Greed and corruption in the name of economic stimulus
Today's Financial News - Posted January 15, 2009
Our elected officials are up to the same old tricks, threatening the nation’s future in the name of votes. Spending trillions of freshly minted dollars may look like a good idea, but you and I will end up paying for it.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): If the nation’s economy ran on political greed and indictments, the GDP would be soaring and we would all be rich. Unfortunately, our finances are fiercely dependent on elected officials and the addiction to scraps of their benevolence is growing stronger every day.
Political greed and corruption is running rampant in America. We have all heard about Blagojevich. He appears to be the leader of the pay-to-play gang, but he is certainly not alone.
Here in Baltimore, the mayor was recently indicted over charges of stealing gift cards
(donated by her developer boy toy) meant for the city’s ever-growing list of poor citizens.
In my home state of Pennsylvania, the governor is getting criticism for breaking his own statewide hiring freeze by hiring a good buddy (that just lost a state congressional election) for a cushy “advisory” job that pays $95,000, 9% more than if he would have won the election.
Same old story
It is because of greed and corruption from so-called leaders like these that I am scared to even look at the $825 billion stimulus package circulating atop Capitol Hill today. I can only image the junk we are about to spend our money on.
For our legislators, it is an $825 billion campaign ad. For taxpayers, it marks the end of a great capitalist empire and the beginning of left-wing socialism.
As it is written, the bill calls for $275 billion in tax cuts (or rebates for the folks already paying nothing) and spending of $550 billion. You can bet those figures will not last more than a day or so before our lawmakers start tacking on their vote-grabbing additions.
We have already spent more than a trillion dollars on this economic mess and the data only continues to worsen. Another trillion bucks of junk spending will not have the muscle to pull the country out of the economic hopper and will only increase the Treasury’s future borrowing costs.
It may get Pelosi and Co. re-elected in a few years, but her successors are going to have one heck of a set of books on their hands.
Already this year, the country is sitting on a record budget deficit. Even without the proposed stimulus, it is expected to stretch to $1.2 trillion by years end. By that time, the deficit could equal close to 15% of the nation’s GDP.
To say the least, this is going to get interesting.
Best advice: Forget about it
But what does it all mean for the average investor? First, if you prepared your portfolio with the proper asset allocations for your income and age, it should mean very little.
The folks that are hurting the most are the ones that got greedy and tried to take advantage of numerous economic bubbles. When that bubble burst, they got slammed. The folks that were prepared are fairing rather well.
Most importantly, this is not a time to get greedy and try to take advantage of the government’s handouts. Sure, billions of dollars are going to flow through the nation’s economy but it has to travel a long way until it reaches the hands of shareholders.
Trying to pick the few winners from a massive stimulus check will be extremely hard for the individual investor. In this pay-to-play environment, by the time the little guy hears of a winner, the profit potential will have vanished.
Stick with the basics. Invest in the companies with strong fundamentals and even stronger products and you will easily beat the Street over the next 12 months.
Do not fall victim to Washington’s addictive Siren call. It will only lead to trouble.
Next Article: Hanging up the commodities boom hat
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