In today's update we've got musings about Microsoft-Yahoo, the administration's FY 2009 budget, the business of border security, the country's services sector, the country's manufacturing sector, worker productivity, and the recently-passed fiscal stimulus bill.

Click the below link if you'd like to read more.

Microsoft-Yahoo

No true value investor could consider Yahoo to be a cheap (i.e., a worthwhile) purchase. Like the vast majority of tech companies that survived the dot-com meltdown, and despite the recent plunge in its share price, Yahoo still is quite overblown.

From Microsoft's perspective, however, one at least can discern some level of cogent thinking behind that takeover bid. Microsoft has become a mature company with relatively-tepid organic growth. It wants to take on Google. It has no chance of doing so by itself. It has mountains of cash. Ergo the acquisition play. Not a good move. But not completely off the rails.

FY 2009 Budget

Here's a link to the administration's synopsis of its budget. For obvious reasons the chances the media accurately and fairly would have reported that item were zero.point.zero.

It's unfortunate the job market slowed down. As of the close of FY 2008, the budget deficit had been more than halved from its most recent high point in FY 2004. As a percentage of GDP, that deficit as of last year was much lower than those which prevailed during {gulp} Ronald Reagan's administration. With much slower payroll job growth, however, along with the recently-passed stimulus package containing broad tax rebates (discussed in further detail below), plus additional spending on anti-terrorism efforts, the hard truth is that we're looking at pretty big structural budget deficits over the next two years or so.

Borders, Inc.

Speaking of the administration's FY 2009 budget:

Border Security Highlights Budget

The Bush administration proposed new spending of more than $ 2 billion to tighten U.S. borders with fencing along the frontier with Mexico and to add more patrol agents and more beds for detained illegal immigrants awaiting deportation.

For obvious reasons that story has no chance of being featured on conservative talk radio or on the single-issue border blogs.

Services Sector Contraction

For the first time nearly in 60 months the country's vast services sector contracted. In January services growth turned negative, falling precipitously from December's growth rate. Services account roughly for 80% of all economic activity. There is, as such, a material possibility of negative real GDP growth in Q1 or Q2. Time will tell for certain.

Manufacturing Sector Growth

The overall manufacturing sector expanded in January. Factory orders in December also were up.

Worker Productivity

Worker productivity in Q4 of 2007 dropped sharply from outsized levels achieved in Q3. Believe or not, in many respects, that's a good thing.

One of the reasons why the labor markets have been so weak is high levels of worker productivity. Employers have been able to accomplish more with fewer workers. A slowdown in productivity suggests better net job growth in the months ahead. By the same token, however, slower productivity -- if that becomes a trend -- portends higher inflation.

Fiscal Stimulus Bill -- The Good, the Bad, the Ugly

The Good

Tax rebates for consumers and tax breaks for small businesses (boosted depreciation and expense deductions).

Also the fact the Senate GOP blocked various pork and self-defeating programs desired by Democrats; specifically, Republicans blocked an extension of federal unemployment benefits, they blocked an expansion of the federal food stamp program, and they blocked an expansion of the federal low-income heating aid assistance program. Conservatives should be proud today of the Republican caucus. Blocking those items took guts and discipline.

The Bad

Expansions of public-money mortgage loan programs. The less of those the better.

The Ugly

Nothing at all.

Yes, for obvious reasons, this plan never had a chance to be as effective as the 2003 stimulus package. Elections do matter. Given the reality of a Pelosi-Reid insano-Congress, however, this package is about as good as anyone could have expected or hoped.