But we’re not…yet.

Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward — all in a desperate bid to make Americans feel better about the global financial crisis.

To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight (G8) nations looks more like a mutual affection society with central bankers anxious to claim credit and backslap each other in congratulations for having avoided the “Great Depression II.”

But by taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, they’ve created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.

Yet that hasn’t quite happened.

Core inflation — which denotes consumer prices without food and energy costs — has actually decreased from 2.5% in 2008 to 1.5% presently. And that has many investors who have heard the siren call of the doom, gloom and boom crowd wondering if they’re worried about nothing.

So what gives?

Well, there are four reasons we haven’t yet seen hyperinflation:

Click here to continue reading Mr. Fitzgerald’s article.

There’s one antidote for this problem … remembering a few basic rules. Just embrace the 10 ideas that follow and you’ll be in line to make some serious money in the months ahead.

Rule Number 1: Invest on the Right Side of Major Economic Trends:That old investing adage “Don’t fight the Fed” serves as a good example here. Rising interest-rate environments make meaningful gains difficult to sustain – unless you know what to look for. Far too many investors got it wrong in the 2000-2003 and 2008-2009 periods by betting on growth stocks in a recessionary economy, and they’re still getting it wrong. Those investors are likely to get burned again should the economy slow even more, despite the government-bailout and federal-stimulus efforts. Make sure to analyze all of the other major global trends, as well – and ride the ones that are truly unstoppable. You’ll know them when you see them, because they’ll have trillions of dollars in new capital flowing directly at them – investment plays in such areas as infrastructure, inflation, energy, food, and water (both supply and purity) are great examples.

Rule Number 2: Sell Your Winners: This may seem counterintuitive, but – if you want to succeed – you must sell your winners. Rule Number 6 – thinking like a plumber to prevent losses – is only part of the success equation. To be really effective, you have to take profits, too. That way, you get more capital that you can put to work. Think of it this way – Safeway Inc. (NYSE: SWY) regularly replenishes the inventory in its

Produce Department to keep it fresh. You should do the same with the “inventory” in your portfolio because, if you let your stocks sit on the shelf too long, they’ll eventually go bad – just like fruit that’s past its expiration date.

Click here for rules 3-10 from Keith Fitzgerald, Chief Investment Strategist of The Money Map Report.

Throughout the “sh*t hitting the fan” events of last fall, and the subsequent policy response, we’ve listened intently on what this Canadian had to say. The picture he paints today is one of bearish conviction. That’s exactly the reason he’s come under recent criticism as his ilk of ivory tower economists have started calling an end to this recession.

Though we don’t think he has anything to prove, he released a special report reaffirming his key points. You can read it in full here. But if you don’t have the time to peruse the twenty-two page (slightly wonkish) document, we’ve broken down the basic takeaway for you.

The equity markets have moved too far, too fast, and a correction is coming. Rather than buy into this rally, you should look at commodities. That’s because David believes that since 2001commodities took off on a secular bull market run.

Also, rather than hold US dollars, Rosie bets that the Canadian buck is a safer bet due to Canada’s smaller national debt (26% of GDP vs. 62% in the US), smaller budget deficit (-3.4% of GDP vs. -11.2% in the US), stronger banking sector (no Canadian bank needed a bailout), lower unemployment, and an economy more reliant on commodity exports like lumber, oil, natural gas and precious metals.

But the scariest–for holders of US dollars—forecast Rosie makes is that the US has yet to use a power policy tool: the devaluing of the greenback.

As Obama continues to take pages out of FDR’s playbook, he’s yet to devalue the dollar as FDR did in 1933. Rosenberg doesn’t say that the US policy wizards will directly devalue the dollar. Rather, he thinks it will happen by the expansion of the Fed’s balance sheet and the creation of freshly printed dollars.

We think he’s dead on about this call. The US’s “strong dollar” policy has become the latest oxymoron to enter the American vernacular. There is only one direction the value of the US dollar is going over the long-term—down.

Where exactly should you invest amidst this economic malaise? Here are the seven places to park your cash. Not surprisingly, our favorite precious metal tops the list.

1.) Gold

2.) Commodities

3.) The Canadian dollar

4.) Resource sectors of the stock market

5.) US sectors that have high foreign exposure (materials, tech, staples, healthcare)

6.) Canadian sectors that benefit from lower import costs (consumer stocks) but lose export competitiveness (manufacturers)

7.) Canadian bonds (a higher Canadian dollar will keep inflation low, hence reinforcing positive fixed income returns)

But the reality is that this tectonic shift in global finance – and the economic shockwaves that will result – could provide investors with some of the greatest profit plays they’ll ever see in their lifetimes.

