Allow me to pause from the political and stock market commentary and declare that Jamaica’s Usain Bolt is the greatest athlete of the 2008 Olympic Games. Maybe the greatest athlete of any Olympic Games. Sure, Michael Phelps won more medals--eight golds in eight attempts--but swimming is full of mutant events. The breaststroke? The backstroke? The butterfly? Imagine if track had events such as these: the sack race, the one-legged hop, skipping backward.

Bolt is raw and elemental. No high-tech running suits for him. No mutant events. Bolt is the fastest human on earth, the best who ever ran. Period. Saturday he won the 100-meter dash, breaking his own world record while lollygagging the last 15 meters. Earlier today the Jamaican sprinter won the 200-meter dash in a stunning 19.3 seconds, breaking Michael Johnson’s world record of 19.32 from the 1996 Games in Atlanta. Johnson’s record had been judged the strongest in track, safe for another 10 years prior to Bolt’s assault.

Bolt ran his 19.3 against a 0.9-meter-per-second wind. No sprint record has ever been set against a wind like this. If the race had been run with a legal tailwind of two meters per second, Bolt’s time might have been 19.18.

Bolt won by more than half a second. Since the revival of the modern Olympics in 1896, no Olympic sprinter has ever won by such a margin.

Another reason I am confident saying Bolt’s performances top those of Phelps is because sprinting is the most universal of sports. Every kid in the world who is not physically disabled has run a sprint at one time or another, either on the playground, the street, a dirt road, in a game, after stealing apples or to flee bullies. The sorting mechanism that leads to the world’s fastest human starts with the largest pool of children of any sport. Not every kid in the world gets a chance to swim, twirl around the uneven bars, dig a volleyball out of sand or swing a bat. Kicking a soccer ball is the only sport that comes close to the globally shared experience of attempting to run fast.

The world’s fastest human is really that. The world’s best swimmer is merely the best among those given the chance to swim. That’s a much smaller pool, as it were.

Usain Bolt ranks with Michael Jordan and Tiger Woods as the most amazing athlete I’ve ever seen.

Share your comments.

In June, at a Forbes conference in France, I did an onstage interview with New Mexico Gov. Bill Richardson. He predicted a Barack Obama victory in November--a blowout.  The outlines of Obama’s big win would be evident by late summer, said Richardson.

That hasn’t happened.

Obama carries a three-point poll lead over John McCain, according to Real Clear Politics, which averages the major tracking polls from Gallup, Zogby, Rasmussen and others. Three points is a precarious lead for a Democrat in August. Al Gore and John Kerry edged George W. Bush by similar margins in pre-convention polls in 2000 and 2004. Michael Dukakis famously led George H. W. Bush by 17 points in August of 1988.

Democrats are chewing their pencils right now. Why, in a potential Democratic year like 1974 or 1932, has Obama not yet blown McCain out of the water? Explanations are many.

1. Obama’s failure to connect with older, blue collar voters. Hillary Clinton exposed this Obama weakness during the final three months of the Democratic primary season. Clinton won more popular votes after March 1.
2. Obama’s “too cool for school” aloofness, as explained by the New Republic’s Michelle Cottle here.
3. High gas prices. McCain says drill; Obama advocates wind power and solar.
4. Russia. We are reminded that the world can be a dangerous place--and no place for a foreign policy rookie.
5. Swiftboating.
6. Racism.

These factors all may have, more or less, bits of truth. They don’t explain why Democrats have lost seven of the last 10 presidential elections and have blown leads since 1976, when Gerald Ford almost overcame a 35-point summer deficit to Jimmy Carter.

May I suggest that the Summer Olympics play a role? I think the Olympics may give Republicans a two- to three-point advantage.

Since 1968, Republicans have dominated the patriotism issue in presidential elections. Democrats such as FDR, Truman and Kennedy had no patriotism deficit, but that all changed in 1968 at the Democratic convention in Chicago when the Democratic Party brand became linked with student protests and anti-Americanism.

Since 1968, the Summer Olympics have been a major production on television. The Mexico City games were the first to be broadcast in color, and many events were live. A mid-point baby boomer myself, I fell in love with the Olympics in 1968 and literally camped out in front of the television to watch the Munich games in 1972. Since then, television coverage has only gotten bigger and better.

