"I'm Outraged, just Outraged!"

This is pretty rich. President Obama is outraged by Wall Street bonuses. But I guess no one should be outraged by $5 billion in a "stimulus" package being allocated to the execrable ACORN. Yeah, that's real stimulative. What a phony. If this guy can last four years without a lot of people getting thoroughly sick of him then this country is more spoiled and corrupted than I thought. Of course, I probably said that about Mr. Slick also.

54-46 Update

I caught Rush's appearance (by telephone) on CNBC this morning. Mark Haines and Erin Burnett did their "good cop, bad cop" routine (is that still legal?), with Haines doing his producer's bidding and acting the curmudgeon, while Burnett said "hey, the tax reduction proposals make sense".

To be honest, I don't know if Haines was playing the role of thick-headed MSM numbskull, or if he really is as thick-headed as he appeared. He wondered where Rush was on "bi-partisanship" after the 2004 election. I guess he didn't get the nature of the ploy, though Rush tried to help by explaining that "bi-partisanship" is a joke, even when you package it as "post-partisanship" and smile.

With the publication today of his 54-46 proposal in the WSJ, Rush is getting some real traction with this gambit. "Illustrating absurdity with absurdity" has long been his trademark, and I'm sure he's especially delighted that so many of the left's religious fanatics are taking the bait. But obviously, this is not all about fun and games.

As Hugh Hewitt noted in his politico.com piece today, "I won" has got to go up in every GOP locker room in the country. Not because anyone's complaining about the victor claiming spoils. But because this phony who played the race-card to the White House is telling the world what he really thinks about "post-partisanship": if you don't like a budget in a time of crisis being filled to the brim with ward-healing, machine-building, special interest-tending lard, that's too damn bad, "I won". Rush is calling him on it, and in his absurd way, he's making them nervous.

Analyzing Last Fall

At this, the beginning of a new semester, Derek recently described for me his spring schedule, senior year. AP Chem, pre-engineering, and AP Government/Econ. And, his day ends at about 12:30, ideal for golf season. He was also eager to tell me that in the 4th quarter, when the transition to the Econ portion of his third period class begins, they traditionally stage a stock market contest. He said that last semester, the winning team finished down 30%. Let's hope he does better, for all of our sakes.

About last fall. How in the world did it happen? How did all that shareholder value just vanish? (And what timing!)I think most of the culprits are well known, but the mystery to me is how they conspired together to work such a precipitous collapse. Obviously, this is going to be studied, and written about, for decades. And I haven't yet seen anyone offering a comprehensive explanation.

In Monday's WSJ, however, L. Gordon Crovitz devoted his weekly column to a discussion of a factor I'd not before encountered. "Value at Risk" ("VaR") models have been used on the Street to measure various types of financial risk, using historical data. Thing is, any model using "historical data" must include the "low but real risk that some new element could make the historical data a poor measure of the future." Once upon a time, these risks, outlying on the "tails" of the Bell Curve, were openly acknowledged in the form of high incomes earned by traders capable of managing the risk that lives many standard deviations from the mean. Here's the upshot from Mr. Crovitz:

It's now clear that the data that banks used were distorted by years of government initiatives to promote homeownership. Government-mandated loans led house prices ever higher and house-price volatility ever lower. When the VaR models looked back, they wrongly modeled a low risk of default. Wall Street shouldn't make the mistake again of ignoring the impact of politics on economics - and politicians should find ways to achieve social goals without undermining the integrity of markets.

This dovetails interestingly with today's "Fan and Fred's Lunch Tab" in the WSJ:

"...politicians like Mr. Frank have been telling us for years that Fannie and Freddie's federal subsidy was a free lunch. We are now slowly, and painfully, learning the price of Mr. Frank's famous desire to 'roll the dice' with Fan and Fred."

What is the price? The WSJ notes that the narrow measure (the price of bailing out Fan and Fred) has gone from $25B six months ago (with a 50% probability that nothing would have to be paid), to a minimum of $238B - greater than the entire federal budget deficit of fiscal 2007.

Even this estimate may be far too low. As for the "macro" cost of Chris and Barney's excellent adventure into housing market manipulation, let's just say a trader who could have figured out how to trade this risk would have become the world's richest man. After all, Mr. Frank pronounced Fan and Fred safe not long before their collapse, and doubled-down on that pronouncement by threatening the race card whenever anyone questioned the viability of the Fan/Fred "affirmative action in housing" model. It would have been hard to bet against them.

In sum, I sure don't know how all the pieces fit together, and I have yet (surprisingly) to find anyone claiming to. But it's a certainty, notwithstanding Mr. Frank's claim that he and his pet mortgage bankers had nothing to do with it, that our affirmative action in housing program is going to bleed this economy hard for years, if not decades.

The "Little Guy"

For those still deluded enough to believe that the Dems are "looking out for the little guy", I submit as Exhibit "A" contra, the infamous Kelo v. City of New London, 545 U.S. 469 (2005). This ought to have been an eye-opener, but alas it's not a perfect world, and you better watch out for those dastardly Republicans who will (a) starve your kids; (b) kill your grandma; and (c) sick the Monopoly man on you.

