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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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Lose Pounds with this Easy New Diet Plan

Walking on the Beach

Walking on the Beach

You hear it all the time; yeah I need to lose a few pounds. I promise, 10 pounds as soon as the holidays are over or what about this one? “This new diet plan I just started has you take three pills in the morning until your liver is so overworked it can’t see straight, eat three leaves of lettuce for lunch, then dine on the splendid taste of the ancient guava seeds for dinner chased by a diet coke.” Yea that should do it, if nothing more it would make you not want to eat anything thus causing you to lose weight.

The old tried and tested ways of losing weight are eating right and exercising. The problem is we are all living in a rapidly paced, drive thru, fast food world that offers very little dispensable time to pick up kids from dance class and football practice let alone the time it takes to prepare a balanced meal. So what are our options?

Well to begin with, living on or near Amelia Island gives us one luxury that most people don’t have. We have a beach and a beautiful one at that. The beach not only offers a great place to get some exercise, but is the perfect spot to clear your head and recharge your mental batteries.

Here is how you do it:

Get a leash for your dog. If you don’t have a dog, visit the Nassau County Humane Society and pick out a furry companion that loves the ocean. Put on some comfortable shoes, grab a bottle of water and head down to the surf’s edge. Walking either north or south is your choice, and your dog won’t mind which direction you choose. Time yourself, just 30 minutes down and 30 minutes back gives you a whole hour of fat burning exercise. Going to the gym has nothing on this weight loss method and believe me when I tell, you’ll get hooked on the beach all over again.

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Our Empire of Debt and Consumption

Debtors Prison

Debtors Prison

Just reading the local papers in Fernandina Beach gives me a daily diet of economic gloom. Our empire of debt and consumption looms constantly. “Record debt forecasted at $1.6 Trillion.” Then for a national perspective, I looked at The Wall Street Journal, which published a slightly different slant, “Decade of Debt: $9 Trillion.” And finally, for an international view, The Financial Times summed it all up in British understatement, with, “US Says Debt Outlook Worsening.” Oh, you don’t say.

The headline issue with the U.S. economy is too much debt. (That’s the BIG problem. There’s a long list of other problems after that.) And the debt problem is getting worse, not better. Debt permeates our culture. Practically the whole nation has bitten off more than it can chew. Within the past two generations, the U.S. economy has transformed from what Harvard historian Charles Maier calls an “empire of production” (which is what won the Second World War, for example) to an “empire of consumption.”

The factory worker, or the beam-walking riveter constructing a skyscraper, symbolized the former empire of production. Those iconic workers are no more. They’ve been replaced by the image of vast tracts of McHouses blanketing the landscape and of parking lots filled with new cars outside coast-to-coast malls, with their owners inside maxing out their credit cards.

As a nation, the U.S. has borrowed and spent far beyond its means. You know what I mean. I don’t have to get into the details on that point. The political class just can’t say no.

The other side of that debt coin is a widespread inability to repay. Households are so deep in debt that they’ve stopped buying, and I don’t care what the so-called consumer confidence surveys say. Less buying means that business profits are down. Where businesses are showing profits, a lot of it is because they are goosing the bottom lines through layoffs and spending cuts.

Layoffs? That’s putting it mildly. Many of the recent job losses are permanent. They’re structural. It’s not just the good old days, when the company said, “Go home and we’ll call you back in a few months.” No, in many cases, the jobs are gone forever. It’s not just factory jobs, either. Those jobs were the first to go. The U.S. economy lost millions of its old-line factory jobs over the past 25 years or so. Now people with white collars are getting hit with permanent job losses in sectors like banking and law.

There are former lawyers waiting on tables, stealing jobs from the traditional class of table servers, actors and starving artists. At many silk-stocking firms, even the formerly non-touchable legal “billable hour” is under attack. And I know doctors and architects who’ve been laid off. Joblessness is up, and it’s not about to come down anytime soon. With joblessness up, tax collections are down across the board. Unemployment compensation accounts are running out of money. Public assistance accounts are running down. Some states want to give early release to prisoners to save the costs of incarceration.