For 16 days every late summer in presidential election years, American viewers are bombarded with Olympic sports that feed patriotic feelings. This was not the goal of the modern Olympics founder, Baron de Coubertin. He was a French aristocrat who wanted the Olympics to transcend nationalist sentiment. But the Baron’s wishes would meet their match in television. NBC knows that Michael Phelps pulls in viewers. Each time the great swimmer mounted the medal stand to hear the national anthem, Phelps, his mother and scores of millions of Americans shed a patriotic tear.

I have no data to support my theory that the Summer Olympics give the patriotic-branded party, the Republicans, a boost at just the right time in a presidential election cycle. But this theory seems to fit the poll trends of the several presidential elections.

What do you think? Are Republicans helped by the Summer Olympics? Why are Obama’s poll numbers stuck in what should be a blowout year for Democrats?

Post your comments below.

Last week I stated my case for a year-long economic and stock market muddle-through.

1.    The economy grows at 2% or so for nine to 12 months.
2.    Stocks trade in a range.

Such a scenario will disappoint Pollyanna and Eeyore alike, but it rides the Federal Reserve's own muddle-through course. If you bought front-row seats for the next Great Depression, sell them. But don’t count on Dow 15,000 funding your year-end yacht purchase either.

Now comes David Malpass, armed with better data and brighter candles, to forecast essentially the same future. Malpass:

• Global GDP should grow in real terms 2.9% in 2008 and 2.8% in 2009, a marked slowdown from the nearly 4% pace in 2004-2007. The growth outlook for Japan, the U.K. and Canada has slowed materially from our April forecasts. The U.S. started the global slowdown with the August 2007 breakdown of securitization and is recovering first.  We think the U.S. is muddling through, not making a major shift in direction despite continuing financial turmoil. …

• We’re lowering our U.S. third-quarter GDP forecast to 2% (was 2.5%). We note low inventories, low real interest rates, rational consumer resilience, high levels of bank cash (since the write-downs are generally non-cash accounting entries), small business flexibility and reasonable output gains apart from housing, autos and finance. But the economic drags are also clear--Washington’s continuing neglect of the dollar, the resulting June spike in commodities, high inflation, the mark-to-market vendetta on bank equity capital, risk aversion by businesses as reflected in low inventories and rising jobless claims, bank caution and high mortgage rates.   

I don’t see any flaws in Malpass’ analysis. Do you?

Post your comments below.

Today’s blog is a three-cheer yell for our partners at Real Clear Politics, Real Clear Markets, Real Clear Sports and Real Clear World.

What’s going on in the world? Nothing much, other than: (1) a presidential election; (2) a dicey economy and bouncy asset markets; (3) the Olympics; (4) Russia.

Four big stories. Four perfect Real Clear Web sites to match. The Real Clear formula is to aggregate the best commentary and add fresh statistical analysis. Sample today's Real Clear offerings:

Politics

Here’s Atlantic magazine’s Joshua Green on Hillary Clinton’s failure to launch:

Above all, this irony emerges: Clinton ran on the basis of managerial competence—on her capacity, as she liked to put it, to “do the job from Day One.” In fact, she never behaved like a chief executive, and her own staff proved to be her Achilles’ heel.

Markets

Check out John Tamny’s masterful analysis on the meaning of oil’s four-week decline:

Last month, gold rose at one point to nearly $1,000/ounce, and oil hit an all-time high of $147/barrel. Since then, oil has fallen roughly 23 percent against a 17 percent drop in gold. So as is always the case, a large reason for oil’s current weakness has to do with a dollar that currently buys 1/827th of an ounce of gold, as opposed to nearly 1/1000th a month ago.

Still, oil has fallen further, and while rumblings of greater supply reaching the market due to presumption of liberalized drilling rules might explain some of the disparity, another realistic explanation lies in the aforementioned gold/oil ratio. As of last month, the ratio was roughly 6.8/1, so if history is any kind of indicator, oil was and is due for an even greater fall versus gold given the longstanding relationship between crude and the yellow metal. Looking ahead, no matter the direction of gold, oil has room for further weakness given a ratio that as of this writing is roughly 7.3/1.

World

Take the time to read Mikhail Gorbachev’s piece on the Russia-Georgia conflict. Like most of you, my instinct is to blame Russia and the neo-czarist Putin. That may still be the accurate view. But it’s always good to challenge one’s own assumptions, and Gorby provides the alternative take on events:

What happened on the night of Aug. 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenseless Georgia" is not just hypocritical but shows a lack of humanity.

Sports

Have fun with this Olympic medal map at Real Clear Sports.

