China the Dollar and Gold

China Gold Futures

China Gold Futures

The way China thinks about the dollar and gold affects every one of us on our precious Amelia Island. In an interview with the London Telegraph, Cheng Siwei, former vice chairman of China’s Communist Party’s Standing Committee, said China has lost confidence in the dollar (nothing new there), and it is buying massive gold reserves to protect itself… “Gold is definitely an alternative, but when we buy, the price goes up,” Cheng, now a global economic ambassador for China, says. “We have to do it carefully so as not stimulate the market.” As a policy, China will buy gold on dips, creating a strong floor for the metals. China’s buying ‚Äì the country has doubled its reserves to 1,054 metric tons ‚Äì also explains why gold has held strong despite a soaring market.

The world’s biggest gold miner, Barrick Gold, hears China loud and clear… Barrick is rushing to unwind its fixed-price bullion contracts, which would expose Barrick to swings in the metal’s price. Barrick is selling 94.8 million new common shares (17% more than the original sale, announced Tuesday) to help cover the $5.6 billion charge it will take to eliminate some of the hedges it has on 9.5 million ounces of gold.

AngloGold Ashanti and Randgold Resources are buying control of a deposit in the Democratic Republic of Congo (DRC) – one of the poorest and most dangerous countries in the world – containing around $22 billion of gold. Production in South Africa has fallen, and after eight straight years of price increases, miners are desperate for untapped reserves. The DRC is one of the last known frontiers of untapped gold reserves. If AngloGold and Randgold have even mild success, expect every mining company in the world to set up shop.

Betting against the majority usually pays off, but I‚Äôm still bullish on gold. The fundamentals are too strong. As our friend Steve Sjuggerud of Daily Wealth says, ‚Äúuntil the average American ‚Äì who laughed at the idea of owning gold last year ‚Äì starts e-mailing us asking us for advice, we’re buying.‚Äù he declared gold will stay above $1,000 this time around… Steve notes that in a real bull market, an asset will hit a new high as optimism surrounding the asset peaks ‚Äì as was the case with gold in March 2008. Then, optimism wanes and the asset price falls.

I think gold will hold on above $1,000 for another reason… the astronomical amount of money the Fed has printed into existence to fund the current bailout.

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How to Become Wealthier

Wealthy People

Wealthy People

Over the last 10 years, have you really become wealthier? I hope the answer is yes… one of life’s many credos is to protect and enhance your wealth, as small or large as it may be. But for the average family, the answer is no, says a Census Bureau study released this week.

From 2007-2008, the most up-to-date data the government has, the median family income fell almost $2,000, to $50,300. That wipes out all gains made over the last three years. Factor in inflation, and the typical family is actually making less now than they were in 1998.

So let‚Äôs gripe a bit: We all spend so much time poking at things like our GDP — reporting changes every quarter and spending millions upon millions guessing where it will be next month, next year, etc. Yet there‚Äôs only one gauge of how wealthily we as a nation are actually growing‚Ķ and we leave it to the Census Bureau to report once a year, with a nine-month lag time. Which matters to you more: If you are more financially sound now than you were last quarter or if the U.S. gross domestic product shrank 2.1% or 2.3%?

Poverty in the U.S. has risen to its highest level in 11 years — that‚Äôs the more popular headline from the Census report. They released the annual poverty study this week, which was oddly delayed, as we mentioned back in August, because the data were ‚Äúnot optimal.‚Äù At any rate, 13.2% of Americas lived in poverty in 2008, up almost a full percentage point from 2007. That‚Äôs the highest rate since 1997. You are likely shaking in suspense to hear next year‚Äôs numbers, but we ain‚Äôt seen nothin‚Äô yet.

What exactly is “poverty” to the U.S. government? It is the equivalent of a family of four living on an annual budget of $22,025 or less. Rest assured that if you’re stuck raising a family on 30k a year, you’ll be just fine. But gold went for less than $300 an ounce 10 years ago today. Take that, inflation. The spot price today has once again broken through the $1,000 mark. Traders have bumped gold up to $1,010, thanks mostly to a weakening dollar.

Economist/sociologist Bill Bonner relates, ‚ÄúThe feds are desperate to restart the economy. The only way they can imagine is by increasing the money supply… and inducing people to spend money. They want inflation, no doubt about it. And they’ll get it — no doubt about that, either.‚Äù

‚ÄúThe question is when. Our view is that they’ll get more than they expect, but later than they want it. We’re looking for another crack in stocks…followed by more fear and loathing in the economy. This will have two major effects. First, investors will turn to the familiar dollar for safety. Second, everyone will hoard money… speculation will cease… and prices will fall — including the price of gold and silver.‚Äù

‚ÄúMarket events — such as another big break in the banking sector — could bring a deflationary collapse. If not, the Fed itself may have to step in to protect the dollar. In either case, gold and silver are not likely to reach their final, bubble phase until this contraction is over.‚Äù

In the meantime, my advice remains unchanged: Buy silver and gold on dips.”

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Reduce Welfare Expenses in America

Welfare

Welfare

How about an idea that will greatly reduce the welfare expense in America? Like most folks in this country, you have a job. You work, they pay you. You pay my taxes and the government distributes your taxes as it sees fit. In order to get that paycheck in some cases, you may be required to pass a random urine test.

What is a problem – is the distribution of our taxes to people who don’t have to pass a urine test. So, here is the question, shouldn’t one have to pass a urine test to get a
welfare check because many of us have to pass one to earn it for them?

Please understand, there is nothing wrong with helping people get back on their feet. But it is wrong to help someone who is sitting on their rear, doing drugs, while we work. Can you imagine how much money each state would save if people had to pass a urine test to get a public assistance check?

I guess we could title that program, ‘Urine or You’re Out’.

(Whoever wrote this one deserves a HUGE pat on the back!)