No matter which camp you’re in, the China-spawned changes are headed our way.

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.
At the end of World War II, virtually the entire world functioned on dollars. By some accounts, 100% of the world’s money supply was the dollar. Today that figure has dropped all the way down to 19%, says Rochdale Securities LLC analyst Richard Bove, a noted expert on the U.S. banking system and Federal Reserve.

Now that the federal government has deployed a few trillion dollars more as bailout bucks, it’s clear that the greenback has lost its mojo and the U.S. government has lost its international monetary leverage.

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 – suggesting that China’s on the rise economically, while its currency is advancing with the unstoppability of a diesel locomotive operating at full throttle.

So if the U.S. dollar gets derailed as the world’s chief reserve currency – as we’ve repeatedly predicted is destined to take place – the world’s next reserve currency is likely to be China’s yuan, known officially as the renminbi.

Washington says that won’t happen, since Beijing takes steps to keep the yuan from being fully tradable. That’s true enough. But Beijing also understands that the dollar is a liability – which is why China’s leaders are going to great lengths to establish the yuan as a viable currency all its own, while simultaneously minimizing the Red Dragon’s dollar-based exposure.

In the last six months, for example, 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 – where the 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, or perhaps even one based on the International Monetary Fund’s so-called Special Drawing Right (SDR).

Created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system, the SDR was redefined in 1973 as a basket of currencies. Today, the SDR consists of the euro, Japanese yen, pound sterling, and U.S. dollar.

My guess is that this gathering in Moscow was merely the first of many such meetings that we’ll see take place around the world in the years to come. Expect the list of attendees to grow, as well.

Given all that we now know, the real question becomes: What happens if China succeeds and the yuan displaces the greenback as the world’s top transactional currency?

The list of potential implications is very long, and includes several scenarios that are almost apocalyptic. But most of the outcomes raise as many questions as they answer.

Let’s consider the Top Five:

• Global Gloom Leads to U.S. Doom: 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 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 factocurrency, 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.

My best guess is that we won’t see any one of these things in isolation, but will instead experience a blending of several or all of them. To the extent that China continues to absorb our inflationary influences, buy our debt in measured doses and maintain its reserves, we’ll probably have a measured decline in the value of the dollar – but not the catastrophic fall many in the doom, gloom and boom crowd are predicting. At the same time, I also see the IMF change course in the next few years to reflect China’s increasingly substantial influence and monetary power.

On the individual investor level, this clearly provides a new set of influences that most investors have yet to grasp. Most will perceive what I have said as a threat, but I believe the correct way to view this is that there will be a whole new set of opportunities coming our way.

Some of those opportunities will be obvious – like the need to invest in currencies and commodities that are of interest to China. Others, like direct investments in China’s yuan, will require special insight, a good investment guide, or a leap of faith.

The bottom line – and the most important thing to remember – is this: No matter how this plays out, there will always be an upside for investors who are willing to seek it out.

Source:  The Five Financial Shockwaves to Expect When China’s Yuan Swaps Places with the U.S. Dollar

“It is critically important that Congress act before the [debt] limit is reached,” Tim Geithner wrote over the weekend in a letter to lawmakers, “so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

Sounds like our Treasury Secretary is finally putting his foot down, insisting that Congress pull back its lavish spending programs and start addressing our incredible $11.6 trillion national debt.

Wait… what’s that? Oh, Geithner’s actually asking for Congress to raise the debt ceiling. If Congress authorizes our government to dig deeper than $12.1 trillion in debt (our current glass ceiling) our partners here and abroad will somehow “remain confident.” How perverse is that?
The U.S. budget deficit rose $181 billion in July, to a record $1.3 trillion, the Congressional Budget Office reported over the weekend. You know the drill by now… tax receipts are plunging while bailout spending is soaring. In budget parlance, revenues in this fiscal year are down 17% while outlays are up 21%.

That’s a $530 billion increase in spending from fiscal 2008.

The CBO still projects the government budget deficit to exceed $1.8 trillion, about four times 2008’s record $455 deficit. More to come tomorrow, when the Treasury unveils official budget numbers.
Sounds like a great time for the government to buy a bunch of fancy jets! Congress recently earmarked $550 million in a defense funding bill to buy themselves eight private passenger jets. That would be the same Congress that went out of their way to publicly embarrass Big Three execs for jet setting from Detroit to D.C.