For those interested in a little 5th Amendment glimpse into our brave new road to serfdom, there's now a book out detailing the trials of one Susette Kelo, entitled "Little Pink House", reviewed in yesterday's WSJ. For those unfamiliar with the tale, it is the saga of Ms. Kelo, a forty year-old, divorced EMT; the house she bought in 1997 in a blue-collar Connecticut neighborhood; a giant corporation (PFE ticker symbol), a grasping city council, and five liberal Supreme Court justices.

It seems that when Pfizer came a courtin' the New London Development Corporation (NLDC), whispering sweet nothings in its ear about a new plant in an older neighborhood adjacent to a recently closed naval facility, the NLDC swooned. But what to do? You can't make people abandon their homes just because you've cooked up a lovely development scheme that promises to fill the city coffers. Or can you?

The Fifth Amendment reads in pertinent part: "...nor shall private property be taken for public use, without just compensation." Thus, until Kelo, the Fifth Amendment takings clause had been understood, not unreasonably, to mean that a taking of private property may occur if (a) just compensation is paid; and (b) the taking was for use by the public. Such "uses" included all those things you would imagine - parks, highways, bridges, and the like.

Since Kelo, however, and thanks the five most "liberal" (Orwell alert) Supreme Court justices then sitting, "public use" now means "public benefit". What's a public benefit? Whatever City Hall says it is. As the dissenting opinions pointed out, this interpretation obliterated "for public use" from the text. It also made clear, for any who might care to see, that the liberal establishment is only too happy to crawl into bed with the biggest businesses and crush "the little guy" like a little bug if there's a fat commission involved.

The happy ending isn't, sadly, that Ms. Kelo kept her house. But neither was it demolished, as were the other holdout homes in her area. Ms. Kelo's was dismantled and re-assembled in another part of town, complete with commemorative plaque - can you just imagine the very same local political thugs who ran her out preening for the photo-op? No, the happy ending is that since Kelo, 43 states have enacted legislation clarifying that "public use" means "for use by the public". Who do you think opposed this legislation? On the other hand, when a similar law came up for vote in Congress, it was defeated. Who do you think defeated it? Getting the idea? Here's your news flash: your grandfather's Democrat party is dead and buried.

Today's Economics Lesson

Courtesy NYU Professor Mario Rizzo, here is John Maynard Keynes of 1942, six years after publication of The General Theory:

Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.

The 54-46 Challenge

I've got to say, he's done it again. There's a reason why this guy, who I remember living in a tract house among a lot of state workers, is (and has been for a long time) in line to buy an NFL franchise. Rush's "bipartisan" stimulus proposal wonderfully highlights the fascistic tendencies of the Obamessiah and the single-brain-cell organisms that slobber over him in the MSM. Of course it is nothing new to note that "bipartisan" means Republicans back down and agree to go along with what the media and beltway libs want. Neither is it news that the government-media complex would love to silence, and seeks to marginalize, new media (shout out to Dan Rather!). So the Obamalama is just another thuggish Chicago pol in this tired old mold - where's the story?

What is new, and brilliant, is Rush's approach to Obama-speak. Don't just "just say no" to national socialism; and don't just say "me too (but less)". Call out the new- speak, and present an alternative (that highlights the farcical nature of Obamanomics). Finally, Reagan-style, explain how it will work, why it will work, and issue a challenge.

Thus the 54-46 Challenge, so-named for the approximate percentage of the vote going to Obama and McCain, respectively (rounding up slightly for Obama). Let the Dems take control of 54% of a stimulus package, and the Republicans 46%. Now there's a stimulus we can really call bipartisan! Astutely, Rush points out that among financial commentators, the supply-siders aren't violently opposed to Keynesian stimulus of some level; and the administration isn't completely opposed to tax cuts. Moreover, opinion polls show the public lacks confidence in the efficacy of government spending, yet has a degree of willingness to try a mix of demand and supply-side solutions.

So let's try a 54-46 solution. The administration, and the congressional majority, can figure out what they'd like to do with 54% of the money, and the congressional minority can do what it wants with 46%. Let us put 46% toward cap gains and corporate rate cuts, payroll tax holidays, housing, and suchlike. They can do what they want with their 56%, and all we'll do is say it won't work and I told you so.

C'mon Mr. President. Whining about Rush Limbaugh isn't very original, much less "post-partisan". Neither is lecturing the minority about who won the election and who didn't. By contrast, the 54-46 Challenge may be the most "post-partisan" idea I've ever heard. Want to be a real hero? Take Rush's advice and float it as a trial balloon, then watch what happens in the markets. You won't need to watch another opinion poll, and Rush has said he'll let you take all the credit.

Quotes of the Day

"Big government is not the solution to our problems; big government is the problem."
President Ronald Reagan, January 20, 1981

"The era of big government is over."
President Bill Clinton, State of the Union Address, 1996

Robert Reich has Nothing Against White Male Construction Workers

Robert Reich, former Clinton administration Labor Secretary, who, as indicated in the Wikipedia post bearing his name "has dedicated his career to making worthless people more worthless", has done the country a tremendous favor. He has given us a most eye-opening glimpse into the true meaning of "economic stimulus" in Obamessiah speak. In so doing, he has hopefully provided the noose with which the current administration will be hanged in 2010 and 2012.