In Michigan, for example, some counties are no longer repaving the roads. They just grind the asphalt to gravel and save the cost of paving. It’s a foretaste of things to come, I believe. I don’t see where the problems of indebtedness have been cured. We’re not even close. How has all that bad paper out there been voided? It hasn’t.

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China Begins its Move Away From US Dollars

Flag of China

Flag of China

China has begun its move away from US Dollar assets and it is moving fast.

China has agreed to buy the first International Monetary Fund bonds for about 50 billion dollars, the IMF said Wednesday. IMF managing director Dominique Strauss-Kahn and the deputy governor of the People’s Bank of China, Yi Gang, signed the agreement Wednesday at IMF headquarters in Washington, the multilateral institution said. Under the agreement, the Chinese central bank “would purchase up to SDR 32 billion (around 50 billion dollars) in IMF notes”.

An SDR is an interest-bearing IMF asset based on a basket of international currencies — the dollar, yen, euro and pound — that is calculated daily and which members can convert into other currencies. “The note purchase agreement is the first in the history of the fund,” the 186-nation institution said. Many economists feel that these SDRs could become the world‚Äôs next reserve currency replacing the US dollar.

But wait citizens of Amelia Island, China is moving way past just the IMF play. Most Americans will view China’s current efforts to dethrone the U.S. dollar as the world’s main reserve currency as one of the biggest economic threats that this country will have to face. In 1990, the U.S. banking system was 2.3 to 2.7 times the size of its counterpart in China. Today, however, the situation has been reversed, and there is much more of an imbalance. In fact, China’s banking system has 25 times the reserves of the U.S. Federal Reserve. At some point, the United States will no longer be able to dictate international monetary policy. Unfortunately, as our monetary policy aptly demonstrates, Washington seems to be the only player involved in this game of high-stakes global finance to not understand just how this is destined to play out. U.S. leaders continue to employ monetary policy as a weapon – despite the fact that most of the rest of the world views the U.S. dollar as a liability.

Why is this worrisome? History tells us that the countries with the strongest economies tend to also have the strongest currencies. It may take awhile for the latter to catch up with the former, but the relationship is highly correlated relationship. This suggests that China is on the rise economically, while its currency is advancing with the unstoppability of a locomotive at full throttle. China has signed at least $95 billion in swap agreements, under which it can trade directly with countries for payment in yuan. The countries that sign these deals are getting huge discounts from China in exchange for their participation – and for buying goods from China, and the deals enable China to do an end run around the entire dollar-based currency trading system.

When it comes to this long-term plan to boost the yuan’s importance, China is waging a campaign on multiple fronts. This past spring, for instance, China organized a meeting in Moscow attended by representatives from Brazil, India and Russia. Their main goal was to supplant the U.S. dollar as the world’s main reserve currency, replacing it with a yuan-led market basket of currencies, one that is simply backed by China’s renminbi and if that fails perhaps one based on the International Monetary Fund’s Special Drawing Right (SDR) as the back up.

If China were to succeed at dethroning the dollar as the world’s reserve currency the potential implications are severe, even apocalyptic. The U.S. dollar goes into freefall for the simple reason that if no country has to hold dollars any longer, they won’t. Instead, thanks to the ragged state of the U.S. government’s finances, many countries will dump greenbacks as fast as they can, which will only put additional pressure on an already-strained U.S. financial system, which in turn will further damage our economy.

Inflation Inflates: Inflation will strike here with a vengeance, as anything bought, sold or priced in dollars will instantly rise in price to offset this fall.

Repatriation Risk: With the dollar serving as the world’s de facto currency, U.S. companies bear very little exchange rate risk when the time comes to repatriate assets or make currency-related adjustments. That would change overnight and prices throughout the value chains would rise sharply to compensate.

Money Costs More: The cost of money itself would rise. If the dollar falls, not only will there be massive selling pressure against it, but the cost of borrowing it will rise dramatically as lenders raise rates to cope with the increased risk of dollar-based transactions.

Death By Debt: And finally, if there is another reserve currency, other countries will no longer have to buy our debt, and you can guess where that will leave us; especially given the fact that we’ve taken on trillions in new debt to help finance our way out of our current mess.