Prepared for a public backlash, Congress has a several lame talking points at the ready… that the current fleet of private jets is outdated… that having new high-tech planes will be better for the environment and ultimately lower cost… and that these planes will be used mostly by the Pentagon and only about 15% of the time for lawmakers.

But here’s our favorite: Legislators are eager complete the transaction so that they can have a new fleet in time for the busiest congressional travel period of the year… August, when they are all on holiday!

Here’s the crucial difference between 2009 and 2007: While the government is still spending with reckless abandon, the consumer is rapidly deleveraging. Consumer credit fell for the fifth consecutive month in June, the Fed announced Friday. Credit outstanding fell by $10.3 billion in the month, to a total of $2.5 trillion. That’s more than double what the Street expected. Revolving credit, namely credit cards, fell by $5.2 billion — a record 10th month in a row of decline.

Now in a state of contraction since February, the average American is embarking on the longest credit pullback since 1991.
“We are clearly in an economy-wide deleveraging process that will last for years,” writes Strategic Short Report’s Dan Amoss. “We are not in a typical inventory-led recession. Sure, the next few years will not mirror the 1930s, because the government and central bank are debasing the currency to prevent a dreaded debt deflation spiral. We probably won’t have 1930s-style bank runs (although the FDIC is running dangerously close to needing to tap its line of credit with the Treasury to replenish its Deposit Insurance Fund).

“But make no mistake: We will pay for the inflationary bailouts at some point down the road with a currency crisis. Central banks cannot keep abusing savers and the bond market to this extent without eventually provoking a collapse in demand for paper money.

“A collapse in demand for paper money, not a decline in the ‘output gap,’ will eventually bring about inflation. We’ll see signs of it as real Treasury bond investors keep balking at these low rates at Treasury auctions, leaving the Fed to step in and monetize the debt. Eventually, there’s a risk that the Fed will lose the tiny bit of independence it has left and the printing press could come under the control of Congress, which would accelerate the endgame for the U.S. dollar. The market for gold-related assets will look ahead to this possibility.”

Dan’s Strategic Short Report readers own calls on GDX, and recently took on a short position in a very well-known bank. We’ll be telling you much more about this fishy financial soon… keep an eye out tomorrow.
The benchmark 10-year Treasury bond just suffered its worst week since 2003. Investors forced yields up 38 basis points last week, to as high as 3.88%.
But the stock market continues to climb. Friday’s better-than-expected jobs report (more on that in a minute) bumped the major indexes up about 1.3%, to their highest levels since October. The Dow and S&P 500 finished up over 2% for the week.

The market looks a bit timid today. After opening down, the Dow and S&P are near break-even as we write
“It’s been a rough year for dividends,” says our income analyst Jim Nelson, “but if you know where to look, your income will be just fine. Below is a breakdown of S&P 500 yields by sectors:

“As you can see, the biggest loser on the list is financials, which shouldn’t be a surprise. The segment’s dividend yield fell 300 basis points (right-hand column) from last year to now.

“The sector that pays the most is doing so under the radar: telecommunication services. This is a favorite of ours. That 14 basis point increase is primarily due to AT&T and Verizon — both paying out around 6%.

“These dividends aren’t nearly as safe as we’d like, though. Instead of gunning for the U.S. telecom industry, we like to play that game in emerging markets. We already have a Pacific Rim telecom in the Lifetime Income Report portfolio, and we’ll be adding another this week. Even after that, we’ll continue to keep our eyes peeled and noses to the ground in case something else pops up in that industry.

“Going back to that table, you can see the next two best-paying sectors are utilities and consumer staples. Our portfolio is already loaded with these, and we’ll continue looking in these directions as well.”

If you seek stable, dividend yielding stocks with serious upside potential, Jim’s Lifetime Income Report is where it’s at… details here.
It’s Monday… time to check in on the annual bank failure tally: Two in Florida and one in Oregon bit the dust over the weekend. That brings the 2009 running total to 72. The three took a $185 million chunk from the FDIC’s war chest. So far this year, the agency has lost over $15 billion from its bank insurance fund.
The dollar is holding onto its surprise Friday rally today.As we mentioned then, we were taken aback when the dollar index jumped from 78 to 79 after the better-than-expected jobs report.

