Partners - Stock market, economic and political commentary by Patricia Chadwick

Is There Hope Despite a Disappointing Stimulus Package?

The stimulus package is a real disappointment because it could have provided a serious punch to shock the economy into action. Instead it is a typical – albeit much bigger than normal – spending bill, which means it is has more than the normal amount of pork and less of the incentives needed to stimulate capital investment, jobs and profits. But frankly, given the dismal state of the economy, I’ll take any spending in almost any form at this time – yes, even pork – provided it is done soon and in a big way. The economy can’t wait much longer.

The stock market appears to be in agreement – it has been in freefall since the stimulus package since was signed. The gallows humor about the pricing of financial stocks (You can buy a share of Citigroup for less than the ATM charge for withdrawing cash) epitomizes the depths of despair investors now feel. This morning’s news that the Government might increase its ownership in Citibank would appear to support its continued role as an equity investor (admittedly a big one) and not a nationalizer. Thank you, Senator Dodd (or should I misspell it as Senator Dudd?) for freaking out investors with your ill-chosen comments.

But a more careful look at the numbers might offer some signs of hope. While the market is rattling around at the lows it hit just three months ago in November, fewer stocks are making new lows. The Dow Jones Industrial average (which with American Express, Bank of America, Citigroup, GE, JP Morgan Chase is hardly an industrial average any more) is performing worse than the more economically sensitive S&P500 while the smaller company averages are still well above their November lows.

And even in the financial sector, there are a few signs of genuine life and for good reason. Goldman Sachs is 60% off its lows in November and Morgan Stanley has doubled since that date. Both are selling for less than book value and employ more conservative accounting practices than the pure banks. So the market seems to believe that there are some smart bankers out there who know how to survive on their own, know how to manage their businesses, and are poised to come out as real winners when the economy eventually turns around. They don’t need Government capital and have announced their intention of paying it back.

Where are some of the places that might harbor signs of new life? Not surprisingly, utility stocks, as a group – both electric and gas – are acting relatively well. While not all of the stocks have safe dividends, many and probably most do, and they benefit from relatively stable revenues. Oil stocks also appear to looking forward with some optimism. Despite the sharp decline in the price of oil, (from a speculatively induced high of nearly $150/bbl to around $40/bbl today), the outlook for energy companies is good. The price of oil will not stay this low for long. Fortunately, the currently low price of energy it is acting like a major tax cut for consumers and encouraging them to drive more. At some point in the next six months or so, it seems to me that the price of oil will again move up to the level that encourages drilling – around $75 – $80/bbl. That will be good for energy stocks. Health care – drugs, biotech and HMO companies – as a group looks good. Again, it is a safe place during the economic storm. Both housing and technology are groups that seem to be getting some life – they are likely to be early beneficiaries of any economic recovery.

Seeking the bottom in the equity market is difficult to do, and catching the bottom is just about impossible to do. The important thing to remember is that the stock market only looks into the future; it does not focus on the past. It will be the best indicator of impending economic recovery and when it sees the first signs of that recovery, we will have a market rally that will rival 1982 and 2003. Hold on to your hats.

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7 Responses to “Is There Hope Despite a Disappointing Stimulus Package?”

  1. Michael Colopy Says:

    First a qualifier: Patricia Chadwick, as anyone who knows her can attest, is as open and fairminded a soul as there is writing today, on blog’s like this, about economic matters, in the month of February, under normal barometric pressure, with a first initial “p”, parent of two, under partly cloudy skies……. So, what follows is the rambling rant of an economically conservative, socially (socialistically leaning) liberal, whose devout optimism outruns any redemption scheme ever dreamed up by believers, visionaries or seers of any stripe, including crystal meth addicts.

    Let’s pose the question begged in the blog:
    What can fairly be defined as pork in the stimulus bill and comprising what percent? FAIRLY defined.

    According to two friends working for GOP Senators, very, very little. “It’s about positioning”, comes the answer. These are honorable people: one is on the staff of a Senator who voted “aye” and the other advises a Senator who voted “nay”.

    As I see it, — and at least a few fair-minded, red state participants apparently agree, the argument is T’d up for its political utitlity, not as policy, prescriptive solution or the paroxism of taxpayer moral outrage it purports to be. OK, so that’s the nature of our national politics today and so be it.

