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CNBC reports that some of the Davos talk is centering on Wall Street Bonuses. UBS and Credit Suisse are already instituting some performance based programs and claw-back provisions. Will U.S. banks soon follow?
WSJ reports that Dell is looking to get into the Smartphone space
So here we are in cheery 2009! 2008’s horror show gave us a credit and stock market meltdown, a Presidential election, hundreds of billions of dollars of assets disappearing from corporate balance sheets around the globe, jobs disappearing left and right, unemployment rates spiking, home values dropping faster than the New York Mets dropping games during the last two weeks of the baseball season and NO New England Patriots in the NFL playoffs! Who woulda thought?
The one ray of ‘Hope’ everyone seemed to be grasping at was, exactly as their marketers intended, the Obama campaign of ‘Hope and Change’. We were going to throw out the fiscally irresponsible President Bush and the Republicans and all of a sudden open a bright new future of fiscal responsibility and economic prosperity and growth. Even before Obama was sworn in on that cold day in D.C., he promised an economic stimulus package that would ‘jolt’ the economy to life. The rumors started in the $700 billion area and now we know the bottom line – $819 billion in new government spending.
More government spending? Is the new boss the same as the old boss? Here is something they now have in common… In through the out window? It seems Obama got a bit confused today and tried to walk through the same ‘not-a-door’ as George W. did a few years ago. Uh oh.
Now back to our regular programming…
MarketWatch.com posted a very helpful line by line breakdown of the bill that just passed through Congress. Lets take a look and speculate on the number of jobs this $819 billion will create;
Now, while tax breaks will leave more money in the pockets of those paying taxes and can help to create jobs on the margin, tuition credits will not create any jobs at all and while tax credits for renewable energy may increase spending on alternative energy research it will create very few jobs this year. Giving back $90 billion to businesses may allow some businesses to keep more employees on and maybe even create a few jobs, but net-net this ’stimulates’ very few actual jobs with real life 2009 or 2010 paychecks. Oh hey – someone gets a tax holiday somewhere. Who, when and where I have no idea but no worries, it will only cost us $99 billion.
It does make a little sense to expand unemployment insurance during these times. Maybe this will keep a few people in their homes a little longer until they can find employment. Health insurance help for the unemployed is an added help and, when you think about it, health insurance help for anyone these days is an added help. Does it create jobs?
All of these items are technically called ‘transfer payments’ which have also been given another name over the years – welfare. This section may help to soften the blow of these difficult times but very very few jobs will be created by this $117 billion section. This spending treats the symptoms of a sick economy not the cause and does nothing to heal the patient.
Oh yeah! Here we go boys! Pick up your shovels and hammers, Jobs will actually be created in this section! Happy days are here again!
It seems like some highways will be repaired (hopefully) and we all know how many state (or federal) workers it takes to watch another state (or federal) worker actually work on a highway. This $30 billion should get a whole lot of pot holes filled if not at least get a few potholes repaired by a few jobs as another few new jobs watch the new few jobs. This spending will be marvelously efficient in creating jobs (insert sarcasm here).
School renovation will get $20 billion. Personally, if Obama wanted to give $200 billion to renovate our schools I would get behind it. This is an investment in the future and always a good idea and the people performing the renovations will be working. There are jobs in here somewhere.
Health Information Technology gets $17 billion in this plan. We do need an upgrade in our health records management and this is only $17 billion (honestly, I do not know if this is a lot or a little in this area but lets just go with it here) and some programmer somewhere will get a job, a manager will order new hardware, someone will build the hardware, the delivery guy will get to make another delivery and a hardware guy will hook up some servers. The food chain of a little bit of spending will get juiced up. This will create some jobs.
Transportation projects get $16 billion in this section and this almost seems like highways would be included right? I heard that AMTRAK is getting $3 billion and if an organization is in need of more money to get you somewhere late, it is AMTRAK. Some jobs must be created in here somewhere.
