Thursday, February 14, 2008

News Flash: Congress Irrelevant, and Initial Thoughts on Stimulus Package

Gotta love the saga that is playing out in Congress. They seem so interested with Roger Clemens and the steroid issue, which is great, I have certainly blogged on this topic. But why is congress involved at this level? They've asked about baseball's problem, and Arlen Specter met with Roger Goodell about Spygate. Great. I'm so glad Congress is concerned with the real problems that face the country. What is a league commisioner for these days anyway, shouldn't they address these problems so that Congress can focus on problems that really impact all of us...

On a separate but related note, the stimulus package is tremendous. I've posted the link to the basics around the plan. So as a country we've spent more than we generate, and our currency continues to fall as the gov't prints more money.* The best part is that the stimulus gets the rebates into the hands of consumers who can keep spending, thereby presumably keeping corporate profits expanding leading to real GDP growth, market appreciation and an avoidance of a recession. Based upon what I've read, I would think that most of the money will go towards debt-servicing, as the consumers try and repair their personal balance sheets, but Congress seems to intend otherwise.

However, probably the best part about the stimulus package is that if you have a kid, you get more money. Great incentives, I've seen these people everyday with 3-4 kids that they obviously can afford. (**Check out this link below, these folks have 8 kids, which is totally responsible, not selfish in any way. Sounds like fertility drugs turned this mother into a dog with a litter, WTF?) With gov't backing, let's keep having more kids we can't afford, and then input them into a system that they will never contribute towards, so they can then hopefully pull out the full entitlement of healthcare that they never pay for. You know why healthcare is so expensive? Because the demographics are exploding, obesity is a national crisis, and there are more people taking out of the system than there are putting into it. If we're lucky, the politicians will reduce the incentive to cure cancer, which is good, because then the population we need to give universal coverage to won't be growing at the other end of the age spectrum either. (BTW, please don't think I'm crying for the drug industry...I think generics are good for the industry, and given the near monopolistic patent protections drugs are given for 5-10 years by the time they get to market, it's more than fair. Generics provide a nice check and balance to this process, because generics force innovation, which last I checked, costs money to develop. I will be posting on this very issue soon.)

Back to the stimulus package, it's a tremendous system with all the incentives in the right place for everyone but those who put into the system. If you feel like the person at the company birthday lunch who orders what they can afford but pays 2 times the amount when the check gets split up, then you know exactly what I'm saying. You may think I'm talking about a sandwich, but if you can't afford a house, or better yet kids, what's the difference?

Gotta love the welfare state...

So if you read between the lines, it all gets back to my title. Congress is irrelavant. They're focused on the little things and when they address the big things, they seem to do no better. (Again, I ask, what is a league commissioner for?) Since's it's an election year, let's just put off the inevitable part of the business cycle at the expense of our long term growth. Maybe if Congress had pressed Greenspan more 4-5 years ago and asked "if we are potentially trading one bubble ("tech") for another ("housing"), aren't we at exactly the same place when it all goes down? (no pun intended) You better believe markets are frothy Alan, how about telling us this when it matters?

* Footnote: Think about it this way; what if the company you work for had sales that were less than its expenses, and to overcome this, it kept borrowing from the bank to fund its crappy operations? What if the bank who made the loan said, "ok here's the money,will give it to you because it sounds like next years sales will be higher than your expenses, but let's make sure your sales are greater than your expenses next year so you can pay the bank back." Well the world (China and Japan) is the US's bank, and we still "sell" less than we "consume", for lack of a better analogy. It's been like this for a while, and the US, and lots of its "assets" are on sale to the rest of the world.

** Footnote: Link to Jon and Kate + Eight...Awesome that cable TV has rewarded this couple's lunacy in its quest to have children.

Link to Stimulus Info on Bloomberg

Link to Stimulus Info at

Hussman's Take on Stimulus Package
Scroll down to "How much of the stimulus will be saved..." subtitle