Thank goodness. Having spent a few months saying how much I thought the Biden administration would spend if they got elected, they look like delivering on my spending promises.

$1.9 trillion of spending to get us started under the banner “The America Rescue Plan”. I have to say, that’s a bit of a negative tagline and a small child could have done better. Perhaps “Money will fall from the sky” or “Get your free stuff here” would have been more enthusing for the populace.

The instructions were clearly to “spend less than $2 trillion”, perhaps because it sounds better. Exactly the same thing happened in December with the $900 billion relief plan. A number very clearly less than $1 billion. The smoke and mirrors of number play works just as well with a record setting stimulus plans as it does with a 99 cent ice cream.

To the detail:

The stand out here is the increase in the minimum wage because this will never be repealed. Doubling it is very significant but in terms of other countries it is still less than Australia’s minimum wage US$20/hour (the highest in the world) but more than the UK’s US$12/hour.

Very modest, Joe. I’m pretty sure the kitchen hands of America would question whether their giving $10,000 to Harvard graduates is something they “simply cannot afford to do”. Fairly certain it is something they can quite easily afford.

In even more exciting news, Biden also announced that his long term stimulus plan would be released in February.  That one will deal with infrastructure spending, climate change and racial inequality.

$1.9 trillion and we haven’t even got to the soup course. Stand by.

Janet Yellen began her confirmation hearings in the Senate this week for her role as Treasury Secretary. She stayed mostly on script:

The best was saved for last though. When asked if she had a conflict of interest because of her dealings with commercial banks since leaving the Fed, she answered “I do not”.  I’m pretty sure that she meant to say “Yes, I absolutely do because I’ve been lining my pockets with money from those fools since the day I left”. Perhaps the record will be corrected later. Here is her list of speaking fees since leaving.

You may believe that this is too simplistic and valuation models are far more sophisticated than this, but they are not. At their core, the number one thing driving “valuation” is the risk free rate against which all other returns are measured. The number one risk free rate is the United States two year treasury yield.

That rate, or near derivations of it, are included in nearly every financial model in the world.

If you feel like something is wrong and that valuations of equities are a little bit high. Look no further, the issue is the bond yield. Based on that yield stocks are currently massively undervalued. It is complete nonsense that this is true, even though intuitively we know that it is false.

The stock market is likely telling us that bond prices are wrong, not the other way around.

Great news this week from our favourite central banker. A new spin doctor has been appointed. The “Director General of Communications” has been appointed to explain:

“how we are working together to protect the euro’s purchasing power”

At the last count the Euro had lost 65% of its value against bitcoin in the last 6 months and 99% of its value in the last 10 years.

I very much look forward to Wolfgang’s explanations. Please join me in welcoming Wolfgang to the team and do say hello if you see him in the corridor.