I've so thoroughly trashed President Obama's economic policies and failed stimulus attempts recently that I fear I may be giving readers the wrong impression...the Dem's are only one half of the Economic Death Squad that now pretends to offer leadership in this country.

The GOP is probably 2/3rds responsible for the credit crisis to begin with (chain-sawing rulebooks will do that) and its current leadership has been equally pathetic in terms of bringing solutions to the table for joblessness and weak business activity.  Unless of course you consider the Rain Man-esque repetition of "more tax cuts" as an example of innovative thinking.

So it should surprise nobody that Obama's $50 billion infrastructure stimulus speech in Milwaukee today was panned within milliseconds of its conclusion by House Republican leader John Boehner.  As if there were any chance that Boehner would even listen to the address for any reason other than to know what it is that he is against.

The GOP's constant kneejerk rejection of economic ideas simply for the sake of Saying No has as much to do with our current malaise as anything being done wrong in the White House.  The newly-minted fiscal conservatives on the Republican side of the aisle, many of whom are themselves responsible for the $3 trillion and counting Iraq War, are like the old men who heckle the Muppet Show from the balcony.

It's naysaying for naysaying's sake at this point and I hope voters will remember that their favorite Republican All-Stars are equally complicit in the crime that is 15 million unemployed 3 years into a recession.

Some Stuff I'm Reading this Weekend...

Doug Kass's beware of bonds piece in this weekend's must-read.  (TSC)

Former Labor Sec Robert Reich - "Welcome to the worst Labor Day in recent memory."  (RobertReich)

Study indicates that the big winner of Health Care legislation will be Small Business.  (Forbes)

Investors are buying emerging market stock and US bond funds, show no love for domestic stock funds at all.  (NYT)

Seth Godin: "Whatever Happened to Labor?"  (SethsBlog)

The 20 Richest People of All Time.  (WallStCheatSheet)

Bill Singer on PIPEs, an emerging area of investor abuse.  (BrokeAndBroker)

SEC puts the ratings agencies on blast with Reg AB.  I'd have preferred the RICO Statute, personally.  (TBP)

That $3 trillion Iraq War cost estimate may actually be low.  (WaPo)

Based on the 1940's playbook, higher bond yields would be a major plus, not something to shriek about - they would indicate real recovery.  (PragCap)

Howard Lindzon prefers having "customers" over "users".  (HowardLindzon)

We lost edgy comedian Robert Schimmel this weekend.  (ComicsComic)

For some background, my friend is the opposite of me in his spending proclivities - his consumer footprint is probably twice the size of mine.  He's got two parking garage spots in Manhattan, one by his apartment and the other by his office, both of which cost him $300-something a month.  You can extrapolate from there to get a sense of what kind of bills this kid is seeing each month.

Anyway, he's in the commercial real estate brokerage biz which is basically Ground Zero for the deflationary spiral right now.  In the absence of businesses expanding and forming, prices per square foot are plummeting pretty much up and down NYC and around the clock.  No one's bringing in new employees so taking more space is literally the furthest thing from their minds.  In a city that recently had eleventy-five hedge funds starting up each weekday that were willing pay whatever you quoted them for space, even the most sought-after buildings now sit at fractions of full capacity.  What's worse, there is no burgeoning industry waiting in the wings to take up all the recently vacated hedgie offices - there are only so many law firms and bankruptcy specialists after all!

My friend the broker may be profligate, but he is also realistic and sees that, because of capacity slack, this could continue for quite some time.  His question is, short of moving to Tahiti with an easel and paint brushes, what can we do to counter the deleterious effects of this deflationary miasma?

My answer?  Not having lived through any periods of sustained deflation in my own lifetime (born in '77), I gave him the only answer I could, one based on common sense.  I told him to Get Small.