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Manage Your Spending and Re-negotiate Your Debts

Bank Charges

Bank Charges

Americans are slowly starting to learn that managing their spending and re-negotiating their debts could save them from the poorhouse. It is becoming quite clear that this recession is far from over and household and individual debts could easily grow to unsustainable levels if people keep on making the same mistakes, they so inconsequentially brushed aside when credit was king. Every financial institution out there, as here on Amelia Island, is upping fees and penalties as bankruptcies and credit card debt are mounting.

To break down the inevitability of the current downward spiral of income and wealth, you only have to realize that:

• Middle Class America will only pay for replacement, but will not buy new. They are learning the old (new) way of saving on every nickel and dime.
• Wealthy America is looking at ways to get money out of the country as they are looking at a horrendous mounting of national debt and social programs to be launched.
• Unemployed America has no money to spend
• Political America is rapidly losing funding as a result of lower tax revenues

Takes these facts and realize that the “ONLY” way for an economy that depends for 70% on consumer spending will rebound is, if people start spending again.
Since people don’t “the snakes in the grass” are changing their approaches. A walk through the aisles at local Home Depot or Lowe’s tells me that home improvement materials have gone up substantially. Two pounds of screws that used to cost $4.29 are now $8 or $9.

I just had to order a pump for a 2004 Chevy and come to find that the production of that particular is already discontinued. The part used to cost $72, but Ron Anderson was happy to sell it to me for a whopping $168. Now these are just small examples of where we’re heading and it’s not a pretty picture. If we don’t want to spend the money on new purchases we will be charged an arm and a leg for indispensable parts.
Many around the nation wonder how to keep their head above water and the only way we know is to stop being ignorant.

1. The worst culprit for keeping you from sinking deeper into debt is, not knowing where your money is going. Make it a priority to keep records of where and how you spend your hard-earned cash. Make a repayment plan and have set goal-dates for paying off debts. Without these tools, it’s far too easy to stay in debt. You can purchase accounting software, make a simple (and free) spreadsheet on your computer or even work it out with a pen and paper; just make sure you make a long-term plan for regaining control of your finances. That is step number One. Be aware of your money and where it goes each month, and be aware of the options available to you.
2. Money is a commodity that carries a cost (interest) and if you are having trouble paying down your debt, have the guts to call your creditor(s) and ask for an interest rate reduction. Make sure you ask for the lowest fixed rate, because anything else like an introductory rate will shoot right back up in a few months and have you back at square one.

Mention competitors’ rates; there is no harm in asking, only the potential for big savings. (Reducing the rate charged on your credit card balance is the first step to getting out of debt.) MSNMoney said recently that in the United States, 43% of families are spending more than they earn each year. I would think that figure is low-balling the real situation. Numbers from 2008 don’t count anymore for September 2009. But at the end of 2008, the average American household that had a credit card was holding nearly $11,000 worth of credit card debt.

With numbers like these, living with debt seems unavoidable and paying it off is an uphill battle you are destined to lose. But if you don’t completely want to lose your shirt in the coming years, here are some more expenses to keep an eye on.

3. Always have a pretty exact idea of the balance in your bank account. According to The Financial Times U.S. banks are set to earn $38.5 billion this year from overdraft fees alone. If you don’t know how much is in your bank account, you could easily withdraw or spend beyond your limit or have a check clear that takes your balance below zero.
According to the National Consumer Law Center, the average overdraft fee is $34.65, and considering a purchase as small as your morning latte could put your account in the red, that’s a hefty price tag. Credit cards fare no better, with late payment fees increasing as well as charges for going over your limit. According to a survey done by the Pew Safe Credit Cards Project in March 2009, 92% of all credit cards had a fee for exceeding the credit limit, including 100% of student cards. The over-the-limit fee and the late payment fee were both $39 for most accounts. And what’s more, these infringements will immediately result in your interest rate skyrocketing up to 30% or higher. In fact, that same survey found that 93% of cards allow the issuer to raise any interest rate at any time. And financial institutions don’t believe in gravity. And once that rate goes up, it is unlikely to come down.

4. Know and be prepared to have fees skyrocket. Banking and fees go hand in hand. But there are ways to reduce the charges you pay on a regular basis. First, make sure all of the accounts you have open are absolutely necessary, consolidating multiple checking or savings account.

Also understand what and how you are being charged. Some accounts are advertised as being free, but in order to have the monthly service charges waived, there are always some conditions attached such as a minimum balance, not exceeding a set number of transactions per month and/or having a set number of direct deposits or automated bills associated with that account.

Remember, if you withdraw money from an ATM other than your bank, the average $1.50-$3 fee is charged both by the cash machine AND by your bank. Some banks are charging even checking your account balance. Likewise, most banks include a surcharge on email money transfers. Keep an eye on your account and make sure you know how much these conveniences are costing you.

5. And the Devil is in the details when it comes to Credit Cards. More than one in six families with credit cards pays only the minimum due each month, says a recent Experian national score index study. You must have read somewhere that this is financial suicide, but let’s take an example at what the actual damage would be. The average interest rate on a credit card in the U.S. is 11.2% according to bankrate.com. One third of credit card holders however are paying between 20-41%. So let’s guess conservatively that a family’s interest is around 20%. The minimum payment is usually around 2% of the total balance (an average $11,000 per family and we see that the monthly minimum would be about $220 per month. If only that minimum is paid, the debt would be paid off in nearly 77 years, with a total of more than $52,000 paid in interest. Push that interest rate up to 30% and the minimum payment is insufficient to ever pay down the debt. Do you see the picture?

6. Another unwise move is to take cash advances on a credit card. Suggestion is only to be used in a life and death emergency. Fifteen years ago these fees were acceptable because they had like a maximum $10 fee. Today 3% comes off the top of your advance and there are no maximum fees. Add all these fees to the transactions fees you might be paying and you’ll be in a shock to see the total amount that disappears from your wallet each month on convenience fees alone.