Full disclosure: Steve Forbes and I became fans of Real Clear Politics during the run-up to the 2004 elections. We got to know the founders, John McIntyre and Tom Bevan. One thing led to another. Now Forbes LLC owns a big chunk of the Real Clear empire.

That’s our bias. It’s an honest one!

Do you like Real Clear's aggregation and analysis? Do you prefer it to newspapers and television news? Post your comments below.

Oil is up a bit today on fears that the Russia-Georgia conflict will escalate. Even so, black gold is way off its peak of $147.27 of only a month ago. My guess is that oil will settle at around $80 to $90 a barrel sometime over the next several months. It will stay there until the global economy gets back to 4%-plus annual growth.

Did you see oil's top?

One didn't have to be a rocket scientist to know oil was in a speculative bubble. The price of a barrel had doubled from August 2007 to July 2008. This jump was too quick, too high to be explained by growing global demand.

Bubbles are really easy to see. Calling a bubble's top, of course, is much harder. Bubbles follow their own mad logic.

Technology and telecom stocks began inflating in 1996 and were in a bubble by 1998. Everyone knew it. But the bubble kept inflating anyway. March 2000 turned out to be the peak, when the Nasdaq briefly went over 5,000.

Houses began inflating around 1998. The 2001 recession killed stocks, but it didn't pop the house bubble. It only put the house bubble on hold and prepared (by way of ridiculously low interest rates) the great inflation of 2003 to 2005.

Today's question is: How can we tell when a bubble is about to pop? Fundamental analysis, we know, is good only at identifying bubbles. It can't predict bubble peaks.

One factor that predicts bubble peaks, I would suggest, is silly overreach.

In July, billionaire oilman T. Boone Pickens mounted the national stage with this television ad. Pickens said:

This is an emergency we can't drill our way out of.

Pickens is a lot smarter than most of us. But here he was wrong. All it took was the threat of new offshore and Arctic National Wildlife Refuge drilling to pop the speculative bubble.

How about the late, great house bubble? Here is a perfectly silly story on house flippers in the March 14, 2005 issue of Time magazine. Money quote:

Buy. Sell. Profit. Repeat. Investors are flipping houses to build wealth. Here is what you can learn.

These days the go-go market is homes, not stocks. In hot spots like Las Vegas and Florida, real estate flippers have discovered that a modest down payment and a little patience can net them tens (even hundreds) of thousands of dollars in profits, sometimes tax-free.

The most aggressive of them figure that some combo of paint, new flooring and kitchen upgrades can turn the dumpy house they bought for $300,000 in February into a $400,000 property they can unload in July. And in the most sizzling markets, they're absolutely right.

The 1990s tech bubble had many stories like this. My favorite--embarrassing, because I missed it at the time--was a March 2000 e-mail poll from Silicon Valley consultant Geoffrey Moore. Recall the Nasdaq had popped up over 5,000 while the Dow had slipped to 10,000. Moore was asking everyone in his e-mail for a prediction: When would the Nasdaq index surpass the Dow's?  The guesses ranged from six months to five years. Everyone on Moore's technocentric list knew it was only a matter of time.

Silly, huh?

Right now, most asset classes are stagnant or deflating. That gives us time to think: Which asset class will form the next great bubble? How will we know that bubble is nearing its peak?

Post your speculations and comments below.

Jim Michaels hated wishy-washy conclusions to Forbes stories. The late, great editor of Forbes magazine called it “palm journalism” … on the one hand this, on the other hand that. Such mushy stories lacked the courage of conviction.

I can hear Jim’s scornful voice as I type these words, but I think America is in a muddle-through economy right now. Sure, it would be more courageous to stand back and pronounce: (1) financial Armageddon, widespread bank collapses, economic depression and a further 20% drop in house prices and stocks; or (2) a quick rebound to 3% growth fueled by $80 oil, $3 gas, strengthening house prices, bankers who actually lent money and the widespread confidence instilled by upside earnings surprises and a 14,000 Dow.

One could make the case for either extreme. But then one runs up against the facts of the economy, which are conflicted and clouded:

Downside case

1. It’s a recession, duh! The last several quarters of gross domestic product have failed to reflect the depth of the slowdown because the Commerce Department has deliberately understated inflation.
2. As the recession lingers, unemployment will creep up.
3. More home owners will default. The spiraling effect will send house prices down a further 10% to 20%.
4. As bankers watch events unravel, their arms will shrink and loans will cease. This will hit small businesses hard. It already has, but things will get worse before they get better. Creditworthy buyers of distressed properties also will be unable to get loans. Thus, the market will be prevented from finding a firm bottom.
5. Barack Obama will win the presidency, and his coattails will bring a Democratic Senate majority of 56 votes. Taxes on dividends and capital gains will double from 15% to 30%. Payroll taxes will go up. The combined marginal tax rate for America’s small-business owners will go to 60%-plus. Consequently, the people who create 70% of America’s new jobs will cease to create new jobs.

