What Now?

by Larry Levin

It looks like the Senate has hammered out a Porkulus Bill. Apparently it needs to go through the meat grinder committee once more, and then it will be served to President Obama. Mmm, pulled pork sandwiches for everyone.

But what happens now? Months of ignoring actual economic data and buying on news of government intervention may have finally met up with reality. There are no more big government interventions on the horizon. Can the current trading range hold up? Will investors who are accustomed to buying into speculative bottoms hold their equities in the face of more bad economic news that is surely coming? The new Treasury plan and Porkulus Bill are done deals so I ask again - what now?

Sadly, many folks actually believe the government can "do something" about this, but they are wrong. Already the government, starting with George Bush, has tried four major stimulus plans including Barney Frank's $300-billion home-savior-project-boondoggle. Even the CBO (Congressional Budget Office) has joined me and others in criticizing the Porkulus Bill saying in a report that the so-called stimulus will worsen the long-run performance of the economy.

Many of you probably just thought: "How can that be? Any amount of money must help."

But you must ask yourself where the money comes from. The simple reality is that Congress does not have a vault of money to distribute into the economy. Therefore, every dollar lawmakers "inject" into the economy must first be taxed or borrowed out of the economy, leaving total demand unchanged. If government borrows the money from American investors, investment spending drops accordingly. If it is borrowed from foreigners, net exports drop accordingly. Even money redistributed from "savers" to "spenders" ignores the fact that savings circulate through the investment spending side of the economy, which counts just as much as consumer spending in the GDP.

This is the uncomplicated reality of economics that Keynesian blockheads simply refuse to understand, while Austrian economists preach. Yet somehow those in power go back to the dry well over and over again, consulting with Keynesian's like Paul Krugman, expecting a better result each time the failed remedies are tried again. This is definition of madness.


Previous Day's Trading Room Results:

Trade Date: 2/11/09

E-Mini S&P Trades*
(before fees and commissions):


1) Engf sell @ 11:10am at 831.00 = +2.00 & +1.50 (2 lot)

2) VA sell @ 1:20pm at 823.25 = -0.25 (1 lot)

3) Algorithm positions (2)...combined SofT and Algo total...+0.25


Electronic (YM) Mini-Dow:


1) No trades today



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