7. Many people do it. The take cash advances on their paycheck. Don’t do it. The industry standard in annualized interest is between 200 and 500% and they enforce balance payments in a sometimes-questionable manner.
These lenders are able to avoid usury laws by calling their interest charges “service fees” which are not regulated the same way in many places. In fact, payday services have been outlawed or severely restricted in 13 states according to bankrate.com.
Beware of your financial balances and you’ll save a lot.

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Hold Your Nose and Buy

The Economy Stinks

The Economy Stinks

The rise in the markets amounts to “hold your nose and buy” (crap) dear citizens of Fernandina Beach. The Fed released its Beige Book for August yesterday. The Beige Book contains information on economic conditions derived from interviews with key business contacts, economists, and market experts. The report was less than stellar.

Consumer spending remains weak. Loan demand remains weak. Credit markets are tight. The labor market is weak. Wages are frozen in most industries and the cost of raw materials is higher.

There was a slight up-tick in real estate sales, much of that at the expense of lower housing prices. There was also a modest improvement in factory output, spurred in large part by the Cash for Clunkers program (which looks like it only cost taxpayers $81 billion – yippee).

None of this is news, really. We all know the economy stinks. We all know the only sectors that show any improvement are those where the government dumps billions or trillions of dollars. Yet the stock market continues its moon shot higher.

“Why?” you ask. Well, the best I can tell is stocks are moving higher because stocks are moving higher.

Everyone feels pressure to get in on this rally. It’s not because stocks are a good deal right now and represent good values. It’s not because growth in the economy or in corporate earnings justifies paying 20 times the earnings or more for stocks. People feel pressured to get in because stocks keep moving up. Everyone else is making money in the market. If you’re the only one at the Labor Day barbecue not sharing stories of untold riches from investing in AIG, Fannie Mae, or Freddie Mac, it gets increasingly difficult to nod politely and compliment fellow partygoers on their investing acumen.

“Hold your nose and buy” is the theme of the day.

We’ve seen this movie before, however, and the ending is always the same. Florida real estate always appreciates… until it stops. Internet stocks always move higher… until they fall, and the stock market always moves up… until it doesn’t.

I don’t know exactly when “doesn’t” will finally occur. I thought it would have happened by now. Instead, stocks are approaching their highs for the year. Every attempt to sell off is greeted by willing buyers. And anyone foolish enough to short stocks is quickly forced to cover and take a loss. It all seems a bit backward, especially in the face of lackluster economic statistics.

History has proven many times that paying 20 times earnings to buy a stock is rarely a good idea, and I’m sure history will prove that point once again. For now, though, the Beige Book remains beige… and the bears are black and blue.*

*outtakes from Jeff Clark at the Growth Stock Wire.

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Federal Reserve Reports that Consumer Credit Fell

Going out of Business

Going out of Business

The Federal Reserve issued its monthly consumer report for July. Consumer credit fell almost $22 billion to $2.74 trillion. The figure has been dropping fairly steadily since the middle of last year. The July number represents an annual rate of decline of more than 10%. It should not shock anyone that $12 billion of the drop was in loans from commercial banks.

The government still has not discovered a way to get large financial firms to loan money. The economy is not likely to recover sharply until it does. Too much consumer liquidity comes from credit access through banks. Bernard Baumohl, chief global economist at The Economic Outlook Group, reviewed the data and told Reuters, “There is no way that this “recovery” can be sustained unless we see a pickup in household spending. The big question out there is will we see Americans spend again to keep this recovery alive?”

The Fed data says a great deal about what is wrong with programs to revive GDP growth. Spending on long-term infrastructure projects and healthcare may be well-intended and even completely necessary, but that capital does not have the capacity to put people back to work quickly or get them to spend money that they genuinely believe that they do not have.

July is awfully close to the fourth quarter. The 2009 holiday spending season may be the most important one in memory. If retail spending is flat or declines, it will mean that the hibernation of the consumer will continue well into next year. That will cause layoffs in the retail sector and in many industries that get most of their sales through retail outlets. The slowing rate of unemployment increases in each of the last four months could be reversed in January 2010 and layoffs may well increase toward 500,000 a month next year.

It is frightening that the economy is currently facing another calamity that will play out in just 3 months. In that way, it is not unlike the banking crisis of a year ago. The Administration and Congress knew that a matter of weeks could make the difference between a collapse of the credit markets or a chance to put them on the early and unsteady road to recovery. Consumer spending is in that place today, near collapse with no support in sight.

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Our Economy is Ill and in Need of a Second Opinion

Our Economic Doctor

Our Economic Doctor

The Fed seems to be searching for a second opinion that will disguise our ill economy and give comfort to the American people. They want to have us think that all is well and things are on the mend. The key phrase of late is “stable”. I read in a business article of a Florida news paper that a recent survey shows there are areas of our country where the economy is “stable”, I feel better already, don’t you?

The survey, (conducted by the Fed) showed that the cash for clunkers program boosted traffic and sales for the auto industry, but went on to say that other merchants are struggling and consumer spending remains “soft”. Well Duhhhhh, have they figured out that it may be just a tad difficult to spend money if you don’t have it.

Another segment of the survey reported all but one of the Fed’s 12 regions indicated that economic activity was “stable,” showed “signs of stabilization” or had “firmed.” The one exception was the St. Louis region, which continued to report that the pace of decline in economic activity appeared to be “moderating.” Do you feel as though you are hearing something out of a third world country where nothing is suppose to make any sense, and if it did no one would understand it? Talk about spend doctors, I think the best are working for Benny at the Fed.

Directly under this headline in the business section of the Florida Times Union was another article titled, “More lost homes over the summer.” There were over 3,000 more foreclosures in the Jacksonville area alone. Foreclosure notices spiked in August to its highest level in the past 5 years. I guess the term “stable” just wouldn’t work here?

