Monday, February 9, 2009

Stimulus Package

I think our elected officials have put the cart before the horse, yet again.  Right now they are all excited and working hard on trying to figure out how to spend about a trillion dollars to jumpstart the economy.  Now they already spent hundreds of billions of dollars in the first round to prevent a disasterous stock market crash (disaster for everyone with a boatload of money invested in the stocks anyway, which means everyone currently in congress--isn't there a conflict of interest somewhere here?).  So a crash was averted. 
 
Infusing cash into a few key corporations seems to have staid the economy in the short term and all the fund managers and financial advisors and even traders could convince each other to keep their money in the market.  And, for those who have, missing the opportunity to get in at the bottom was just too tempting. 
 
I think the market is totally being domiated by greed.  Any smart investor should either do what Buffett did and negotiate guarantees for investing a wad of cash into a company, or like most everyone else, just sit out until the market settles.  But how can you not be in the stock market now.  At these levels, you are guaranteed a nice return when the stock market returns to its previous highs.  Next month, next week could be too late.  Buy and hold because if we aren't at the bottom we definitely must be near...just ignore the jobs data.  In fact, embrace them because cost cutting boosts profits--one more reason to buy stocks at these levels.
 
An to further guarantee our natural born right as US citizens to be the wealthiest nation in the world, we are prepared to spend up to $1,000,000,000,000 to get the economy going again.  The first step in spending that amount of money, or any amount for that matter is to (and remember this point because it is very important) raise $1,000,000,000,000.  I repeat, the first step is to raise $1,000,000,000,000.  Ok. we don't have to do that because we are the government and we can print as much money as we need.  Now the second job is to spend a trillion dollars.  That's easy. 
 
Just pick a handful of companies and states and give the money to them.  Don't worry about how they spend it or where it goes.  They know what to do with it.  They have lots of ideas of how to spend it.  But we don't need to know the details, right?   BofA knows what to do with it.  They said that they'll pay back the $10B in a few years.  Any customer who thinks that doesn't include them, then they are fooling themselves.
 
Now Obama's plan, to use the money to rebuild the country's infrastructure sounds good, if we were Mexico or something, but will that really generate the trillion dollars to cover costs?  I don't see it.  It is like the housing bubble all over again.  Let's take a trillion dollars of equity out of our country and then remodel our land and then it will be worth even more than when we started.  And these people are running our country?
 
If I could point the finger at one person...well to be fair, one person couldn't pull off this mess...so the two people who are at most to blame are Ben Bernanke and Henry Paulson.  Their biggest crime, working that fateful weekend to help JP Morgan fund the purchase of Bear Stearns.  In their short-sightedness they thought that they could pull an Alan Greenspan/Long-Term Capital Management trick to sacrifice one company for another so the markets could bear the shock.  The shock that every investment bank's executive teams must have known was coming. 
 
This trend that hasn't stopped, yet.  I have no doubt that this unbelievable situation we are in has been exacerbated by the Bernanke solution: when in doubt, hand the money out.  I hope the textbooks that come out in the next few decades can expose the real culprit of the melt-down, whether it be anyone from Ronald Reagan to Obama and beyond.  It wasn't right to do and there are probably few people with clean hands.
 

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