Upside case

1. It’s not a recession, as much as the media want you to believe otherwise. The second-quarter GDP will be revised upward.
2. Unemployment, at 5.7%, is nowhere near recessionary levels. It is actually near the post-World War II average.
3. Home prices are firming up. Nationally, the rate of decline has slowed. In some regions, prices are on the rise.
4. Bank of America, which absorbed Countrywide Financial, the poster child of bad paper, has seen its stock go up 80% in three weeks. This amazing rebound demonstrates the underlying resilience of most American financial institutions.
5. The stock market has already discounted the likelihood of cap gains and dividend taxes going up to 20%. Beyond that, the market doesn’t much care whether Obama or McCain becomes the next president.

This is palm journalism at its worst, I must admit. I can hear Jim Michaels saying, "Call it one way or the other, wimp!"

OK. Here’s the call. We’re going to muddle through. Sorry, Jim, but now I must look to Ben Bernanke. On Tuesday the Federal Reserve decided to leave the federal funds rate alone. Let’s call it “palm monetary policy.” One the one hand, the Fed finally sees inflation as a greater threat than recession. Yippee! On the other hand, it is not clear yet that the Fed is really serious about fighting inflation. Boo!

Sorry, Jim!

Don’t fight the Fed. The Fed has scripted a muddle-through economy. For another nine to 12 months, that’s what America is going to get.

Post your comments below.

One expects vigorous debate on politics. We the people have always argued about politics and always will. Politics is never about reaching truth. It is always about a power struggle of competing philosophies and people.

Call me naive, but I used to think economics was about a search for facts and truth. But it seems that getting to economic truth is vastly harder. Maybe politics obscures any shot of getting at truth. Maybe the global economy is so big, interconnected and complex that truth finding becomes impossible.

For example, take the U.S. gross domestic product (GDP). Last week the Commerce Department released a preliminary figure of 1.9% growth for the second quarter. Nominal growth was 3% minus a deflator of 1.1%. Say again, please? The government used a deflator of ... 1.1%?

Who believes that? According to Reuters, the Commerce Department’s own figures showed a 4.3% inflation rate during the second quarter.

But consumers face much higher prices. The gross domestic purchases price index, which measures what Americans buy and includes import prices while excluding export prices, was measured at a much higher 4.3%  in the second quarter.

Forgive my ignorance, but why is 1.1% the GDP deflator and not 4.3%? Were the latter figure used, it would show the second quarter retracted 1.2%. If I am missing something in my simple question, please set me straight.

It seems that wherever I look these days, I find ambiguous or confusing information like this. House prices are bottoming. Wait, they're not. The dollar is finally strengthening. No, that’s an illusion.

My question to you, my smart readers, is how do you sort all this stuff out? Where do you find economic truth these days? What data and trends do you look at and trust? Do you think the financial markets--stocks, bonds, commodities, real estate--are keenly ahead of the data or are thrashing around on winds and rumors, just as most of us are?

Obviously, some investors are making tons of money in these foggy, turbulent times. Are most of them just riding a lucky streak? Or are they  truly better sifters of facts and trends.

Lots to think about. Post your comments.

I have an idea for a comic opera set to a German libretto with whiffs of English rock music. This idea, as you may detect, is cheerfully ripped off from "Die Fledermaus" by Johannn Strauss II.

The plot is about a government that attempts to win favor with its people by spreading money hither and yon.

The rub is, Where does this money come from? The government, correctly, does not want to raise taxes on the people. This government and its leaders are fairly dim. They don’t know much, but they do know this: Raising taxes will not produce much in the way of new tax receipts. That’s a good thing to know. It’s about the only thing this government knows.

So--aha!--the government starts to print money! Suddenly there is more money to give to the people.

The people buy bigger houses and bigger cars. They gorge on bigger meals. They become bigger themselves. They are happy.

Only one creature in the land knows of this ruse. It is a mouse who lives in the factory where money is printed. The mouse sees what it is going on.

The mouse tries to warn the people of government’s scam. But no one listens to the mouse. Except for one deaf, dumb and blind kid--sorry about mixing German librettos and Who rock operas, folks--who understands the implications of printed money.