Folks, I don’t believe in doom and gloom. I do however believe that we all deserve nothing more then the truth about what is really happening in our economy from the top down. I just don’t believe we are being given all the facts and what we are being given has a spin on it that leaves many thinking all is well. I hate to be the one to tell you this, but all is not well. We are going to see many more foreclosures and bankruptcies with unemployment rising. More and more businesses will cut back or close their doors. Inflation is another monster that is now peeking around the corner at us and soon we will feel his hot breath.

I guess it is kind of like have a loved one in intensive care and not expected to pull through. The family is gathered at the hospital and the only good news the doctor can offer the family is things are stable for now, but continue to make your arrangements.

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Everything I Know About the Market in 30 Minutes

Stock Markets

Stock Markets

If you want to learn a about investing in a very short period of time, go to www.gmo.com and read “Everything I know about the stock market in 30 minutes.” It’s a set of notes from a Jeremy Grantham presentation. It only takes a few minutes to read the whole thing, but it contains a lifetime of fantastic investing advice, including Grantham’s well-known quote, “Very hard work gets in the way of thinking.” Citizens of Amelia Island, here is a bit of his advice.

Grantham says the three biggest weaknesses of investment managers (and most investors) are:

1. A mixture of overconfidence and an over eagerness to be busy. There are, therefore, far too many decisions made.

2. A failure to differentiate between high and low confidence and therefore between major and minor bets. Managers are either risk takers or conservative. A better solution is to be conservative almost all the time, but take large risks when the fat pitch finally arrives.

3. A fixation on the short-term. This is reinforced by daily performance feedback and by a need to regularly impress clients. It also equates with high turnover. The irony is that most important factors are easier to predict long-term than short-term.

The effect of these mistakes, Grantham writes, is “high turnover, high costs and a mass of small, often offsetting bets going nowhere, yet perversely an underweighting of the few powerful ideas most managers do indeed have. Clients end up overpaying for large indexed or over-diversified components of their account.”

The antidote, says Grantham, is to “Build the portfolio around a few major long-term bets… The same talent will produce more this way.”

In today’s world I feel it is necessary to look at all of the markets…Equities, Commodities, Bonds, Currencies, Indexes. Emerging… Don’t just look at US markets as the end all be all as they are going to be on a one way street going the wrong way soon. It’s a big world out there. Keep your horizons broad. Be careful, very careful.

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Hubris and the Hooker

Ashley Dupre

Ashley Dupre


You play hard, you play rough, and hopefully you don’t get caught.
~ Eliot Spitzer (2006)

Once upon a time but not too long ago my state of New York was saved from Eliot Spitzer, a particularly nasty breed of politician, all because of a beautiful hooker from New Jersey.

Praise her name, Ashley Alexandra Dupre! Also known as Ashley Rae Maika DiPietro and Ashley Youmans and Kristen and Victoria she’s the type of girl that you date for a fun-filled drug-fueled summer, engage in a screaming, bottle throwing break up with come October, to forever after remember her fondly until your last breath.
As for Eliot Spitzer, he was New York governor but luckily not for very long, as he was a foul-mouthed bully and power mad. Swaggering down our state‚Äôs Main Street, he was dubbed “the Enforcer” by an adoring, slavish media. Eliot rose to prominence first by using his political power as state attorney general to threaten and shake down his fellow New Yorkers.

The “terror of Wall Street” and many other streets he may have been, but luckily for most he was easily bribed to go away. But he had not played nice with the New York State legislator, and threatened to maybe even make them stop being so openly for sale, and that body has a long, august history of chewing up any challengers to their looting. Soon enough, unseemly couplings with a prostitute brought down Eliot, and an outraged People sent him packing.

The whole sordid mess started at Harvard (naturally). One of Eliot‚Äôs professors recalls “what set him apart” from his fellow students was “he was interested in a career in politics” which tells us quite a bit about Eliot right off the bat. And Harvard was where he met someone who wasn‚Äôt a very good judge of character, a law professor named Susan Estrich, who actually advised this monster to go into politics and to use the state attorney‚Äôs office as a stepping-stone.

Example of the type of man Eliot Spitzer was as both attorney general and then governor is given by the time he called a news reporter (who dared to disagree with him in print) and threatened, “You will pay the price. This is only the beginning and you will pay dearly for what you have done.”

He also enjoyed pulling off publicity stunts like threatening to arrest his targets in front of their wives and children and he had quite a temper, too, they say. Imagine this man if he’d gotten to the White House? He’d have made Dick Cheney look like John Adams.
Ms. Kimberly Strassel of the Wall Street Journal best sums up his style. “The Spitzer method was to target public companies and officials, leak allegations and out-of-context emails to a compliant press, watch the stock price fall, threaten corporate indictment (a death sentence) and then move in for a quick settlement kill. There was rarely a trial involved.”

Using the immense, arbitrary power granted to a New York district attorney, Eliot moved from one Mafia-like shakedown to the next, piling millions of dollars into the state coffers and collecting millions more in “donations” from the very same firms and people he was persecuting. Naturally, this made him a rising star in the political world (he was, after all, reeling in the dough).

Fortunately for the people of our state, and maybe even the world at large, Eliot combined his foolish threats against his fellow politicians with a habit of frequenting hookers and, due to the pervasive surveillance society we live in, his bank records (like everyone’s bank records) were an open book to be trolled by whatever bureaucrat wished to paddle around in them. And when, just by the purest of coincidences, some bureaucrat happened to be paddling around in Eliot’s, what was stumbled upon?

Illicit payments to a brothel called “The Emperor‚Äôs Club” to engage the services of a prostitute! Yes! And not only that, he had knowingly broken the Mann Act, which makes it a federal offense to transport a hooker across state lines. And even worse for Eliot, his wife would now learn that he had last used the brothel on Valentine‚Äôs Day.

