Marty Feldstein on the economy

He says that the Bush tax rebates from earlier this year has not been effective. The tax rebates in May gave $48 billion to consumers, and spending rose by less than $6 billion, while in June the rebates gave $28 billion to consumers, and spending rose by $5 billion. That equals a total of $76 billion dollars in rebates and just less than $11 billion in increased spending. If the original goal of the tax rebates were to boost consumer confidence and spending, it failed. Only 14% of the money infused was put back into the economy.

He goes onto explain how Obama's tax-rebate plan is based on similar tendencies. Based on these percentages, $65 billion dollars in rebates (which he proposes) will only yield $10 billion in increased spending. Perhaps Obama should rethink it.

Addendum: Greg Mankiw relays some analysis from a friend of his at the white house:

"Prof. Feldstein assumes that the growth in consumer outlays would have been flat had there been no stimulus. He then observes that consumer outlays actually grew by $12 billion more from Q1 to Q2 that they did in the prior quarter, and attributes that to the stimulus. Many observers think that, without the stimulus, consumer outlays would have grown more slowly in Q2 than Q1. If this is the case (and we believe it is), then the effect of the stimulus is bigger than $12 billion."

Interesting, but they are presupposing a pre-stimulus decline in consumer spending of $55 billion in May and June, which seems a bit excessive.

Assorted Links 9/29/08

Hey guys. Here's a few interesting links I've picked up the last few days around the internet:

1) Housing is still overpriced. Along with some pretty compelling graphs.

2) From good to great!... and then bankrupt. Many of the companies in the book Good to Great are doing terribly now, which forces you to question the original wisdom of the book. The companies include (!) Fannie Mae.

3) Quotes on investing. From Paul Graham, Warren Buffett, and Nassim Nicholas Taleb, among others.

Hope you are all having good summers. If you have something interesting to share but don't want to post it yourself you can e-mail it to me and I'll pass it along.

Campaign Contributions at Vassar

From the perspective of the contributor, donating money to a campaign can be seen as an investment. You are allocating assets in the hope of future will be to office.

Here's some interesting data from Fundrace.com on the campaign contributions from professors at Vassar:


It's almost an even split... between Obama and Clinton. Why have no professors donated to the McCain campaign? I have three hypotheses:

1) Professors at Vassar almost unanimously support Obama.

2) Professors at Vassar who may support McCain are afraid of being ostracized by their peers if they donate to a Republican candidate, so they either do not donate or do not list their profession as a Vassar Professor.

3) McCain supporters at Vassar are too pragmatic with their money to donate small amounts of it to a presidential campaign.

I'm leaning towards #1, but #3 is an intriguing possibility.

(Hat tip: Mads Vassar.)

Assorted Links

1) An article from Overcoming Bias on the biases involved in investing. Money quotes:

Basically, the totally rational investor won't count what he can't quantify, but much of the value in investing, or entrepreneurship, comes from an option value that is impossible to quantify. I know someone who built a product based on an optimization routine for superior investment strategy—the flagship idea failed, it never had a chance, but his system is now a popular risk management tool.

2) Venture capitalist Fred Wilson discusses the potential Yahoo and Microsoft merger. He calls it the "soap opera drama that won't go away." Indeed.

3) A new form of performance evaluation, using "matching" stocks to account for the fact that many of the stocks chosen by investors are not as large-cap as the S&P.

Minutes 4/28

Attendance:
1) Georg Machinist
2) Sean Murray
3) Arjun Agarwala
4) Brian Kim
5) Danny McBee
6) Dan Tan
7) Matt Fixler
8) Katy Mixter
9) Steve Donnelly
10) Robert Babbage
11) Chris Nieminski

We discussed opening up the mock portfolio over the next week to ten days, and the first stock we're putting on the watch list is Ford (F). Concerns were expressed about how to track dividends and stock splits using the yahoo portfolio tool, so if anyone knows 100% how to do this, that would be very helpful.

The account is vassarinvestmentclub@yahoo.com, and the password is [redacted], for future reference.

In the beginning of study week, the exec board is going to meet to vote on the stocks we've been researching, so aim to be finished by that week.

We also are going to hopefully have a guest speaker, a trader who Georg has worked with in the past, on May 8th. It will be low-key, question and answer, details to come.

Finally, we talked about trying to get some sort of physical location, and who and how is best to approach the VSA.

Minutes 4/14/08

Attendance:
1) Andrew Raz
2) Joe Davis
3) Danny McBee
4) Andy McKenzie
5) Steph Dini
6) Chris Nieminski
7) Nadia Jihad
8) Matt Fixler
9) Georg Machinist
10) Brian Kim
11) Stephen Donnelly
12) Katy Mixter
13) Dan Polhamer
14) Dan Tan
15) Arjun Agarwala

Agenda:
Georg, Dan, and Drew reported back on their meeting with Cappy. Basically, Cappy agreed to help us with the grant if we produce a few research materials with the resources we have. We will take a few of the best reports we produce in the next week, put them in a prospectus with a letter from Prof. Flynn and one or two of our models, and Cappy will take this to alums. Our mock portfolio will likely run for most of next year.

We discussed using our remaining budget for capital expenses and research materials, and we are going to purchase filing cabinets, a printer, and I will look into the prices for subscriptions to the financial times, the economist, and any other relevant monthly magazine. We are also looking to start a library of related books, and a few titles were floated around.

Georg and Dan presented a brief synopsis of how to value a company, including explanations for using P/E ratios, beta, the difference between long and short, gross margin, and other finer points of yahoo finance. Other tools people should use are dealbook.blogs.nytimes.com and themarkets.com, which is a good way to get a sense of a company's position within the market, as well as market trends on the whole.

Good work/attendance, and keep up with your reports.

Minutes 4/7/08

Attendance:
1) Stephen Donnelly
2) Drew Raz
3) Georg Machinist
4) Danny McBee
5) Nadia Jihad
6) Brian Kim
7) Andy McKenzie
8) Chris Nieminski
9) Matt Fixler
10) Dan Tan
11) Robert Babbage
12) Arjun Agarwala

We discussed making the changes to our constitution to reflect the group's changing executive board structure and voting procedures. Approval for these changes was not met with any resistance, and I believe Drew and Georg are going to make the necessary changes.

We also discussed moving meetings to New England Building, and this also was not met with any resistance, so our next general body meeting will take place in New England, in the first classroom to the left when you walk in.

Budgeting was the next point of discussion, with research materials being the major point of discussion for next year. Capital IQ, a Bloomberg Terminal, and a subscription to themarkets.com were the 3 services mentioned. Georg is going to see if we can get a grant for the Bloomberg terminal, and if educational discounts are available for all these services, before we decide what to pursue.

With the $875 currently in our account, it was suggested that we purchase filing cabinets to store our research materials, and finding a space for the filing cabinets would be the next step.

Andy suggested we post the minutes on the blog, and will be doing that from now.

Finally, we split into our industry subgroups to discuss possible companies/options and further meeting times.