Reducing the expenditure footprint allows you to preserve both cash and cash flow, two of the most valuable commodities of all when prices and returns on investment are falling all around us.  Many will be forced to puke up properties, investments, businesses and crown jewel assets in a deflationary environment - but kings are made on the other side.  The kings would be the counter-cyclically prepared, the guy showing up to the estate sale with an unencumbered bankroll.

We're not concerning ourselves in this post with the debate about will we have deflation or not, we already do.  It may not last or get much worse, but who's to say?  Better to Get Small now and be wrong than to stay big, sprawling and at risk.

Remember, the armies that have won the great wars throughout history were not necessarily the most illustrious or fierce.  Rather, they were those armies that could be amply protected, supplied and fed without breaking the royal treasury.

Cartoon by Stuart Carlson/ The Record

Source:

Cartoons of the Week (TIME)

Alan Abelson's column in Barron's nails something important about this past week's big bounce in stocks - he's basically saying that all the fundamental and technical analysis you want can't even touch the power of a mightily wrong estimate in terms of moving the markets.  To wit, we did not have a "good" August jobs number, but we did have a number that was much better than the consensus punk estimates - and that was all we needed for some up-field progression.

The trouble with relying on rallies from whack expectations is that the expectations don't remain so whack for so long.   The ranges also tend to narrow as well; better to be a typically wrong analyst in broad company than attempt to be an infrequently correct outlier.

If the better-than-expected game is going to get harder to play for those looking to get more constructive on stocks heading into the fall, then where will the strength needed come from?  Ask any NFL coach, they'll tell you that true leadership can only come from the locker room.

Stocks need strength in other stocks at this junction.  In my view, after last week's reprieve from the recent and relentless out-of-stocks-into-bonds trade, we're going to need a better foundation to work higher.  Leadership must emerge from the ranks, not from the economic data or our weakness in forecasting it.  A lackluster number from the PMI or the BLS that just happens to be not quite as lackluster as what was expected is not going to do the trick going forward.

Better-than-expected on the economic front has given us a reason to stop selling stocks, but stocks themselves need to give us a reason to come in and buy them if we're to finish the year nicely.  And no, the quarterback Apple Inc ($AAPL) can't do it all alone.  We're going to need the oil services and drilling complex to pick itself up off the field along with some spunk out of the large cap banks.

In the meanwhile, a few more shock merger announcements or rumors (Burger King, Potash, Genzyme, Dollar General, MacAfee)  should keep the short-sellers off the blitz.  This may buy us time for that stock leadership to make itself known amidst the cacophony.

This one'll keep the kids up at night for sure, watch this robot snake climb a friggin' tree:

hat tip Laughing Squid

Chris Cernich, a former numbers guy from Ford Motor, is now being called one of the most powerful men on Wall Street.

From the WSJ:

The 46-year-old is the new head of M&A and proxy-contest research at proxy-advisory firm Institutional Shareholder Services Inc. For a mouthful of a title, the job is relatively simple. Mr. Cernich advises some of the world's biggest institutional shareholders about how to vote shares on mergers, proxy contests and corporate governance issues.

The clients—largely mutual funds, insurance companies, and pensions—almost always follow ISS recommendations, largely because they can't devote resources to the slew of shareholder votes arising in their portfolios.

That means Mr. Cernich can often represent the crucial swing votes that decide whether a merger is approved or dissident directors elected to a company board.

Proxy advisory firms weigh in on board votes and contests, essentially providing an opinion for voting shareholders as far as which candidates or measures are in their best interests.  There will be no shortage of these crucial decisions ahead of us.

Source:

Wall Street's New Power Broker (WSJ)

Good luck and be careful, intrepid investors!

Reading Paul Krugman's latest op-ed, in which he declares himself Smartest Man Alive for his calls in early 2009 about the need for big and bold stimulus, I can't help but feeling that the professor does not go far enough.