We know all this for certain because (sing along now) of the pervasive surveillance society we live in – his phone calls were tapped. Caught red-handed as red-handed can get, as soon as Eliot was finished in that hotel room so was his political career.

Despite clear evidence which investigators had on Eliot, despite the phone calls and banking records and Eliot himself even admitting that he was in fact guilty of violating the Mann Act (among other laws) U.S. Attorney Michael Garcia claimed there was “insufficient evidence” to convict. What exactly would he have needed to convict Eliot was left unsaid, maybe a sex tape of him and his rented partners? Would that be enough?

More likely, the fact that he was a politician, a state governor no less, weighed heavily in his favor, as he certainly knew about a lot of skeletons in a lot of other closets. So in the end it was decided that as long as he went quietly, he wouldn’t have to exit the stage through any jail cell.

Yet no adult believes that a sitting state governor was bought down for something so routine as frequenting brothels. The truth is, even before his personal, fateful, dirty little St. Valentine’s Day tryst Eliot had already made his fatal blunder.

Eliot, like all the dim-bulb Ivy League bankers pouring their firms‚Äô capital into sub-prime mortgages, came to believe his own line of bullshit, and by his hubris New York was saved. Believing the ever-fickle voters were solidly behind him he was now going to Clean Up Albany the way he had Cleaned Up Wall Street. “Listen, I’m a f—ing steamroller, and I’ll roll over you and anybody else,” he threatened and bragged to his fellow politicians.

The stature of his office having gone to his head Eliot forgot that at base, he was nothing more than a college educated shakedown artist, one whose personal life was as seedy as his political one, and this left him extremely vulnerable to political attack. Had he confined himself to merely making life miserable for ordinary citizens rather than going after his fellow politicians, he would still to this day be sitting on his throne in Albany.

Eliot‚Äôs biggest failure as a politician came from the fact that when he attained the governorship, he still wanted to play “crusader,” he completely forgot that it was no longer powerless, cowering businessmen he was bullying around, but other politicians, all equally powerful and also, like him, completely lacking in scruples or any respect for the law.

They quickly made chum out of him, Eliot resigned his office within barely a year.

Laws Are For The Little People
I believe in an evolving Constitution. A flexible Constitution leaves room for us to consider not merely how the world once was, but how it ought to be.
~ Eliot Spitzer

Eliot Spitzer‚Äôs sordid tale is but one more example that in modern America it‚Äôs not the “rich” hiding behind their million dollar lawyers who can safely ignore our court system‚Äôs voracious appetite for victims, it is the political class who can, overwhelmingly, safely ignore the law. Glenn Greenwald speaks to this repeatedly on his blog, using the refusal to prosecute any politician who ordered his underlings to torture as an example. But examples of this trend extend far beyond just torture ‚Äì the problem is more a wholesale refusal by the political class to obey any law at all.

In his blasé disregard of the law, Eliot Spitzer is a perfect example of this trend, but he’s far from alone. From former district attorney Michael Nifong – a junkie so addicted to power that he was willing to jail three men he knew to be innocent in order to feed his habit (he served no jail time) to former state comptroller Alan Hevesi, caught stealing over $80,000 from the public till (he served no jail time) to Eliot Spitzer getting caught red-handed violating the Mann Act and suffering no punishment other than ridicule, in America the disregard for the law runs deep.

America’s political system is a shambles, home to legions of lesser specimens that all bring to mind Adam Smith’s description of the type of man Spitzer is:

Arrogance is perfectly familiar to them. They entertain no doubt of the immense superiority of their own judgment. When such (reformers) condescend to contemplate the constitution of the country which is committed to their government, they seldom see anything so wrong in it as the obstructions which it may sometimes oppose to the execution of their own will.

Eliot Spitzer is merely a particularly nasty specimen of the kind. If he were still New York governor, how many innocent men would at this moment be torn from their families, sleeping in a prison on his orders?

In a New York Times profile in March of 2008, Ashley Alexandra Dupre pleaded that she doesn‚Äôt want to be “thought of as a monster,” and she shouldn‚Äôt be. It‚Äôs important to keep in mind the hero of our story is not whatever bureaucrat was paddling the U.S.S. Stasi through Eliot‚Äôs banking statements and listening in on his phone calls.

Rather it was Ashley herself, as she’s the one who actually took it for the team, who did the dirty work that needed to be done to protect our freedoms. The only thing that spared New York from a full term of Spitzer was this perfect combination of hubris and a hooker.

And now the newspapers report Eliot’s craving for power is in full bloom again, that he’s threatening another run for office, and I fear we cannot count on lightening striking twice.

I thank God for Ashley Alexandra Dupre – a genuine American hero – and urge that we all honor her hard work and sacrifice in two ways. First, by letting her throw out the first pitch to open the 2010 New York Mets baseball season, and most importantly by never letting a man such as Eliot Spitzer anywhere near a position of power again.
September 9, 2009

C.J. Maloney [send him mail] lives and works in New York City. He is currently writing a book on Arthurdale, West Virginia during the New Deal. He blogs for Liberty & Power on the History News Network website. He will be speaking at the September Manhattan LP meeting, details here.

Copyright © 2009 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

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FREE Stock Tips as Precious Metals Show Strength

Silver Bars

Silver Bars

Precious Metals are showing more strength today after a strong showing last week. Gold futures are now above the symbolic $1,000 per ounce level, and the December silver contract is at $16.75. While there have been several false starts this summer where precious metals have traded higher, only to be forced back into a trading range, today’s move appears to be setting up a true (and potentially long-term) positive trend. The following are three indications that the current move is legitimate.

