but we just got another one, and before we close this off, I’d like to put it in. I’m not going to read it precisely. Imbedded in the President’s jobs speech is a view on paying for it. He famously used the term, the Buffett Rule. Do you have any thoughts on the jobs bill and the embedded tax payment to pay for the jobs bill?

Stephen: I do. I’ve written a lot about this in the last couple of weeks. First of all, the President’s job bill is not going anywhere for better or worse. It landed with a thud in Washington, and that’s probably because of the high partisanship that I mentioned a few minutes ago. My opinion about the President’s jobs bill is that it’s mostly temporary measures. Temporary cuts in the payroll tax, some temporary infrastructure spending. I’m of the belief, I’m not a Keynesian economist, I don’t think our problems with our economy are temporary in nature. I think they are structural in nature. We need big fixes, not temporary things that are going to expire in a year.

I think the fundamental flaw with what the President proposed was is all these things that will pump prime the economy over the next 12 months or so, but then you get hit with this big huge tax increase in 2013. And this is an important point for people to remember. Think about what happens in 2013 under current law. You have all of the Bush tax cuts effectively expire, and President Obama said he wants the ones for high income people, and the capital gains and dividends taxes to go up.

So, you’re talking about the top tax rate going from 35 to 42 percent. You’re talking about capital gains going from 15 to 20. Dividends from 15 to 20. By the way, there’s also a 3.9 percent investment surtax and Obamacare that takes place in 2013. So, now dividends and capital gains don’t go from 15 to 20, they go from 15 to almost 24 percent. Then you have this trillion-dollar tax increase on top of that that President Obama was talking about to pay for the stimulus. What that does is it makes 2013 look really bearish if all those things go up.

I don’t think there’s any stimulus effect to telling investors we’re give you a really good deal now, but 14 months from now, we’re going to wallop you. That just doesn’t make any sense to me economically. I just don’t see how – look, people don’t hire workers for 14 months. You can give them a payroll tax cut now, but if the payroll tax goes right back up again in January of 2013, it’s not that big of an inducement for people to hire. I was underwhelmed by the President’s proposal, and I don’t think that it has a lot of legs in Washington right now.

Wade: The challenge is no matter what party is in power in Europe or let’s say the OECD countries, whether it’s the liberals or the conservatives, or their economies are all in the same straights and their particular view of the world is under attack. Now, it’s the dealing with this problem, and I don’t think there is anything other than structural issues, but those are not structural issues unique to the United States. Those are the structural issues in the most capitalist countries and the most socialist countries, with the present exception of Sweden –

Stephen: Because the developed countries and living beyond their means.

Wade: With the exception of Sweden, which is one of the most socialist countries, but as you and I know, has taken some of the strongest steps on banks and pensions over a decade ago.

Stephen: I think the problem and maybe this is the last point we’ll make is that there is a kind of absence of global leadership right now, all over the world. You just don’t see in Britain and Germany, France, and the United States, you don’t see the kind of leadership this world needs. Where are the Winston Churchills? Where are the Margaret Thatchers? The Ronald Regans? To take this bull by the horn and fix things. Everybody is quivering and the leaders are milk toast and that shows from how the financial markets are performing, and how the bond vigilantes are punishing Europe for their policies. I think that’s a very discouraging thing, but it also means that if you get regime changes in some of these countries, things can turn around pretty quickly.

Wade: I don’t know. On the stock market issue, I watch everybody try to read into the stock market whatever they want. It’s the tealeaves. If the stock market is doing good, they want to credit it to their thing. I think the stock market, all my friends on Wall Street, as the saying goes, the French is worth five basis points. I think they overstated obviously. People invest in stocks and think they’re going to get earnings. Period. When they don’t think they’re going to get earnings, they don’t. And I’m afraid they don’t think they’re going to get earnings. Steve, as always, it’s been fantastic. We had a new record number of attendees today. I really appreciate your time and we’ll be talking to you in a month.

Stephen: Talk to you next month. Happy fiscal New Year everyone.