Lets wrap this section up – water projects, military and V.A. construction and broadband deployment are all infrastructure building projects and they will create jobs. This section of $104 billion is the most worthwhile and stimulative section of this bill. Actually, IT IS THE ONLY STIMULATIVE SECTION OF THIS BILL!
If it walks like a duck, quacks like a duck, gives away money like the AFLAC duck then its probably government spending. This entire section is nothing more than an increase in government spending. Period. The measly $9 billion in the last two items might create a few jobs but the other $208 billion (more than one quarter of the entire bill) will create ZERO jobs. We all know the states are in trouble. Estimates in California alone are as high as $28 billion through June of 2010. This state bailout money, and let’s call it what it is, will not create a single new job. It may keep the states from increasing taxes or cutting services but the ability to create jobs here is minimal. One way to look at the government bailing out the states would be to have all the citizens of the United States bail out the citizens of the states in the most trouble. In effect, the state problems are being shouldered by the federal government so this is appropriate. Now lets play devil’s advocate and think about the states with the largest deficits and see if there are any party politics mixed in here somewhere; California, Georgia, Florida, New Jersey, Illinois, Massachusetts, New York and Pennsylvania top the list. Of these 8 states all but one voted for Obama. COINCIDENCE? Lots of spending in here – very few jobs. All this is, is the backing and filling of holes in state budgets and creates NO jobs. Also, please notice that Medicaid is a welfare program – yes it is – since the day it was created.
I lumped these last two in together as all the spending here creates no new jobs. Education and Pell grants might keep a few teachers working longer and research may open a new lab or two, but in the big picture – NO NEW JOBS. Energy efficiency will help save energy (I hope – this is the government we are talking about after all) but create very few new jobs.
So, in conclusion, out if this $817 billion in new spending one section of $104 billion may actually go a ways towards actually STIMULATING the economy.
Why is Obama afraid to call this what it is – an increase in welfare, state aid and government spending. Why is he hiding behind this ’stimulus’ label when what we need is a REAL stimulus bill…
…and not another FRIVOLOUS bill.
It’s not just the banks.
Every industry needs a good kick in the a**. Today, Dell Inc. (DELL) filed an 8K with the S.E.C., stating that Michael Cannon (who was recently “relieved” of his President of Global Operations duties) “will receive a cash severance payment of $10 million with $5 million to be paid on or before February 20, 2009, $2.5 million to be paid on or before April 20, 2009, and $2.5 million to be paid on or before July 31, 2009.” Cannon’s start date was February 2007 and his last day will be January 31, 2009. Cannon also entered into a “Consultancy Agreement,” which will give him another $1.5mm. He gets out of that in February 2011.
Shareholders should descend upon Round Rock with pitchforks demanding that this type of agreement never happen again. To make matters worse, Dell just cut 1,900 jobs in Ireland. How do you think those employees feel about Cannon’s generous severance package?
Every time this happens, the company will usually say “it was in his agreement. . .we can’t do anything about it.” My advice is don’t enter into this agreements. There is no reason to pay someone that much for such a short amount of service to the company and, more importantly, their shareholders. If you’re a Dell shareholder, remember. . .you are paying for this. If DELL is dragging down your 401K or your 529 Plan, then you have every right be angry.
Dell will tell you that they enter these agreements to protect “sensitive information” and to ensure that the “non-compete agreement” stays intact.
Newsflash: Dell’s stock is at 1998 levels. HP is eating their lunch. Let him go to a competitor and use the $10mm to buy back some of your stock.
Bloomberg ponders why we, the U.S. taxpayers, aren’t getting a deal like Warren Buffett got when he gave Goldman his money. Henry Paulson, who just happens to be the former Chairman of Goldman Sachs, apparently did not think it was necessary to make sure the taxpayers received more favorable terms when dealing with Goldman Sachs and the other begging bankers.
The article hits the nail on the head. If Hank was at at Goldman and arranged this deal for Goldman, he would immediately be fired. Why can’t he show the same sense of dealmaking as the Chairman of the U.S. Treasury?