Volume – When looking at any sharp breakout in stocks, commodities, currencies or other asset class; most traders will tell you that they want to see heavy volume in order to validate the trend. Volume which is above average usually indicates strong institutional buying (or selling in the case of falling prices), and when institutions make a move, it can take them several days or even a period of several weeks in order to build their full position. Nimble traders can often see these volume tracks and get involved quickly in order to profit from the continual buying as a group of professional managers build positions.

Another thing that volume can tell you is that many people have been caught off guard. In the case of precious metals, the argument against inflation has been widespread as economists believed that a weak recovery would keep loose policy from resulting in the traditional inflationary pressures. If those opinions prove to be false, there will be many investors and traders alike, scrambling to find protection which could result in a long-term buying spree for gold and silver.

Currencies – The media has named several forces which are pushing gold and silver higher, but one of the most important factors is the continued weakness of the US dollar. The bottom line is that the dollar is quickly losing ground and becoming worthless as we print more paper in order to meet our obligations. In order for gold and silver to continue to rally, we don’t necessarily need the dollar to continue to be weak compared to other currencies. I’m much more concerned with the actual purchasing power of the dollar when it comes to goods and services than with the comparison to other currencies. But if we do continue to see the dollar decline on a currency basis, then gold and silver will most certainly remain a great hedge against the currency decline.

Stimulus – The new administration is working very hard to pull the economy out of the recession and generate new growth. But the stimulus policies are actually designed to lead to inflation if necessary in order to prop up an economy and hopefully generate some new jobs. This is a horribly loose monetary policy and will lead to rampant inflation and be a wonderful push up for precious metals prices.

How to Profit From the Move
The best choice for equity traders is to pick up shares of GLD (an ETF which mimics the price of gold). I would suggest you also look at silver as a way to diversify and potentially get more bang for your buck.

Gold is the most widely accepted precious metal position, but silver actually has stronger supply/demand characteristics which could yield better investment returns. While nearly every ounce of gold that has been mined over the last five thousand years is still in existence (in the form of jewelry, packed away in vaults, as collectors items – or otherwise stored), silver is actually used in many industrial processes. It is used for x-rays, in making polyester, to solder electrical connectors, in high quality reflective processes, and even for medical wound dressings. This means that silver is being used up and at the same time it is seen as a storage of value.

Silver Chart

Silver Chart

Aggressive investors might consider buying calls on the silver ETF (SLV). I suggest the January $17 or $18 strike price which is still relatively cheap considering how close the underlying is to the strike price. We will likely see SLV above $20 within a couple of months and possibly even above $30 by the end of the year. Long-term, the price of silver could increase 3 times the rate of gold as unprecedented stimulus and irresponsible government spending leaves its inevitable mark on our economy.

If you use this trade please let me know so I can track the general precious metals interest on Amelia Island. I’m in it and looking forward to very merry Christmas holidays.*

*Research from Zachary Scheidt, Zachstocks.com

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Manage the Behavior Do Not Crucify the Tool

Time Management

Time Management

Twitter and Facebook are like TV and computer Games, if you can manage your behavior, they are great tools for learning and entertainment. I have no time to tweet, retweet, mySpace, Facebook, Linkedin, Hubpages or Squidoo or stay on top of the dozens of other social Internet media sites. I’m on overload, seriously on overload.

Our Web master keeps hammering on all the things we could do better. Stronger headlines, repeat of headline in first 160 characters of the article. Oh wait, was that 140? No… that is Twitter, but not on our Twitter, we can only use 114 characters because there is something like a standard link built in.

I have an excel list with some 100 social sites to keep my usernames and passwords administered. Mostly different ones because common knowledge says it’s stupid to only use one username and password. ‚ÄúIt is too easy to hack‚Äù, someone yells from left field. I look back at what I wrote so far and realize that the title is not repeated in the first paragraph. At first I think, screw it, the title only reflects what I want to say in the end….which is that it’s not Twitter’s fault or Facebook or hi5 or YouTube that you can not organize your time and energy and spend way too much or not enough time profiling your life or business on social media… and then I decide to put an opening paragraph in there that repeats the title ‚Ķsomewhat.

So here you have it, I’m right smack in the middle of this rant against an Internet dominated life that on occasion seems completely out of control. Taking about stress (I like digressing because that’s how my mind works), the headlines on Yahoo News talk about stress being the major contributor to illness. Duh, I have known that for years. I have seen it with my own eyes over and over again. The first time I vividly became aware of how stress changes young and healthy people, into sick and distraught individuals, was exactly 20 years ago. Hurricane Hugo hit St. Croix on September 17, 1989, and literally destroyed the island and everything on it. On Sunday the 16th, the island was gorgeous, green, lush and paradise to live on. On Monday September 17th, it was dirty brown, beaten to a pulp and a display of misery that could only be described as the center of a war zone defoliated and raped. I will spare you the story of how many people I knew got sick, contracted various types of cancers, drowned in self-pity and unfortunately even committed suicide.

This morning one of the headlines mentions the progress of Tropical Storm Fred and the likelihood for it to become a hurricane over the next couple of days. Great I think, I’m scheduled to fly out to St. Maarten in the next day or so. Could history repeat itself?
Stress is a major contributor to illness. Nutritionists claim that the food you eat is another major contributor. Sure, but how many people do you know who eat and eat because of stress? How many times do you catch yourself grabbing a quick fast food fill up because your job or the kids or the government demands on your life and finances just don’t leave you enough time to prepare and eat a balanced meal?

My mind is a curious thing, because when I write this I remember going to Food Lion Supermarket on Sadler Road a couple of days ago and noticed that the bacon wrapped Filet Mignons in the meat section had been priced down from an initial $4.19 to $1.71.
I bet ten to one that they didn’t sell because they look tiny compared to what people pile on their plates in most of the fast food restaurants and buffet filling stations. I bought some and had a delicious, balanced Labor Day meal.

Manage your behavior, don’t crucify the tool.

