New stimulus analysis shows Obama never understood investment

The free-spending left has always been known for its firm belief in free lunches and general economic illiteracy.  But taken in investment terms, the left-dominated Obama administration comes up looking even more colossally stupid, bringing back just 44 cents for America for every dollar spent.  What kind of investment is that?

A professional investor's analysis, spotted by ZeroHedge writer Tyler Durden, really makes President Obama, and the vaunted stimulus spending program he is still praising on behalf of himself, look like a rube, a boob, and a fool.  Seriously, you would not want Obama to be your fund-manager after reading this.  Simon Black, whose website says he lives in Chile, explained this as he analyzed what was almost exclusively the Obama administration's $11.6-trillion stimulus.

The size of the stimulus didn't bother him.  The problem, he said, was the return on investment.  As he explained it:

Debt (affectionately referred to as 'other people's money') can actually be a great way to enhance investment returns when used wisely and judiciously.

Private equity fund managers use debt to acquire businesses through what's known as a 'leveraged buy-out', where they'll put up a portion of the cash they need, and borrow the rest.

I did this a couple of years ago, for example, when I purchased an Australian-based business for $6 million.

A local bank offered to finance most of the acquisition with a $4.5 million loan at around 5.75%.

That meant I only needed to write a $1.5 million check for a business that was earning nearly $2 million annually.

It was a no-brainer, because I knew there would be more than enough money to make the loan payment (less than $500k annually) and still generate a substantial return on investment.

Real estate investors do the same when they purchase property.

If you have, say, $1 million, you could pay cash for a single property that costs $1 million… or you could use that money as a down payment and buy a $5 to $10 million property.

If the investment is a good one, the cash flow will more than cover the loan payments, and you'll end up making a lot more money.

Intelligent governments (hopefully not an oxymoron) will do the same thing, borrowing money to finance infrastructure projects that generate more growth and tax revenue.

Needless to say, Obama didn't do that.  Remember all the shovel-ready jobs that never happened?  And the signs on the dilapidated highways claiming that it was our tax dollars at work as the highways stayed awful?  Los Angeles around the 405 near Wilshire had a lot of those, as did Orange County's Highway 5.  More to the point, remember all the municipal budgets and pensions that got bailed out instead, the stimulus cash paying bloated pensions to bureaucrats who retired at 40?  Or the padded welfare benefits, such as Obamaphones, it paid for?  That was pretty much how the stimulus was spent instead.

That's why Black has numbers like these:

Uncle Sam borrowed $11.6 trillion between 2008 and 2018.  But the US economy only grew by $5.1 trillion.

So every $1 the government borrowed resulted in just 44 cents of economic output.

Again, you'd think that every $1 borrowed would have generated at least $1 in economic output.

After all, if you borrow $10 million to acquire real estate, you'd think you'd AT LEAST have an asset worth $10 million.  And if it's a good investment, hopefully more than that.

What a creepy thing to think it was Obama who managed the greatest portfolio out there: the U.S. Treasury.  This guy couldn't invest to save Soros.  He was a colossally bad investor, just as President Trump is a fairly good one – and who by contrast just happens to be cutting bureaucratic fat, waste, fraud, and useless regulations as the U.S. economy, by a weird coincidence to the left, booms, and the U.S. debt goes down.  This is what an investorly take on a budget looks like.

Obama had none of that good sense.

What's fun about the piece is that Black isn't at all ideological in his analysis.  He's purely a market guy.  He points out that stimulus as a result of taking on debt really can work, and has, citing two great examples from relatively recent history that paid off: the Louisiana Purchase, which yielded an exponential return on the $300-million investment for the U.S. economy, and the case of tiny Panama, expanding its Panama Canal in recent years, a move that tripled its economy in the span of just a few years.  Those were good stimulus investments, and they paid off, bigly.  They were government spending, but they were managed as smart investments, with real payoffs.

Obama never thought like that.  He'd often use terms such as "investments," but what he really meant by that was return-less spending.  Any questions as to why he left the U.S. finances in such a deep hole?  He was atrociously bad as a steward of the U.S. bankbook.  Let's hope voters pay attention to that as they consider whether to elect today's Democrats, whether of the Nancy Pelosi or Bernie Sanders variety.  Both are big, big fans of Obama's investment practices.

