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Sunday, February 01, 2009


Stimulating TV

Today is a pop culture holiday called the Super Bowl, when many of us, including the legions who would never watch any other football game, gather for a party (usually featuring mass quantities of chips, beer and spicy, non-nourishing food items) and to watch four hours of very clever commercials interrupted by occasionally exciting football and a spectacular halftime show. This year's halftime fittingly features Obama campaigner Bruce Springstein, himself an icon of late and post baby boomer culture. I am looking forward to it, but not nearly as much as Tom Petty last year. But that's just me.

The game is something of an enigma. As usual, the two teams involved are playing their best football of the year coming into the game, but neither was a heavy favorite to get this far and one, the Cardinals, was a bigger long shot than the Giants, who upset form to win last year. I will concede that the Redbirds are flying on all cylinders but I still make Pittsburgh the winner, 34-17.


Everything else making the news lately involves financial stimulus and the bill brewing in Washington. Despite the new President's better intentions, the House bill turned into a partisan exercise, which is what happens when folks like Pelosi, Waxman, Conyers, Rangel, et al are in charge. They have managed to lard this thing up with a lot of spending that has nothing to do with stimulating anything except the Dems chief fundraisers, i.e. the teachers' and public employees unions. So naturally, all of the GOP members wound up in opposition joined by a few red state Dems.

So I would make the case that while the vote FOR the bill was partisan, the vote AGAINST it was a little bipartisan. I know, I'm just being difficult.

This morning, the Senators took their turn on the news shows. Supposedly, this is a more serious and deliberative group, but we live in post-literate times, when soundbites are what seem to matter and all arguments are dumbed down to the lowest common denominator (inanity). By the way, this seems to go for just about everyone. It's not just the politicians in child-speak, the questions coming from the moderators reveal no greater insight. On Meet The Press this morning, Senator John Kerry (D-MA) advocated for INCREASING the cost of the bill to put more of the actually useful projects in, while keeping all of the social spending, the redistributionist tax breaks, and the lard in the bill. Senator Hutchinson (R-TX) seemed to be garbling her talking points, advocating for the job creating aspects of the bill but insisting that the short term fixes come out, simultaneously complaining about the spending that will take too long to have an impact. In the end, she said she will oppose the bill unless it is changed.

A somewhat more intelligent panel followed, the most persuasive of the group being (as usual) Steve Forbes. He may not be taken seriously by academic economists and political scientists, but Mr. Forbes has long been among the most insightful (and accurate) observers of the American economic and political theater. He took his usual strong positions on reducing taxes on capital and on payrolls, while advocating most strongly for the end of mark-to-market accounting. For a review on the latter, just scroll down to my last post.

Also on the panel was CNBC's Erin Burnett, a well educated young player in the business media who happens to combine intelligence and good looks (to a distracting degree). She more than held her own, pointing out that the populist political posturing by the administration and congress on the subject of Wall Street bonuses (known everywhere else as COMPENSATION) was distracting everyone's attention from the real problem.

My take is that there has never been a stimulus plan that stimulated job recovery and this one doesn't either, and it won't even if it gets fixed. That having been said, there are some useful planks in it (certain infrastructure items that should be done on the merits and AMT relief) and just because a stimulus program doesn't stimulate, it may still be economically valid if the improvements are long lasting and provide important benefits. For example, 75 years after the New Deal failed to life the country out of the depression, its tangible evidence is still providing public benefit. The highway system, built during the slowdowns of the post-war years have provided tremendous economic benefits and still do, though ongoing maintenance is always necessary. However, what we don't need is to nationalize the banking system and provide a lot of useless bridges to nowhere, libraries and museums no one wants to visit, transit systems for cities where the public insists on driving, and pouring more money at a public school system that needs a qualitative overhaul, not a refunding.

On taxes, rather than put an annual band aid on the AMT, we should make it the income tax system for the whole country. It is fairer, removes incentives that no longer are needed, and simplifies the tax system by eliminating deductions and taking the lower half of the income earners off the roles.

If we could eliminate mark-to-market, the banks would have the time to repair their own balance sheets. The bad bank scenario now being discussed would only help if the public bank overpays for the assets; otherwise, the write-downs will be realized and the banking system will be no better capitalized than now. So if it looks like the Obama administration is squirming and groping (just like the Bush administration did) it is because government money is not really the answer to this crisis.

As for Wall Street "bonuses," the investment banking business model of paying 50% of revenues as compensation was not viable, and so it went - there is no independent investment banking industry left. That compensation system will be gone. The payments approved by Merrill's John Thane on his way out the door fulfilled what he believed to be his obligation to the traders, and it looked worse than it was. In retrospect, he should have reduced the formula substantially to better reflect Merrill's failure. Those traders were lucky to get anything - just ask the people who used to work for Lehman Brothers.

But using Wall Street as a whipping boy is not winning the President any points in my book.


Last Monday, I bought 300 shares of Bolt Technology for my IRA at 6.96. Each year, Forbes publishes a list of the country's best 200 small publicly traded companies and I usually pick two or three that meet my criteria to add to the buy/hold list. I will start adding those new names this week.

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