A Final Note… Buy Gold and Silver sooner than later.

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Precious Metal Prices Are Not Falling Soon

Distributed for Honest Money

Distributed for Honest Money

Precious metals prices won’t fall very far unless governments worldwide stop spending funds they don’t have. (OK, China is spending money it DOES have. Everybody else? No way.) Will governments stop spending? It is doubtful. So with excess spending, we’ll see the accompanying monetary expansion from the central banks. That’ll give us more inflation. And the only effective defense against inflation is gold and silver.

Gold bugs and speculators of the world are on the edges of their seats. With gold stopping $3 short of $1,000 yesterday, will this be the one that sticks? Are the days of three-digit gold prices about to be a thing of the past? Your guess is as good as mine Amelia Island, but scanning through the pages of investment advisories, not one has issued any sell recommendations on the shiny metal — thus it’s safe to say all analysts are holding on for the ride.

Long term, gold and silver prices are going higher, Byron King, one of my favorite advisories, summarizes. Really, where else can they go? Lower? With the current monetary madness that’s infecting the world’s central bankers?

Silver in particular has been very interesting lately. With gold near $1,000 and the precious metals buzz revived.

If you believe silver to be a store of value as legitimate as gold, it looks like there’s more potential short-term upside for poor man’s gold. While gold is just a breath from all-time highs, an ounce of silver goes for $16 today, about 23% below its 2008 high of $21. Sellers will say this is because of silver’s industrial capacity — which has been beaten bloody by the credit crunch. Buyers, like Byron and most of us, say we’re heading into an inflationary period so great that this will be rendered somewhat irrelevant.

The gold/silver ratio is both in a state of decline while still higher than typical, another bullish argument for silver:

The gold-to-silver ratio has spent most of 2009 in a downtrend, meaning the price of silver has been rising faster this year than the price of gold. Just this morning, it hit 59, a 2009 low. During the high inflation of the 70s, the ratio stayed below 50. Back in gold standard days, it was hardly 15. So silver is undervalued compared to gold, and it has some momentum on its side. I’ve heard worse odds.

One last note on precious metals: The dollar is way stronger today than it was in March 2008 when gold and silver hit historic highs. The dollar index goes for 78.5, well above its low around 71 in 2008. The index is actually around break-even for the week; testament to just how bold precious metal buyers are becoming.

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Economic Recovery Got a Huge Slap in the Face

Economic Recovery

Economic Recovery

Whether real or artificial, hopes of an economic recovery got a huge slap this morning, courtesy of the data patch. Here’s the quick and dirty, so listen up Fernandina Beach.

The U.S. service sector contracted for the 11th month in a row, the ISM said today. After Monday’s ISM manufacturing gauge, which showed surprise growth, traders had their fingers crossed for a score above 50 in today’s ISM service sector reader. Not so, said the group. Their index stood at 48. In other words, 70% of our economy was still shrinking in August.

Retail sales fell 2.9% in August, the 12th straight month of decline. Despite the “back to school” rush, only low-cost brands showed signs of life last month… Costco, BJ’s, Gap, Aeropostale, Target and T.J. Maxx all outperformed.

Jobless claims from last week came in at 570,000, worse than the Street expected. Coupled with yesterday’s worse-than-expected ADP jobs report, the outlook is none too rosy for tomorrow’s government employment data.

Personal bankruptcies shot up 24% in August, year over year, putting the U.S. on track for over 1.4 million filings this year.

And here’s the one statistic that troubled me the most this morning: Student debt grew 25% in the 2008-2009 school year, says the latest from the Department of Education. So much for “the great deleveraging.” Total student loans outstanding exceeded $75 billion during the period, up from roughly $60 billion the year before. An estimated 66% of U.S. college students borrow money for school, with the average individual debt load of $23,186 by graduation.

So let’s get this straight… the next generation is borrowing more than ever, at a faster rate then ever, during extremely worrisome credit conditions, heading into the worst employment environment in recent history, while on the verge of inheriting the biggest federal debt burden the world has ever known? Go figure. But, don’t forget this is the generation that wants big government and think getting a government job is the greatest career move you can make.

