http://online.wsj.com/article/SB124286497706641485.html

Indiana Treasurer Richard Mourdock revealed this week that his state’s police and teacher pension funds have lost millions of dollars in the Chrysler “restructuring.” Indiana’s State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher’s Retirement Fund “suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government,” reports Mr. Mourdock.

Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy “secured” status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy.

We’ve worried that the Chrysler sandbagging would discourage bond investment. And, sure enough, Mr. Mourdock says that from now on no funds under his control will invest in the secured debt of “General Motors, other manufacturing companies, or those insurance companies who have or will be receiving bailout funds.” Given the recent actions by the feds, he adds, “the risk is too great for any prudent investor to accept.”

I recently took on a second “moonlighting” job to sustain my business (full-time+ job that it is by itself), my wife also took a part-time job — thrusting our 1 year old into daycare 3 days a week.
One of our liberal friends found about this as our new jobs had made us disappear from our social circle. She came to me nearly in tears offering help and sympathy.
I told her the same thing that I was telling her August-December of 2008, “hey, you already did you part by putting Obama in office, thanks for offering, but if I get any more ‘help’ from you liberals I’ll end up in a tent behind the Salvation Army.”
Surprisingly, she didn’t respond to my rude and aggressive comments with a defense of Obama…but just stood there looking sad. I think some of even the more hardcore hope-n-changers are seeing the cracks in the facade. Little good it does us now.

The economic climate is too uncertain, the administration has expressed too much hostility towards business. Why borrow or spend capital? Why stick our necks out when plans can be destroyed on a whim with new regulations and taxes? No thanks, we’ll just cut the workforce, put off major investments, make our current operations as efficient as possible, and wait for stable adults to regain control of the government.

there is a great deal of money in short term debt instruments at the moment. this is a huge pool of “money on the sidelines”. the allure of safety has driven yields on CD’s and bills down to very low levels (at one point last year 3 month US t bills traded at a negative yield)

this stock of capital differs from equity capital in an important way: it expires. in 3 months, you will get cash for your 3 month bill. unless you go out and buy something else, you will just be sitting on dollars. investors have been accepting negative real rates of return on the short end of the curve for some time now. this is real money on the sidelines. on an inflation adjusted basis, you are PAYING to keep it there. a retreat from the “safety bid” will push money out into other markets again. a situation where large pools of capital are being held at negative real return is not sustainable (notable exception of the social security trust fund, but that’s a horse of a different color…)

while you are correct that every seller needs a buyer, you are assuming that the size of the pie is fixed. if more money keeps flowing into the financial system (and it does) then it’s easy for there to be “money on the sidelines”. if you fund a 401k but don’t invest it, that’s money on the sidelines. if mutual funds take in new contributions but don’t invest them immediately, same thing. if you leave your cash in a savings account or a mattress or whatever, this is also “sideline money” (though deeper on the sidelines). there is a huge pile of cash waiting to be allocated just at the hedge funds that took AIG to the cleaners. (ask paulson (the fund not the treasury dimwit), 200:1 leverage can really add up)

further, retained earnings at companies plays a similar role. deferring investment and husbanding cash flow can cause a big uptick when the spigots are opened again.

this is what “money on the sidelines” really means. there is a great deal of it around right now, particularly in the hedge fund world. i have also never seen small cap growth names with such strong balance sheets and large cash piles. most are still too scared to put them to work even just buying back their own stock, but this seems to be thawing out a bit.

(i do agree with you though that the term is often used incorrectly)

If I tried, I couldn’t come up with a worse set of anti-growth policies than Obama’s. Is there a single plank in Obama’s platform that supports real sustainable growth? Do any of his “investments” have a measurable payback period?

The CBO assumes 2.4% growth instead of Obama’s 2.9%, so the CBO projects that his budget will blow up even faster — with permanent trillion dollar annual deficits … What if we don’t even hit 2.4%.

We’re likely to have at least a weak recovery in 2010 that will carry into 2011, bought with post-dated checks … even if pissed away, a $1.8 trillion deficit will have its effects — call it a sugar rush. Beyond that, Obama has gutted the potential of our private sector.

No more, at least for a while.

I need a break. I’ll be at the cottage.

Need a job? Fuck you. You voted Democrat so call Obama, maybe his toilet needs cleaning. Sorry for the language, but hard truths sometimes need hard language.

Again, I differentiate between businesses “sitting on the sidelines,” which mine is, and investors. Investment money can’t “sit on the sidelines” because for each position closed out somebody must add an equal amount to his position.

I’m doing more than sitting out. I’m cutting back on labor and other avoidable expenses in order to boost free cash flow, most of which will go to de-financing. I am also structuring my affairs for maximum legitimate tax avoidance.