“For months now,” explains Bill Jenkins, “every time there was good news for the economy (like Friday’s jobs report), it was bad news for the U.S. dollar. But not on Friday. The initial reaction to the good U.S. news was to sell the dollar. Then suddenly, the market reversed its course and began selling the other currencies with both hands, and buying the U.S. dollar, instead. In other words, the tide shifted, and good news for the U.S. economy also became good news for the U.S. dollar.

“So has the U.S. dollar put in a bottom here? Are we about to see a knee-jerk reaction favoring the greenback to other currencies? Only time will tell. But FX traders better be on alert. My readers saw a 42% profit in the Swiss franc on Friday’s move.”

42% in one day? Nice. There’s plenty more where that came from… just check out Bill’s Master FX Options Trader.
Since the dollar remains strong, gold is still under pressure. The spot price is down about $20 from Friday’s high, to $945 an ounce.
“Why is every analyst, yourselves included,” a reader asks, “so quick to believe the government’s unemployment and GDP figures, when the political interests of the White House are at stake in the numbers and the White House controls the executive departments that generate these figures? We know from past unhappy experiences (e.g., weapons of mass destruction in Iraq) that the White House is capable of lying when it suits political purposes. Not to mention that GE, Murdoch and the other oligopolists who control the news we get are politically and financially motivated to play along and hype the figures.”

The 5: We’ve talked about the dubious nature of the jobs report so many times (like here, here or here) that we thought we had gotten our point across. Guess not.

Uncle Sam — though the power of statistical ploys like the birth/death model, seasonal adjustments and margin of error — can put the jobs numbers just about wherever he wants. We follow ’em because they can greatly affect the prices of your investments, they influence policy and public opinion and there are very few viable alternatives. We quote folks like John Williams often so you get a worthy alternative point of view. We could only be more contrarian by ignoring government stats altogether, which would be a disservice to you, whom we promise to inform, enrich and entertain.

And speaking of Mr. Williams:

“Heavily distorted seasonal adjustments have artificially reduced the levels of new claims for unemployment insurance,” writes John in his latest Shadowstats alert. “They appear to have flowed through not only to July unemployment and payroll reporting, but also to the July purchasing managers manufacturing survey.

“July usually sees a regular pattern of planned automobile production line shutdowns to accommodate retooling for the new model year, but recent disruptions to the auto industry have changed the pattern this year. Without the usual pattern of shutdowns, the government’s computers nonetheless responded by creating the usual offsetting boost in jobs, not only in the auto industry, but in supporting industries, as well. The auto industry itself was alone among durable goods manufacturing industries in showing a reported seasonally adjusted monthly gain in July, up by 28,000 jobs…

“The severity of the ongoing economic contraction has started to generate other distortions in data reporting:

• Year-to-year comparisons will begin to see a flattening in annual declines, as year-ago numbers used in comparisons were in severe contraction.
• Extreme economic disruptions have distorted patterns of regular activity and related seasonal-adjustment processes.
• The birth-death model overstates payroll levels during recessions.
• Short-term discouraged workers begin to disappear from the broader BLS unemployment measures as their “discouragement” extends beyond one year…

“While Wall Street likely will hype the July employment results as confirmation that the economy has turned the corner, such hype and resulting overly optimistic expectations should be slammed in the months ahead, when the positive reporting distortions reverse out in a normal catch-up process.”

Source:  The Debt Ceiling, Dividend Plays, A Currency Sea Change and More!

It brings back the question, which has loomed dimly at the margins of America’s collective consciousness, as to whether we can get through the long emergency ahead without going through a wringer of domestic political convulsion. At this rate, sooner or later, anything identified with wealth could become a target for the wrath of the unemployed and foreclosed. The first rock that flies through an East Hampton window, or the first firebomb tossed into the lobby of Goldman Sachs Manhattan headquarters could ignite a chain of events that shoves all economic policy out of the political arena and quickly divides everyone at the center of power into armies out for blood.

What the nation — including President Obama — can’t seem to get through its head is that the USA has entered a period of epochal economic contraction. Instead of growth, as measured in conventional econometrics, we can only expect (in the best case) transformation to a different economy within the limits of real contraction. The president has got to stop promising renewed growth. While this would affect the perceived “standard-of-living” as measured in things like shopping mall sales and vehicle miles driven, it would not necessarily mean diminished “quality-of-life.” It would mean different ways-of-life for a lot of people — for instance, young adults who had expected lifetime employment as corporate executives but who, instead, find themselves ten years from now working at farming. We have an awful lot to get real about.