    Nonetheless, it is disconceting in a season of real national peril to see so many GOP lawmakers, most conservative commentators and all GOP party flaks deploying the pork label as an epithet to discredit whatever the new president and the Democratic majority try to do in terms of federal spending to re-invigorate the economy: i.e., positioning. No doubt, as the supine press repeat the charge, there must be some grain of truth to it. It may be a very small grain in a mountain of sand, but hey, it’s the only political flakkery current conditions allow — especially since it is essential to duck responsibility for the largest profligacy in US history which was generated on GOP tenure. (Vice President Cheney, responding to a questioner of his own party from the House Appropriations Committee who objected to GOP sponsored expansion of both government itself and government deficit spending, famously retorted that “Reagan showed deficits don’t matter.”

    If, as alleged, pork is truly a significant portion of the stimulus bill, what is it? So far there have been only anecdotal out-of-context references that some of us know to be worthy and legitimate but easily mischaracterized as pork because a project’s title sounds unusual (condom design analysis, the mating habits of bees in southern CA or the impact on yellow-bellied salamander social life of global warming….) On top of that, some of the very minor examples alluded to, I heard on Friday, turn out to be inherited from earlier GOP-backed initiatives to benefit folks back home. What many observers often miss is that when some obscure federal agency undertakes a seenmingly questionable project (an odd name is usually all that’s needed for the ad hominem smear), even though it is entirely meritorious, often it is under the aegis of Members seeking more taxpayer funding to spur the home district economy.

    As the original author of a hard hitting Christian Science Monitor op/ed some years back, “Pork Sweet and Sour”, lampooning water projects and many other boondogles (most of them, ironically, spewing public money into solidly red states), I am an emphatic opponent of wasteful governmental spending or any heist of taxpayer money that is either unworthy or could be substituted efficiently by private means.

    Why is the the chant not accompanied by identification of the trough-tending we used to see as apart of every appropriations process on Capitol Hill? We have yet to hear a non-ideological analysis that credibly distinguishes federal funding for projects (qua stimulus) from nonmeritorious ones. There are two reasons for that notable deficiency: first, the anecdotal citing of “pork” skewered as clotting up the bill is in reality so insignificant as ruin the claim, and, second, there is not even a patina of moral sheen remaining to cloak most of the GOP congressional critics when their recent record of fiscal responsibility is examined.

    The chorus of alarm and facile commentary about the stimulus bill being “loaded with pork” is a cost-free broadside that hasn’t been born out with any credible specifics. There are — surely must be, some nonessential things funded under the new bill. And yes, this meets the definition of pork, in the narrowest sense. It also meets the definition of unfairnes and while we neededn’t bend double over inconsistency, like strong whickey it has its uses but houldn’t be overdone.

  2. P Walsh Says:

    Right on, brother! I agree with you whole-heartedly!

  3. patricia Says:

    Thank you. I keep trying to find some good news, but it is getting increasingly difficult.

  4. patricia Says:


    In response to your thoughtful, erudite (and I trust deliberately at times humurous)response, let me clarify why I was so willing to toss the term ‘pork’ into the trough. The relevant bill was entitled and marketed as “The Stimulus Bill”. Truth in advertising should therefore allow the funder of that bill (the US taxpayer that you and I both are) to expect the bill to be one whose sole purpose is to stimulate the economy. Other spending appropriations, it seems to me, should fall under the purvue of the regular annual apparopriations bill that comes before Congress (or is that a biennial event?) But somehow this Stimulus Bill appears to have morphed into the typical glad bag of Congressional pet projects – with no blame on my part laid on any particular political party. It is full of long term spending deals which will do little or nothing to live up to the title and purpose (at least as espoused by the President who seemed to be AWOL during the its creation) of the bill as one which was conceived as a quick and powerful shot in the arm to the economy to help stabilize it and hopefully even resurrect it. If it was just a regular big fat spending bill, then why the rush? In a period of crisis such as exists today, the most potent tool the President has is that of leadership. Unfortunately, I am having difficulty witnessing that in our new President. When I compare him to President Reagan, who also took office in the midst of an economic crisis, the leadership is sorely missing. I realize that he is inexperienced in matters of both politics and leadership (unlike Pres. Reagan), but he did a brilliant job of selling himself to the American people as the best qualified candidate for the office. I want him to succeed, because the country needs that so badly, but I am afraid he is appearing a bit out of his league. I can see Mitt Romney in the background smiling, and planning his strategy for 2012.