The free-spending left has always been known for its firm belief in free lunches and general economic illiteracy.  But taken in investment terms, the left-dominated Obama administration comes up looking even more colossally stupid, bringing back just 44 cents for America for every dollar spent.  What kind of investment is that?

A professional investor's analysis, spotted by ZeroHedge writer Tyler Durden, really makes President Obama, and the vaunted stimulus spending program he is still praising on behalf of himself, look like a rube, a boob, and a fool.  Seriously, you would not want Obama to be your fund-manager after reading this.  Simon Black, whose website says he lives in Chile, explained this as he analyzed what was almost exclusively the Obama administration's $11.6-trillion stimulus.

The size of the stimulus didn't bother him.  The problem, he said, was the return on investment.  As he explained it:

Debt (affectionately referred to as 'other people's money') can actually be a great way to enhance investment returns when used wisely and judiciously.

Private equity fund managers use debt to acquire businesses through what's known as a 'leveraged buy-out', where they'll put up a portion of the cash they need, and borrow the rest.

I did this a couple of years ago, for example, when I purchased an Australian-based business for $6 million.

A local bank offered to finance most of the acquisition with a $4.5 million loan at around 5.75%.

That meant I only needed to write a $1.5 million check for a business that was earning nearly $2 million annually.

It was a no-brainer, because I knew there would be more than enough money to make the loan payment (less than $500k annually) and still generate a substantial return on investment.

Real estate investors do the same when they purchase property.

If you have, say, $1 million, you could pay cash for a single property that costs $1 million… or you could use that money as a down payment and buy a $5 to $10 million property.

If the investment is a good one, the cash flow will more than cover the loan payments, and you'll end up making a lot more money.

Intelligent governments (hopefully not an oxymoron) will do the same thing, borrowing money to finance infrastructure projects that generate more growth and tax revenue.

Needless to say, Obama didn't do that.  Remember all the shovel-ready jobs that never happened?  And the signs on the dilapidated highways claiming that it was our tax dollars at work as the highways stayed awful?  Los Angeles around the 405 near Wilshire had a lot of those, as did Orange County's Highway 5.  More to the point, remember all the municipal budgets and pensions that got bailed out instead, the stimulus cash paying bloated pensions to bureaucrats who retired at 40?  Or the padded welfare benefits, such as Obamaphones, it paid for?  That was pretty much how the stimulus was spent instead.

That's why Black has numbers like these:

Uncle Sam borrowed $11.6 trillion between 2008 and 2018.  But the US economy only grew by $5.1 trillion.

So every $1 the government borrowed resulted in just 44 cents of economic output.

Again, you'd think that every $1 borrowed would have generated at least $1 in economic output.

After all, if you borrow $10 million to acquire real estate, you'd think you'd AT LEAST have an asset worth $10 million.  And if it's a good investment, hopefully more than that.

What a creepy thing to think it was Obama who managed the greatest portfolio out there: the U.S. Treasury.  This guy couldn't invest to save Soros.  He was a colossally bad investor, just as President Trump is a fairly good one – and who by contrast just happens to be cutting bureaucratic fat, waste, fraud, and useless regulations as the U.S. economy, by a weird coincidence to the left, booms, and the U.S. debt goes down.  This is what an investorly take on a budget looks like.

Obama had none of that good sense.

What's fun about the piece is that Black isn't at all ideological in his analysis.  He's purely a market guy.  He points out that stimulus as a result of taking on debt really can work, and has, citing two great examples from relatively recent history that paid off: the Louisiana Purchase, which yielded an exponential return on the $300-million investment for the U.S. economy, and the case of tiny Panama, expanding its Panama Canal in recent years, a move that tripled its economy in the span of just a few years.  Those were good stimulus investments, and they paid off, bigly.  They were government spending, but they were managed as smart investments, with real payoffs.

Obama never thought like that.  He'd often use terms such as "investments," but what he really meant by that was return-less spending.  Any questions as to why he left the U.S. finances in such a deep hole?  He was atrociously bad as a steward of the U.S. bankbook.  Let's hope voters pay attention to that as they consider whether to elect today's Democrats, whether of the Nancy Pelosi or Bernie Sanders variety.  Both are big, big fans of Obama's investment practices.