I came across a good breakdown of the stimulus bill before the Senate. It’s from US News and World Report. In light of some of the reporting that’s gone on, I’ll share some of the highlights from this article:
$142 billion in Making Work Pay tax credits
$70 billion in Alternative Minimum Tax relief
$33 billion in green energy tax incentives
Approximately $21 billion in business tax relief and incentives
$87 billion in increased Medicaid funding
$47 billion in unemployment insurance improvements
$16 billion to repair, renovate and construct public schools
$27 billion is included for highway investments
$23.9 billion for investments and incentives in health information technology
$79 billion State Fiscal Stabilization Fund
Those figures represent $546 billion of the $888 billion total. This piece was printed yesterday, February 2, so there could have been some changes already. If you’d like to access the entire article, here’s a link:
*****Add Nobel prize winning economist Paul Krugman to the list of economists backing the bank nationalization idea. In a recent New York Times editorial, Krugman asks:
"If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found?"
Makes sense to me. I find the proposition that we simply bail out current ownership and management distasteful, to say the least. The way to truly wipe the slate clean is to nationalize them and then spin them off again. I virtually guarantee Warren Buffett will be first in line to buy a scrubbed Citigroup (NYSE:C).
*****The Dow closed below support at 8,000. But the S&P 500 held strong above support. That the major indices are holding at support levels is encouraging. After all, we’re in the middle of earnings season.
And while there have been some upside surprises, you can’t really say that earnings are good. They’re not. Companies are not making much and they’re cutting spending and firing workers to make up the shortfall.
I don’t ever want Daily Profit readers to lose sight of my contention that unemployment is the single most important factor for measuring recession. And clearly, the employment picture is not showing any signs of stabilizing, much less improving. That necessarily means the recession is worsening.
*****Stocks are a somewhat separate issue. That’s because investors are looking months, even years, down the road. So when we see stock prices hanging tough during this earnings season, it’s clear that investors believe that companies are doing what they need to do in the way of cutting spending to weather the recession.
In other words, the recession is priced in. This is another important observation that I’m not going to let Daily Profit readers forget.
If stocks are fairly priced given current earnings, then it’s up to investors to weigh economic data and decide whether things are getting better or worse. Obviously, the biggest catalysts right now are the stimulus bill and the next stage of the bank bailouts.
While neither is a cure-all, they are part of "slogging through." And I’m starting to feel as if there may be some kind of a rally coming for stocks. My best guess for timing is sometime next week as earnings season starts winding down.
*****The Trademaster Investor Forum: Steady Profits in a Range Bound Market airs on Monday, February 9 at 6 pm. If you haven’t registered for this free video event, you can do so HERE.
The TradeMaster strategists will be discussing how to trade for profits in the current market. Plus, they’ll be answering your questions. It should be a very informative event. So if you’ve got 30 minutes to spare Monday evening, tune in to the Trademaster Investor Forum: Steady Profits in a Range Bound Market.