The tool here is the 500 item Buffet that fills half of the restaurant space, the behavior is the need to try out all 500 items in one visit. It is a lesson for many things in life. Simply because it’s there in front of you, does not mean you have to immerse in it beyond the point of resistance.

The Internet has offered us numerous valuable tools for information, education and entertainment. The social media that have emerged in recent years have allowed an increasingly isolated world to stay in contact and/or make new “friends”.

It’s easy seduction to spend many hours a day on these sites and completely disregard other daily obligations, interactions and activities. It’s smart to set yourself limitations in the amount of time you spend on these sites, or else you’ll find yourself even more isolated from the world around you.

Rapidly advancing technology will produce many more Tools that will demand your time and attention. It’s the nature of the beast. Crucifying the tools won’t help you manage your time and relationship. Managing your behavior is the only salvation. That’s why I took a “leave of absence” from tweeting, writing and researching this weekend and strolled our beautiful Amelia Island Beach. I completed some much needed maintenance and repair around the house and spent quality time with my loved ones.

I highly recommend it!

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Game Show Contestants Now Play to Survive

Deal or no Deal Models

Deal or no Deal Models

The phrase, “surviving a game show” has become more serious my dear Fernandina Beach friends. According to USA Today contestants on shows like America’s Got Talent and Deal or No Deal have undergone a dramatic change in the past year.

Instead of dreaming of building a mansion or retiring early, the poor saps that go on those shows are now just hoping to win some kind of money to keep afloat. On Deal or No Deal, the percentage of unemployed prospective players jumped from just 5% of its total applicants to 20%.

Who Wants to be a Millionaire’s host, Meredith Vieira, claims that her contestants no long play for big prizes. They’re there to collect a few mortgage payments or to help pay off credit cards. Apparently, the market’s recent fake recovery hasn’t ended this game show contestant trend. Vieira notes, “There’s still a sense of need, as opposed to want.”

This could spell disaster for marketing these shows. No one wants to watch desperate people cashing out early so they don’t have to move.

“Mustn’t Watch TV” aside, you shouldn’t be surprised by the still-pathetic situation out there. After all, one of the favorite buzz phrases on CNBC is “lagging indicator.” Forget that the phrase is an oxymoron. It’s applied to, more than anything else, unemployment numbers. We have seen a slow down in job losses, which is to say that we aren’t losing jobs in this country as fast as we were. July even saw a slight increase in employment. I suspect a portion of that tiny bump is due to people giving up. If you aren’t applying for jobs, you no longer count.

We like to think of unemployment as a percentage. But it’s important to put the actual number of would-be-workers into perspective. We have about 14.5 million unemployed people in the U.S. Рat least 14.5 million reported unemployed people. Of those, we have a significant amount that has been in that situation for more than half a year. That’s the most people on the dole since the Second World War. The question is, “If we do ever recover, where will these new jobs come from?”

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How to Avoid Paying Twice for Home Repairs

Home Repairs

Home Repairs

So you plan to hire someone for home repairs. It could be to fix that leak in the roof, hang a new front door, or remodel your kitchen. Avoid paying twice for these jobs.

You call a licensed contractor and think all is well. The estimate is within your budget and the contractor seems like a very nice person. You tell him to proceed and actually pay one third up front.

The contractor gets the necessary permits and the work begins. The quality of his work is absolutely top notch. The building inspector signs off on every phase of the job, a picture perfect job. At the end of the job you pay the remainder of the money owed and everyone is happy.

It is months later that you learn there is a lien placed against your property because the contractor has not paid the supplier for the material used to do the job, materials you have already paid for. How can this happen? Under Florida law, subcontractors and material suppliers can file what is known as a construction lien if they are not paid for work performed or materials.

Is there anything you can do to protect yourself against this type of rip off? Before you hire a contractor you should do a little homework. Check with the Florida Department of Business and Professional Regulation to make sure the contractor is licensed and is in good standing with the Department.

Get the licenses number and visit www.MyFloridaLicense.com to verify first that the license is valid and there are no outstanding issues against the contractor with the Department. The Department lists complaints filed if it is determines probable cause of violation of state regulation. You can also verify a license by call 850-487-1395.

Make sure that the contractor has workers compensation coverage. If the contractor does not have this coverage and a worker should get hurt, you could be liable. Visit www.fldfs.com/wc/ and click the box that says “proof of coverage database”.

Check with your local building department and inquire if they have had any issues with this particular contractor. You could also check the Better Business Bureau in your area. Another level of comfort you could add would be to ask the contractor for the names of customers he has done work for, ask them if they were satisfied.

I know this seems like a lot to do just to get a little work done and it is, but today you must be very careful when it comes to money. More and more people are figuring out ways to rip others off in order to make a little more money. Don’t become a victim, do a little checking and avoid paying twice.

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America Needs to Become Productive Again

Wall Street Tricks

Wall Street Tricks

It’s Labor Day and we laborers are supposedly on holiday. I realize that American needs to become productive again while I’m out walking on Fernandina Beach’s Main Beach cogitating about our holiday. The concept of Labor Day was initially to honor the workers who helped build our formerly productive great nation. Workers that produced goods and chattel, built our nations infrastructure, and kept us strong. We had output. We manufactured products that supplied us and the world with the basic products that help forward its quality of life So to the few of you that still perform this dying function I salute you on this your day of being honored.

Wall Street’s Next Sick Tricks

But true productivity ain’t the case for most business sectors and people of our now consumer and debt based economy. Our former way of productive life has gone the way of the great white buffalo. Disappeared. Vanished. Gone. Kaput. History. Now the only new products, outside of the work of Steve Jobs and Bill Gates, are Wall Street’s next sick tricks.
As if the current destruction of the world’s economy hasn’t been successful enough here we go again with the newest paper of mass destruction.