The deaf, dumb and blind kid starts buying gold. He buys gold at $200. He buys gold at $300, $400, $500, $600, $700, $800. He keeps buying gold and becomes very rich.

The large people have stopped getting rich. Their dollars don’t go very far and no longer buy all their large houses, large cars and large meals. The large people get angry at their government. The government needs someone to blame, so they look about the land for a patsy. Aha! The government decides to blame the deaf, dumb and blind kid and the deflator mouse, who saw the ruse all along.

The large people in their large cars and large pitchforks set out to find and kill the kid and the mouse. The large people are very, very angry. It was all working so well until that stupid mouse spilled the beans to the deaf, dumb and blind kid, who started buying gold.

Where does our comic opera, "Deflator Mouse," end? Dear readers, it is in your hands now. Post your scenarios below.

From The Associated Press earlier today:

The Commerce Department's report Thursday that gross domestic product grew at a 1.9% pace in the second quarter was below the 2.4% predicted by economists polled by Thomson Financial/IFR.

Dang. My own guess was 2.8%, so I flubbed it worse than the pros.

Seriously, is 1.9% growth that bad? Back when football games were allowed to end on a tied score, the phrase you always heard after Your Guys had blown a lead to Their Guys and ended up in a 28-28 tie was: "It's like kissing your sister." Not inspiring. Not the worst.

We might be kissing our sisters for the next 12 months. The dollar shows small yet encouraging signs that it is strengthening. And not just against other currencies, but against commodities, which counts more. Keep an eye on this.

Keep an eye on house prices. Are they bottoming? Perhaps. May declines were 0.9% nationally, an improvement over the 2%+ monthly declines we saw in the winter and early spring.

Keep an eye on the elections. My own opinion is that Barack Obama plus a 55-seat Democratic majority in the U.S. Senate would be bad for the economy and stocks. We can debate whether Obama's economic instincts are leftist or centrist. The gut question is: Does Obama believe wealth must be created before it can be redistributed? I don't know the answer, but I'm inclined to think that Obama is, first and last, a politician. A large Democratic majority in the Senate would pull him left. That could be the difference between a 20% or 30% tax rate for capital gains and dividends.

It is not certain Obama will win the presidency, though the odds favor him. John McCain is running a grouchy and incoherent campaign. Yet he trails by only 3%, according to Real Clear Politics. Obama hasn't closed the deal with American voters. I am reminded that Hillary Clinton won more Democratic primary popular votes than did Obama after March 1. Obama is the presumptive nominee only because his team figured out caucus votes and Clinton's team did not. End of story.

So keep an eye on house prices, oil prices, gold prices and election polls. I have a feeling the trends and results, from an investor perspective, will be mixed. Some good news here; bad news there.

We'll be kissing our sisters for the next 12 months.

Agree? Disagree? Post your comments below.

On the morning of July 14, my wife and two other couples from our neighborhood were drinking coffee and enjoying the 6,000-foot mountain air at the University of California's Lair of the Bear Camp Gold in the Sierra Nevada Mountains.




We talked about our stock portfolios and 401(k)s. If these kept melting the way they had for six weeks, we joked, our retirement homes might be like the foul-smelling tents at Camp Gold.

“No. Now is the time to buy,” said Roger, who works in finance at Cisco. We all looked at Roger. “OK, smart guy, what are you buying?” we asked.

“Financials. They’ve bottomed. I’m buying Bank of America. Today.”

Roger’s bottom call for financials came as Monday’s market was just opening in New York. His recommended BAC had made its 52-week low of $18.44 the previous trading day on Friday.

Today, as I write this blog, BAC is quoting $32.95. That’s a spectacular gain of 79% in 16 days.

My wife used to work at Bank of America in the 1980s. After the October 1987 crash, BAC dropped below $8. She knew she should buy it, but she couldn't pull the trigger and has always regretted it. But on July 15 she caught BAC at $20.50. Unfortunately, it was a small investment of $7,000 within an IRA. Still, a tax-free $5,500 gain in 16 days is nothing to sneeze at.

Question is, Have financials gone too high, too fast? It sure looks like it. On the other hand, at $32.95 BAC is well below its 52-week high of $52.96. If BAC had tracked the Dow Jones industrial average since October, it would be trading in the low 40s today.

What do you think? Have financials gone too high, too fast? Would you buy, sell or hold Bank of America at $32.95?

Post your comments below.