Tuesday, November 25, 2008

How to characterize Obama's fiscal stimulus plan

Greg Mankiw has a delightful literary approach to describing fiscal stimulus plans:

Last year's failed stimulus was temporary, targeted, and timely.

A better plan (but not ideal from a supply-side or libertarian perspective) would be John Taylor's: permanent, pervasive, and predictable.

Obama's recently proposed plan appears to be helpful, hopeful, and humongous.

Critics fear it might end up being pointless, political, and pork-filled.

Larry Summers now calls for stimulus that is speedy, substantial, and sustained.

Some of his readers think Obama's plan will end up being:
  • big, bloated, and borrowed
  • immodest, immoral, and imbecilic
  • clumsy, corrupt, and counterproductive
  • expansive, extensive, and expensive
  • weighty, worrisome, and wayward
  • politicized, pandered, and pathetic
  • socialized, silly, and sorry
  • random, record-setting, and ridiculed
  • ultimate utilitarian utopianism
  • absolutely abjectly apocalyptic.
Hardly ringing endorsements. Message to Obama: your current proposal is a non-starter. Go back to the drawing board and start from scratch.


The Lab-Rat said...

Current valuations have nothing to do with fundamentals. It is easy for someone who doesnt get judged on a daily/weekly/monthly P&L to tell you markets are cheap, and it is hard to disagree. You need to understand liquidity http://www.amazon.co.uk/Liquidity-Theory-Asset-Prices-Finance/dp/0470027398 And the fact that every trade has 2 sides, and often these sides may be leveraged, and often they may be forced to delever. Swap spreads do not reflect an improving situation here, they are liquidity driven.

Spiral said...


I have been thinking of buying Cheesecake Factory stock (Symbol: CAKE).

It's selling for about 7 bucks a share and a P/E of about 7 to 8.

What do you think?

Scott Grannis said...

Rat: I don't disagree with you at all. A recurring them in this blog has been that valuations are so awful that the don't reflect a forecast of the future, but rather a market that is suffering from illiquidity and terror. Deleveraging is undoubtedly a factor. Another theme however is that while there is no shortage of money, there is a shortage of willing buyers.

Scott Grannis said...

Spiral: You most likely know more about CAKE than I do, which is next to nothing. I would guess that it is selling cheap because the market expects a depression in which people virtually stop eating out. I'm not that pessimistic.