Looking to Profit From Your Life Insurance

After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one. The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

Bottom line it will run up the cost of the insurance premiums to where folks can no longer afford it. When is our country going to wake up and stop our government from allowing the plunder and pillage of the little that we the citizens have left?
I feel the first thing we need to do to become productive again. Folks, it is time to throw the bums out and fire their bankers.

Happy Labor Day!

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Cash for Congress Clunkers

Bonzo for Congress

Bonzo for Congress

One of my financial blogger peers, Ethan Roberts at Tycoon Publishing, wrote about the necessary next “Clunkers” program, “Cash for Congress Clunkers”. I beseech citizens of Fernandina Beach to respond to this program as lovingly as Americans embraced Cash for Clunkers parts 1.
Announcing “Cash for Congress Clunkers”!

Last week, the controversial “Cash for Clunkers” automobile sales program came to an end.

Clearly, despite a great deal of criticism, it was a big success in generating sales for the struggling automotive industry. In fact, money for the program ran out early, and Congress had to throw a couple of billion dollars more into the program to keep it going.

Another Clunker off to Pasture

Another Clunker off to Pasture

Another $4,500 clunker gets put out to pasture…

Of course, the car dealers were understandably upset that the government was taking its sweet time in reimbursing them the $4,500 checks to cover each rebate that the dealers had given out. But that’s good old Uncle Sam, the entity that may soon be handling everyone’s health insurance.

I can’t wait — can you?

Dollars for Dishwashers
Now comes a report that a new federal program will soon begin providing rebates to consumers who buy the more efficient “Energy Star”-rated home appliances. CNBC.com jokingly referred to it as “Dollars for Dishwashers.” There is now some $300 million set aside from the economic stimulus bill to fund this state-run program.

However, one of the main differences between the auto-clunker and the appliance-clunker programs is that consumers don’t have to turn in their old appliances in order to buy an Energy Star appliance and qualify for the rebate.

The rebates should range from $50 to $200 per appliance. Although individual states have the right to decide which appliances should be included, the Energy Department is hoping that the rebates will primarily be given for air conditioners, water heaters and furnaces.

The idea behind this program is that consumers will buy more-efficient, energy-saving devices to replace their older, “energy-wasting” ones. However, the percentage of the rebate that buyers will receive on a heating-and-cooling appliance is markedly smaller than the percentage that one could receive in the automobile program.

Not only that, but buying a new car has much more of an emotional appeal to the average consumer than buying a water heater!

Car or Water Heater?

Car or Water Heater?

Hmm, tough decision; which would Ethan rather buy….?

These programs have now stirred me to thought. Is it possible that we could enact a similar program with our tired old clunker politicians?

There are plenty of those around who have been costing us billions of dollars, while blowing nothing but hot air for years now. Very energy-inefficient they are, and undoubtedly adding to global warming as well!

Announcing My ‘Cash for Congress Clunkers’ Program!

So today, I am announcing the creation of “Cash for Congress Clunkers.”

Here’s how this new program will work:

You trade in all the current congressmen and women who have been scorching the American economy for the last decade or two with wasteful and expensive government pork programs, and replace them with new, efficient ones who will guarantee to save the American taxpayer billions of dollars every year!

Let’s do some quick math. There are roughly 135 million tax returns filed every year. I think it’s safe to say that these “Congressional Clunkers” have already cost us at least $135 billion. And there’s absolutely no sign of them letting up!

One billion is 1,000 million. So if the American voters trade in enough Congress Clunkers next year for more-efficient models, perhaps it could save each taxpayer at least $1,000.

Now maybe that’s not as good as receiving a rebate, but saving money is a close second to getting money, in my book.

Time for a Trade-in

Fortunately, for the taxpayers, some of the “clunkers” have already been replaced, such as that “Bridges to Nowhere” senator, Ted Stevens (R-Alaska).

Interestingly, it took an indictment by a federal grand jury for failure to report gifts on his Senate financial disclosure forms (charges were later dropped by U.S. Attorney General Eric Holder, citing prosecution misconduct) to inspire the Alaskan voters to finally trade in this 38-year-veteran clunker.

Bridge for Ted

Bridge for Ted

Got a bridge for sale, Ted?

But unfortunately, many more clunkers still remain, both Democrats and Republicans alike:

Politicians

Politicians

And then there’s “good ol’ boy” Sen. Arlen Specter, who can’t quite decide which team he’s on. He was a Republican for many years, but fearing he could lose his seat in 2010 as a Republican, he suddenly decided to switch to the Democratic party.

How’s that for true courage, folks?!

But whichever team he chooses, he’s still part of the greater body of people who spend taxpayer money like it’s the last day on Earth! This old clunker is a five-term Senate veteran.

Sure, he can still turn over like an old engine on those cold Pennsylvania winter mornings, but wouldn’t it be nice to trade him in next year for a senator who doesn’t switch political parties because he’s afraid to lose an election?

Specter

Specter

However, we do need to be careful. Just because we are trading in one old clunker politician, doesn’t automatically mean that the new model is going to be any more efficient in watching over our money. After all, we just traded in one spend-happy president for a newer version who turned out to be even more of a spendaholic!

Meet the Boss

Meet the Boss

Now remember, the deadline for the Congress Clunkers program is Election Day, Nov. 2, 2010. So even though it’s early, now is still a good time to start thinking about trading in your state or local-level clunker. But be careful to scrutinize the new model you will be receiving, so as not to elect a clone of the old guy!

Ready to Upgrade?

How about it, Tycoon readers? Are you as fed up with all of the irresponsible, pork-laden “bridge to nowhere”-type programs as I am? Are you tired of seeing the same tired, old hack politicians from BOTH PARTIES wildly spending your money, and the monies of future generations ? If your answer to any or all of these is yes, then please join me in the “Cash for Congress Clunkers” movement next year! Want to tell me about the ones you’d most like to trade in from your own local area or state? Spread the word!

Beautifully said Ethan.

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