Let's see - how can I spend this $13?

(17 Feb) I'm not sure who really believes that this amount per person is going to stimulate anything but that's actually what the big personal benefit in the spending bill/law comes down to. I really don't get it. I guess I don't drink the right flavor of Kool-Aid.

So, many ask, why the amazing lack of positive response to this "must have" ill-named "stimulus" package? Let me count the ways.

Why the spending plan/law doesn't solve our current challenges

There are three major reasons, in my not usually humble opinion.

First, most of what are categorized as being benefits are not going to have any real impact for more than a year. Next, most of the so-called benefits are for transfer payments and programs of indeterminate benefit to anyone but the administrators of same. Finally - and, by any measure, most important - there still has been nothing done about the problem of the bad assets in banks.

Until the latter is addressed to the satisfaction of the professional investment community, nothing else matters much.

Cars, houses, energy and banks

Today, GM and Chrysler are going to come to the market with their plan to (a) get more money and (b) not have to go into bankruptcy. The unions continue to blame the economy, as opposed to looking in the mirror. The stock of GM and Ford are both down today as, to be polite, these shares have become nothing more than lottery tickets. Seems to me that, unless they go into bankruptcy and can reorganize into more effective systems, all it will be is good money after bad.

Tomorrow, we'll hear about how the administration is proposing to attempt to reduce mortgage payments for some in a "public-private partnership." The problem is that the private isn't going to go along unless they see some benefit to doing so...feeling good not being perceived as a big benefit. If there is a viable solution, that may help shore up housing values in the hard pressed areas like the sand states.

The shares of the energy companies are a big drag on the indexes as low demand is keeping the price for crude down. Worse news is that it is also holding back any new drilling and development of any sort as it's not cost effective in this market. Given the long lead times, that can prove to be a real problem when demand increases.

The banks continue to see their share prices erode as no help of significance is forthcoming. This, too, is a major drag on the indexes. The latest word is that a bank plan is coming "within weeks." The ignorant people in DC just don't seem to get the importance of this. Everything else is a band-aid at best. A viable, definite plan that eliminates this foolish mark-to-market stuff and allows for accounting for these bad loans in a way that frees up capital is what's required to really stimulate our economy - and that of the rest of the world.

Until - and unless - that happens, don't look for much positive out of the markets.

Speaking of the markets...

As is the case with most recessions/bear markets, it appears that we're going to be testing the lows we set last November 20th. This too is a usual and normal process.

We're at relative value levels not seen since the last real recessions of the mid-70s and early 80s. But until people feel that there is some stability in the markets as a result of having a dependable financial system, it's a continued sideways shuffle.

As Warren Buffet said, "Five years from now, 10 years from now, we'll look back on this period and we'll see that you could have made some extraordinary buys. That doesn't mean it won't get more extraordinary a week or a month from now. I have no idea what the stock market is going to do next month or six months from now."

I'm with him.