  5. Michael Colopy Says:

    Well said. And, YES, of course you are correct that there is almost always a facetious thread since the nonesense I inflict attempts to reflect the inherent comic absurdity of modern life.

    On to the issues raised above: viewed from here, the evidence is against the characterizations given.
    Consider the following three points which comprise the nub of the criticism above: the knock that the president lacks a compelling leadership, the timing and stimulus value of the bill and the specifics-free charge of “pork” that allegedly lards it. If there is one feature of President Obama’s style — as several national surveys and two of my five senses confirmed two nights ago when he addressed the joint session of Congress, he is in indeed exhibiting effective leadership, across all disciplines and even ideological preferences ( — except for the extreme right where the first priority is attending to the second coming’s third warning.) The reflexive and shallow carping from conservatives was ably demonstrated by Sen. McCain and it got a pitch perfect presidential response. At the White House meeting of Hill leaders on Tuesday McCain cited huge cost overruns in the presidential helicopter replacement program. To which complaint President O jovially and adeptly responded, noting that he’s just fine with the current birds, his career to date hadn’t included many, and that this mismanaged program was being stringently reviewed by the Secretary of Defense at his request. This response was delivered in as pithy, precise, commanding and engaging a manner as McCain’s was glum, dissonant, and a false imputation to the current president of spending profligacy ginned up by his predacessor and initiated by — whom? pray tell: Bush’s SecDef, Donald Rumsfeld, Mr. Managerial Competence, no less.
    More to the point, the essential fiscal oversight the last administration and its flaks on Capitol Hill so conspicuously failed to provide, represents a costly deficit of management that is being energetically and systematically addressed now. [We’ll skip past the question begged by this odd development: namely, why is the party of the most staggering waste and mismanagemeent in US history shuffling forward with these off-the mark pieties?]
    So that’s this week’s vignette, Obama’s leadership laced with fiscal prudence in one brief exchange.

    On the question of the inclusion of non-stimulus items in the bill, the best the House GOP (read Eric Cantor, Republican whip — read also, self-promoting, venom-tipped electric prod: Minority Leader John Boehner is only the marionnette)) could throw up is the government’s long planned purchase of a fleet of vehicles to replace fuel-inefficient ageing ones. Unlike the helicopter gambit, this procurement would help kick-start or add to assemblyline work keeping a large number of blue collar American workers gainfully employed and off the swelling welfare and unemployment rolls. As the poor drugee who sleeps on the sidewalk outside the E Street cinema would declare: “that’s rill stimillatin’, baby!” In fact it carries the twin benefits of stimulus and timeliness, both much needed just now. That is why I see the NO votes — 100% of the GOP in the House and all but three in the Senate, as betrayal of those middle and lower income taxpayers who are least responsible for, least benefited and most harmed by the financial meltdown underway.

    It’s worth noting that even in McCain’s camp, this one is acknowledged to be a huge improvement over the spending bills routinely called up for votes when Congress was under GOP sway.

    Shouldn’t we be asking why Members of the People’s House, to use Jefferson’s description, acted so irresponsibibly at this moment of national crisis in opposing the crafting of a timely solution? Opportunistic partisanship of the Limbaugh sort (“Actually, I DON’T want this president to succeed!”)– not yours, to be sure, is upatriotic, in my view, and should be agggressively challenged for the prancing fraud it is.
    I’m not suggesting, in the argot of Pat Buchanan’s last run at the White House, it’s pitchfork time, but in some haunts in the suffering heartland, it’s getting there.


    By the way, your appearance on CNBC’s Squawk Box was excellent. (Will have have to ask off-the-record about the billowing blue chincilla in which you were swathed against the predawn frost.) Your commments were insightful, incisive and, best of all, authoritatively optimism generating! So much so that I won’t be investing all those lottery tickets today! If there is s run up on the Dow today, lots of shareholders will owe you a hefty commish!