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Gold and Silver on a Tear

Chinese Investing in Gold and Silver

Chinese Investing in Gold and Silver

Gold and silver are breaking out of a five month price pattern dramatically to the up side. They are on a tear. This is happening for many reasons. Moral hazard in the equities markets, huge government debt, irresponsible money printing, core inflation, safe haven buying, dramatic new industrial needs for silver, seasonal jewelry gift giving, new commodities trade commission restrictions against illegal shorting, and seasonality are all behind this wonderful overdue rally, but what has me really jacked is the new China card being played.

Paul Mylchreest’s China Thunder Road Report, announced news that will bring big smiles to gold and silver investors everywhere. Apparently China is pushing the idea of buying gold and silver for investment purposes to the general population in the way that Western television sells soap powder. If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market! I‚Äôve touched on this new trend with our Fernandina readers before.

The report notes that China’s Central Television, the main state-owned television company, runs a news program letting the public know how easy it is to buy precious metals as an investment. On silver investment the announcer is quoted as saying “China has introduced its first ever investment opportunity for silver bullion. The bars are available in 500g, 1kg, 2kg and 5kg, with a purity of 99.9%. Figures show that gold was fifty times more expensive than silver in 2007, but now that figure has reached over seventy times. Analysts say that silver has been undervalued in recent years. They add that the metal is the right investment for individual investors and could be a good way to cash in.”

What appears to have happened in China is a total relaxation of laws on holding precious metals by the individual with the government pushing gold and silver as an investment option, seemingly at every opportunity. This is a far cry from the situation only a few years ago where the distribution of gold and silver was strictly controlled. Now, the Thunder Road Report notes that every bank will sell gold and silver bullion bars in four different sizes to individuals and gold related investments are said to be soaring in popularity.

Around a year ago, Leyshon Resources managing director, Paul Atherley, in an investor presentation in London commented that some employees at the company’s gold mining project in northern China would, on pay day, go to the local bank and buy a small gold bar as an investment and wealth protector. This was considered at the time to be mining company hype, but this seems to be exactly the same phenomenon noted by Thunder Road. The Chinese are being converted from being the lowest per capita gold consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of gold is likely to exceed that of India, which has been for years, the world’s biggest gold market. And one suspects that the potential for gold purchasing by individuals is only in its earliest stages. As more and more Chinese move into the cities and individual wealth grows, this trend is only likely to accelerate.

The piece on Chinese gold and silver potential ends with the following comment: “Simply put, the Chinese government is trying to trigger a national gold craze… and it’s working.‚Äù

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There Ought to be a Law

He's the Banking Queen

He's the Banking Queen

When chairman of the House financial services committee exclaims, ‚ÄúThere ought to be a law,‚Äù you may want to run for cover. And that’s overwhelmingly the case when that person is one Barney Frank (D-Mass.).

Bedrock Barney is of the opinion that it’s not enough to pass laws that effectively block U.S. citizens and residents from accessing offshore banks and brokerages. He also does not think it’s enough to use interpretations of existing laws to make it very difficult for U.S. citizens to purchase foreign securities. Of course not… Barney Frank is a lawmaker. So Barney wants to take the witch hunt up a couple of notches and forbid U.S. banks from doing business with countries that are ‚Äì in Barney’s opinion ‚Äì poorly regulated. Switzerland, Luxemburg, Liechtenstein, Monaco, maybe even Hong Kong or Singapore, if there is not enough government supervision regulated into the financial structure, they’re unfit and should “forfeit the right to participate in the American system,” he says.
From the top of his holy hill he exclaims: ‚ÄúWe will instruct the SEC (Securities and Exchange Commission) and Treasury and the Fed to deny access to the American financial system to any country that holds itself out as a haven to escape our financial regulation.”

