News

Day after day we hear from one elected/appointed official after another, each telling us that things are under control because they have a “plan”. Mostly it sounds to me like they have a “plan for a plan”, and that in fact, they have little to no experience in actually running a business, having to make payroll, or in anything that would remotely resemble “real world experience”.

With Fed Chairman Bernanke telling us today that “the US should begin to come out of the recession in late 2009”, and with Obama’s fireside chat for the nation tonight where I have no doubt that he will offer all kinds of interesting predictions, I thought it would be a good time to go back over the last couple of years and explore the words of wisdom from the leaders of the free world.

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Following my update, I have included an article from one of the foremost economic analysts of our time, Ambrose Evans-Pritchard. He called the subprime crisis just 6 months before it hit, and this weekend came out with extraordinary comments about the banking and currency crisis hitting Europe and parts of Asia right now. The reasons why his warnings are important will be obvious, and it’s important to remember that just as the US appeared to coming out of the Great Depression in 1932, a foreign banking and currency crisis helped to push the US back into a Depression that lasted another eight years. We live in a global economy that is interconnected more than at any point in history, and as difficult as it is already going to be for the US to recover from the recession/depression at hand, any kind of global meltdown will make the recovery that much more complex and lengthy.

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February 4, 2009

MARKET UPDATE

This will be a quick but important update. The Obama administration, along with our new Treasury Secretary, will be announcing their financial bailout and fiscal stimulus program early next week…likely on Monday or Tuesday.

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Ø No one, and I mean no one, likes Obama’s stimulus package. When you see Democrats struggle to support these socialistic ideals, you know that they are a bad idea. Less than 15% of the stimulus will work its way into the economy in 2009, while the rest will go to support bankrupt social programs…a bottomless black hole. Obama came into office with a 70% approval rating, and unless he wakes up and fast, he will see his numbers go the way of George Bush. What happened to “change that we can all believe in”?

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Seinfeld fans will remember the episode where Jerry refers to people that appear to be the exact opposites of George and Kramer as being from “Planet Bizarro”. Planet Bizarro comes from a comic book featuring Superman and Batman. On Planet Bizarro, everything happens exactly opposite to what we are accustomed seeing on Earth. They see bad as good and good as bad. Superman and Batman are villains instead of heroes, and morality is upside down. Sound vaguely familiar to the daily news we’re getting?

Bizarro also explains the details of Obama’s stimulus package…completely upside down.

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As I write this, gold is up $40/ounce and is preparing to blow through $900.

As you can see on the chart of gold it is also well above the 50 day moving average and has also just cracked its 200 day moving average. If we can close above $900 I look for a fast move back over $1000/ounce and new all-time highs.

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Like many of you reading this, I made a lot of money during the Clinton presidency. Love him or hate him, Bill Clinton and his economic team knew how to stimulate the economy, and they knew how to make the stock market go higher, year after year. Under Clinton’s Presidency we saw the best bull market in US history, and there’s not even a close second. The bottom line is that these guys knew every trick in the book, and they weren’t afraid to use them (see market manipulation).

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Quick but important point. Everyone…especially those on CNBC and the so-called expert economists (an oxymoron if I’ve ever heard one)…are saying that we cannot have another Depression because “this time” we saved the banking system, which will prevent another Depression from taking place.

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“May you live in interesting times” … Ancient Chinese Curse

That’s right. This famous Chinese proverb was actually written as a curse, and I’d say that it totally and completely sums up this past year. 2008 just became the worst investment year since the Great Depression, with losses of 35-40% for most major indices. At least we can say that it wasn’t boring….and that it only lasted one year.

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When the news broke about the $50 billion Ponzi Scheme that Bernie Madoff engineered over a twenty to thirty year period, I knew the story rang a bell. I went back through my records and found the original Barron’s article in 2001, and written by Erin Arvedlund. Included in her excellent research were quotes from several well known Wall Street veterans where they openly questioned Madoffs ability to consistently generate 15% plus returns, year after year, in good market or bad. All of the warning signs were there, and lots of bright people believed that this guy was running a huge scam. They were right, but no one seemed to care.

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