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.

4 comments:

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...

Scott,

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.