I’m not sure if the expression “Alone Against the World” means something to Barney, but he’s surely alienating a lot of U.S. friendly forces out there. Let’s not forget that bankers in the USA’s closest ally, the United Kingdom, are talking about refusing American business because of all these regulations. Keep in mind that the rest of the world still looks quite angry at the U.S. and Washington for allowing the world financial markets to derail last year… and here comes the “Chief” of the oversight committee, the one who should have put a foot down with Wall Street a long time ago, calling the Kettle black.

If that does not spell supreme arrogance, it surely reflects colons the size of Fort Knox.
Let’s turn our attention to Barney Frank, the-holier-than-thou-democrat-from Massachusetts and explain why he should be the last one to talk on this topic. While I can’t blame Barney for single-handedly causing our current economic crisis, he did play a major role in bringing about this worldwide fiasco. Why? It was Barney who time and again prevented Congress and government regulators from investigating mortgage giants Fannie Mae and Freddie Mac‚ĶBarney Frank kept Washington out of timely and routinely checking on these quasi-government entities.

Barney Frank and Friends

Barney Frank and Friends

When the Bush Administration wanted to get reassurance that the housing bubble was under control in 2003, Barney literally said, “Fannie Mae and Freddie Mac are not facing any kind of financial crisis.” After the Bush White House warned that the collapse of these mortgage giants could cause “systemic risk for our financial system,” Barney retorted that the administration was more concerned about financial safety than housing. Barney openly complained that, “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Well, we all know the rest of the story.

In July 2008, Congress enacted a law permitting the federal government to nationalize Fannie Mae and Freddie Mac. Two months later, the feds did exactly that. The Congressional Budget Office estimated last year that the bailout would cost $25 billion. However, real economists that smirk at the spin doctors inside The Beltway have estimated the real cost is likely to exceed $1 trillion once all the sub-prime mortgages these entities issued are written down to their real value. That’s only 40 times plus the published number! And if you check out my co-writer Nick’s story on how sub-prime is making a comeback, you know that Barnett “Barney” Frank, the Democratic representative of the Fourth Congressional District of Massachusetts, still holds the reins tight. And now, Mr. Frank wants to export his vision of regulation to the rest of the world, that same bloated vision he so skillfully massacred us with. And guess what, he says the way to do it is to use the same kind of financial sanctions that the United States currently uses against North Korea, Iran and a couple of other derelict and expendable nations‚ĶFinancial Warfare, Washington style.

Here’s how it works.

In September 2005, the Treasury’s super-secret intelligence unit, the Financial Crimes Enforcement Network (FinCEN) issued a ‚Äúfinding‚Äù that North Korea was an imminent threat to the global financial system. Proof was not needed. Weapons of Mass Destructions don’t need smoking guns.

This “finding” put the world on notice that the U.S. Treasury would soon be confiscating assets from the U.S. correspondent accounts at North Korean banks, or from any bank doing business with North Korea. All the Treasury needs to do to begin this process is to conduct a secret civil forfeiture hearing, where the targeted bank has no right to participate. This draconian sanction is authorized in Section 311 of the USA PATRIOT Act. It essentially prevents blacklisted banks (or entire countries) from dealing in U.S. dollars. If Barney gets his way, and extends this draconian regime to the entire world, how do you think other countries will react?

Their response is likely to be the same as when Congress enacted the Sarbanes-Oxley Act in 2002. (This law imposed extremely burdensome accounting and disclosure regulations on publicly traded companies.) The number of companies delisting themselves from U.S. stock exchanges nearly tripled the year after Sarbanes-Oxley became law and these were the “good” years in international financial relations.

This time the sanctions are much more severe than those prescribed by Sarbanes-Oxley. Foreign investors from targeted countries will withdraw assets from U.S. banks and U.S. dollars in droves, and they’ll likely terminate all relationships with U.S. banks, insurance companies and other financial institutions.

What do you think that might do to the long-term value of the U.S. dollar? Barney apparently doesn’t have a clue. If Barney succeeds in exporting heavy-handed U.S. regulation to other countries, the weak prospects for the dollar are the least of my worries. Please somebody shut Barney up or retire him or do something before we have alienated the rest of the world in a worse way then George W. ever was capable of, or else let‚Äôs talk about a ferry service from Amelia Island to the Bahamas before long.

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