Kudlow’s Money Politics

The Stock Correction Is Over

New economic stats today on retail sales from both China and the U.S. show there’s no double-dip recession out there — no matter what the bears-gone-viral may be telling you. No Armageddon. And no stock market crash either. Actually, today’s 123-point Dow gain to get back over 12,000 is a key sign that the stock correction may be over.

Forward earnings at $96 a share on the S&P 500 (1,288) show a price-earnings multiple of about 13.4-times. Trailing earnings of $94 a share show a similar multiple. So stocks have decent value. Stocks also have an attractive 7.25 percent earnings yield, compared to 3.1 percent on 10-year Treasuries and 5.7 percent on investment-grade corporate bonds.

I’m not a roaring bull. But I am more positive than I was two months ago when I first started talking correction.

The Fed is still accommodative. The yield curve is positively sloped. And the oil-price shock looks to have peaked at around $100. All those are positives. Perhaps as QE2 pump-priming ends in a couple of weeks we will see a somewhat stronger dollar and a weaker oil price.

But the good news today is that retail sales in the U.S. came in better than expected. They actually increased slightly, by three-tenths of a percent, excluding the auto sector which has been hard hit by Japanese supply shortages. Core retail sales excluding autos, gas, and building materials increased two-tenths of a percent and are up 6.1 percent over the past year.

We’re in a muddle-through economy. It’s not the Reagan ’80s. But it’s also not the Carter ’70s.

In China, where the data is just about as important to the U.S. as the U.S. data, May retail sales rose 16.9 percent year on year, or slightly less than the 17.1 percent registered in April.

Meanwhile, industrial production in China rose 13.3 percent for the year ending in May, just a tad less than the 13.4 percent registered in April. These are solid numbers. They’re off their peaks. But it’s not a collapse. China’s going to keep on growing. There is no meltdown.

And the Bank of China raised bank reserve requirements again, a response to the 5.3 percent CPI for May — which is an inflation warning to both China and the United States.

Ben Bernanke should quit yapping about a clean debt bill for more Treasury borrowing authority without serious spending reductions. No fiscal confidence will return unless measures are taken now to curb out-of-control spending and borrowing.

People in the bond market are not stupid. For several months they have known that the debt-ceiling talks would be hardball negotiations and will go down to the wire. But 10-year Treasury yields have plunged from just under 4 percent to around 3 percent. The market knows there will be no default. A deal will be made. But it has to be a spending-control deal if anyone is to ever believe that the U.S. is serious about its financial plight.

And for my money, any deal should include a pro-growth component, like a 15 percent business tax rate that also abolishes all deductions.

Most Popular

White House

Implications of the Flynn Pardon

President Trump granted a pardon to Michael Flynn, his former national-security adviser, today. Flynn had pled guilty to lying to FBI agents about conversations, during the 2016 transition, with the Russian ambassador about sanctions. Flynn’s pardon should bring to an end one gross violation of the ... Read More
White House

Implications of the Flynn Pardon

President Trump granted a pardon to Michael Flynn, his former national-security adviser, today. Flynn had pled guilty to lying to FBI agents about conversations, during the 2016 transition, with the Russian ambassador about sanctions. Flynn’s pardon should bring to an end one gross violation of the ... Read More
History

Thanksgiving Is Not a Lie

We live in a time of heedless iconoclasm, and so one of the country’s oldest traditions is under assault. Thanksgiving is increasingly portrayed as, at best, based on falsehoods and, at worst, a whitewash of genocide against Native Americans. The New York Times ran a piece the other day titled, “The ... Read More
History

Thanksgiving Is Not a Lie

We live in a time of heedless iconoclasm, and so one of the country’s oldest traditions is under assault. Thanksgiving is increasingly portrayed as, at best, based on falsehoods and, at worst, a whitewash of genocide against Native Americans. The New York Times ran a piece the other day titled, “The ... Read More

The Imaginary Trump

Like Andrew Jackson, Donald Trump is man who represents the age in which he lived. Whatever you may think of the age. Jackson embodied a generation of men who had risen and made their mark in a young country. He represented their desire for greater representation, even if it had costs for slaves and Indians. He ... Read More

The Imaginary Trump

Like Andrew Jackson, Donald Trump is man who represents the age in which he lived. Whatever you may think of the age. Jackson embodied a generation of men who had risen and made their mark in a young country. He represented their desire for greater representation, even if it had costs for slaves and Indians. He ... Read More
Culture

On Being Grateful

My mother always enjoyed making Thanksgiving dinner. She took a traditional Southern woman’s pride in being a good cook, following her mother’s recipes, and my family made a rare display of kindness by declining to inform her that she was a fairly dreadful cook, one whose kitchen alchemy on the electric range ... Read More
Culture

On Being Grateful

My mother always enjoyed making Thanksgiving dinner. She took a traditional Southern woman’s pride in being a good cook, following her mother’s recipes, and my family made a rare display of kindness by declining to inform her that she was a fairly dreadful cook, one whose kitchen alchemy on the electric range ... Read More
Economy & Business

Shopping Superstitions

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses. This is pure nonsense, and you should feel free to ... Read More
Economy & Business

Shopping Superstitions

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses. This is pure nonsense, and you should feel free to ... Read More
Film & TV

Bowing Down to Obama

‘How can we miss you when you won’t go away?” political podcaster Yvette Carnell joked two years ago when Barack Obama began his comeback tour by making sideline pronouncements about the state of the nation after his brief retirement. Now the comeback is official, with two new Kool-Aid-drinker Obama ... Read More
Film & TV

Bowing Down to Obama

‘How can we miss you when you won’t go away?” political podcaster Yvette Carnell joked two years ago when Barack Obama began his comeback tour by making sideline pronouncements about the state of the nation after his brief retirement. Now the comeback is official, with two new Kool-Aid-drinker Obama ... Read More
U.S.

Gratitude: What We Owe to Our Country

Editor’s Note: The following essay by National Review founder William F. Buckley comes from the first chapter of his 1990 book, Gratitude: Reflections on What We Owe to Our Country. I have always thought Anatole France’s story of the juggler to be one of enduring moral resonance. This is the arresting and ... Read More
U.S.

Gratitude: What We Owe to Our Country

Editor’s Note: The following essay by National Review founder William F. Buckley comes from the first chapter of his 1990 book, Gratitude: Reflections on What We Owe to Our Country. I have always thought Anatole France’s story of the juggler to be one of enduring moral resonance. This is the arresting and ... Read More