You see, in his piece The Real Story, Krugman picks on conservatives and all levels of Austerians for being obstructionist in their opinions back when the size of the stimulus plan was being decided.  The fact that Obama couldn't create private sector employment if his administration depended on it (it might) tells Krugman that it is only an issue of stimulus size, rather than shape or constitution, that has led to our failure to truly recover.

I have been very consistent on this site for two years now about the fact that it is the TYPE of stimulus that has been wrong all along, I've not yet weighed in on the SIZE of it.  But since Krugman's opened the door with his renewed calls for "boldness", I'll bite.  Here goes...

When the President addresses the nation this week with his pre-midterms new stimulus Hail Mary pass, I don't want to hear about deliberate or even responsible spending.  I want that crazy crazy, nahmean?  I'm looking for intergalactic dollar amounts.  No more half-steppin - time to drop a nuclear bomb on the anthill.

I am publicly calling for $50 trillion in stimulus.  And I want it now.

How do I arrive at that figure?

For starters, it ain't even real money anymore.  For all the talk of "printing presses", I go 4 or 5 days at a time without even touching a filthy paper bill.  I bought a Kit Kat yesterday with a Discover Card.  For serious.  It's all fake money anyway.

The difference between another $1 trillion and $50 trillion is like the difference between how Tiger's ex will live based on whether she got $100 mil or $750 mil in the divorce.  There's no difference at all really.

Here's something else to consider - no one in this country (or their kids or their grandkids) is ever actually going to be paying it back anyway.  Who the hell do we even owe this money to?  Last I heard, one branch or department of the government was making loans to another part of the government with Wall Street banks in the middle laundering it and exacting their commission.  What's wrong with the refinancEES refinancing the refinancERS?  When the debtors are the creditors are the debtors, who even bothers trying to unravel that pretzel?

I don't know what you people are all worked up over, a trillion, a few trillion, a lot of trillions, what's the difference at this point?  Let's have a stimulus bill so gargantuan that 600,000 people have to be hired just to proofread it.

Whatever, let it rip.  $50 trillion, Barack.  Go big.

Three more days of Summer ahead of us, then it's Back To Skool, kids.  I don't know about you guys, but I'm getting pumped for the fall...

Martin Scorsese's HBO show about Atlantic City mobsters during Prohibition (Boardwalk Empire) is going to kick all our asses and Mario Batali just opened up Eataly on 23rd Street - a multi-floor, 50,000 square foot restaurant/market/foodhall/shrine to Italian cuisine.  Flannel shirts are coming back again this fall (which is cool 'cause I'm still fully loaded) and the gang from Arrested Development is back with a new series called Running Wilde on Fox (trailer).

Anyway, we're not quite there yet, so let's do the last weekday linkfest of the Summer.

Four important investing lessons from departing legend Stanley Druckenmiller.  (MercenaryTrader)

In case you missed this - James Saft's We Are All Widows and Orphans Now was terrific.  (Reuters)

Hearing about Wall Street guys wearing makeup makes me want to go be a lumberjack in the Great North Woods.  (Dealbreaker)

Chess is looking to China and sees a possibly bullish inflection point for US equities.  (iBankCoin)

"Spend enough money and you can move the GDP up. Hire enough people and you can get unemployment down. It’s not that complicated." LOL.  (DailyReckoning)

The economics of being The Situation.  (WallStCheatSheet)

Based on earnings yield (earnings divided by price) stocks are the cheapest they've been in a half century.  (MyBackPages)

Perhaps the most important question of all - Can the rest of the world continue to grow if the US stays flat?  (CuriousCapitalist)

Hilarious: Cancel FDIC insurance, that'll get everybody spending cash again!  (Weakonomics)

Trader Leigh Drogen has is head in the sand, but here's what he's watching for.  (SurfView)

Too many economic indicators?  (AbnormalReturns)

The Yahoo! Tech Ticker message board is an Idiot Ghetto.  (TBP)

These non-traditional guitarists will seriously blow your mind, one by one.  Unbelievable.  (MentalFloss)