I am speaking, of course, of his recent "testimony" - presumably in his capacity as Obama economic advisor - before some banana-republic congressional conference chaired by congressman Charlie("let's reinstitute the draft so we can get more white kids killed")Rangel. This spectacle first came to my attention via Rush, and also was a hot topic on Tom Sullivan's show yesterday. Now, it can be found on youtube at http://www.youtube.com/watch?v=opxuUj6vFa4

The lowlights are as follows. In opining on the objectives of the forthcoming "stimulus" legislation, Mr. (not, to my knowledge "Doctor", as suggested by the illiterate Rangel) Reich said that the money should be allocated with the greatest speed possible (good!), for "high social return" (?). Amplifying on this point, he infamously proclaimed that "the money should not go to highly-skilled professionals, or to white male construction workers." Instead, (presumably the preponderance of) stimulus money should be allocated to "the long-term unemployed... people who are not necessarily white construction workers or high-skilled professionals." For those still struggling to discern the direction in which the Obamalama wishes to take the country - whether his nods in the direction of moderation are mere head-fakes - the Reich Manifesto ought to provide a clue.

If I sound like I take offense at the notion of hundreds of billions of debt-financed federal expenditures being allocated on the basis of criteria other than the twin, and mutually-reinforcing, goals of economic recovery and taxpayer value, then I have succeeded in communicated my displeasure. And, with apologies to Seinfeld, I wish to make it crystal clear that I am not offended as a (mostly) white male; I am offended as an American and a taxpayer! Though offensive on many levels, the Reich Manifesto is offensive mostly because it reveals, with utmost and brazen clarity, that this claque of super-annuated student council candidates, whom the below-the-median crowd has put into power, cares not a whit about economic recovery or getting the unemployment rate back to pre-recession levels. If they did, they would take the greatest pains to ensure that deficit-financed stimulus be allocated in ways that maximize (taxpayer) return. Like it or not, that goal would require putting the money in the hands of people who have the skills to create lasting value. And, like it or not, in many cases, this would mean "white male construction workers".

For those of us who fancy themselves New Deal historians, the Reich video is no surprise. As is becoming increasingly clear via recent scholarship, the New Deal was an abject failure as an economic enterprise. It was, however, a masterful exercise in big-government propaganda. I'm reminded again of the famous encounter FDR had with his Treasury Secretary, Henry Morgenthau, in the latter's office. Morgenthau had a sign on his desk, intended to guide his subordinates, which read "does it contribute to the recovery?" When he saw this, FDR sniffed "this isn't about recovery; this is politics" - at a cost in human misery measurable on the cataclysmic scale. And so it is with the new administration. A President with no executive experience, who's goals in life appear to have been to (a) spend other people's money, and (b)"remake America", has been handed the opportunity of a lifetime. As his Chief of Staff, Rahm Emmanuel, put it: "a crisis is a terrible thing to waste".

The public expects Washington to spend money, and Washington will be happy to oblige. The public thinks it's buying infrastructure, but it's only half right. It's going to buy the infrastructure of a political machine, whether it wants to or not, and at a very dear price. Further, as Congressman Rangel candidly explained in the video, the administration needn't worry about what the middle class might think of this mad (social) scientist experimentation - they'll be way to preoccupied with taking care of themselves to raise a fuss. Where does this leave us? A massive exercise in social engineering, doomed to fail as a massive subsidy to bad behavior, bad culture, bad habits, and bad ideas, resulting finally in, as Holman Jenkins described in the title of his recent WSJ piece, "A Lost Decade". Ten years from now, they'll still be saying it's Bush's fault, but I'm telling you now: by then, it won't be.

Investment Thought of the Day (one month later)

On December 15, I noted that Cramer featured five high-dividend payers as strong, safe stock plays for the current environment. The stocks were: BMY, GXP, KMP, NAT, and VZ. Below is a rundown of their respective performances since then:
CLOSING PRICE 12/15 1/12 Div. Yield
BMY 22.50 22.15 .31 (12/30) 5.50%
GXP 18.48 19.42 (x-d 11/25) 8.60%
KMP 47.65 48.14 (x-d 10/29) 8.50%
NAT 32.77 32.21 (x-d 11/19) 19.80% (!)
VZ 32.30 31.79 .46 (1/7) 5.70%

During the relevant time frame, the S&P 500 ETF (SPY) declined in price from 87.75 to 86.95. Obviously, this is a very short time frame within which to assess the performance of any portfolio. Nevertheless, we can say that so far, it is holding up well and performing as advertised - reasonable price performance relative to the S&P, plus good to great (to fantastic) dividend yields. Moreover, I haven't heard any bad news about any of these companies, which is a real bonus these days. We should continue to monitor these stocks.

Quote of the Day

“Just because something doesn’t do what you planned it to do doesn’t mean it’s useless.”
Thomas Alva Edison