A genuine reorganization of the US economy seems beyond the ken not just of all US politicians but of the entire US news media and business leadership. A wonderful example a couple of weeks back was the idiotic press conference by General Motors marketing chief, Bob Lutz, who thinks he can revive the American Dream with electric cars. (By the way, this is pretty much the same thinking I encountered at the Aspen Environmental Forum among the Green celebrities.)

From a purely practical standpoint, the electric car is absurd. If they were produced on a mass basis, they would crash the electric grid — assuming that the masses could afford to buy them, which assumes a lot. We simply don’t have the electric generating capacity to run even one-quarter of the current car fleet on volts, and building the necessary nuclear or coal-fired power plants in five years is also an absurdity. (Don’t expect wind, solar, biomass, or anything else to pick up the slack.) If electric cars were produced as just a niche product for the elite (e.g. Goldman Sachs employees), they would soon provoke the resentment of the non-elite left to the mercy of the oil markets.

Anyway, America’s motoring dilemma has gone beyond the issue of how we power the cars — and even beyond the insanity of blindly maintaining our extreme car dependency per se. The continuation of Happy Motoring now hinges on two other big quandaries: 1. the likelihood that there will be far less capital available for car loans, and 2.) the likelihood that there will be far less government money for road maintenance. The problem of Peak Oil — and the prospect of price-jackings and shortages — is just the cherry on top.

By the way, for practical purposes Bob Lutz of GM is an employee of the US taxpayers now, since the US owns 60 percent of the “new” General Motors, so he must be considered a spokesman for national policy. Since a transformation of the US car fleet to electric vehicles is absurd, what would be an appropriate response to profound economic contraction? How about walkable communities connected by public transit? Why is that not a focus of the “new” General Motors? In 1941 the company made the transformation from cars to armaments in a matter of months; why can’t it produce the rolling stock for a renewed passenger rail system? Or trams? Is this not enough of a crisis? The answer is that there is no leadership in this direction. If President Obama declared this to be a policy objective, and stuck to it for more than one business day, he could drag the sleepwalking American public in this direction, and the rest of national leadership in government, business, and media with it.

This kind of thing is what prompts casual observers to wonder if the president is a cynical shill for business as usual, or a victim of the worst conventional thinking with no real vision, or just another clueless sleepwalking bozo with a charming veneer.

In circles that pass for “progressive” these days, the natives are getting restless. Their agitation seems pretty inchoate for the moment — still resting on vague, poorly-defined wishes for “change.” These vague promptings need to be focused on specific action that is realistic within the context of comprehensive contraction and transformation. A big piece of this would be the recognition that our suburban sprawl economy is dying, and that we now have to bend our efforts to reorganizing American life on the most fundamental physical terms. We have to inhabit the landscape differently, move around it differently, generate food out of it differently, and make things on it again. Whatever remaining real capital there is in the system can’t be squandered on cash bonuses for Wall Street employees.

Source: Wobble Time

[Note: For more of Mr. Kunstler’s inexhaustible work, including art, articles and links to his books, be sure to check out his webpage here.]

The Wall Street Journal recently reported that Andrew J. Hall, head of Phibro LLC – Citigroup’s energy trading unit - is pressing the company to honor a 2009 compensation package that could be worth as much as $100 million. Such a lofty payout would put Citi at odds with Kenneth Feinberg the Treasury Department’s newly appointed pay czar.

Citigroup, which reported a net loss of $27.7 billion in 2008, received $34 billion in funding from the Troubled Asset Relief Program (TARP). That means Citi, along with six other financial firms, will have the compensation for its one hundred highest-paid paid employees reviewed by Feinberg.

“Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives,” said a Treasury Department official. “That process is just beginning now, and Mr. Feinberg has begun consulting with those firms about their compensation plans. We are not going to provide a running commentary on that process, but it’s clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance.”

The pay czar cannot force companies to break contracts with their employees, but he could ask those companies to reduce an employee’s future pay to compensate for a single large payment or factor the amount of a contract into an employee’s overall pay and use that calculation to bring down total compensation.

However, Hall’s compensation will be particularly tricky. According toThe Journal report he has long had a profit sharing contract with Citi entitling him to a sizeable portion of Phibro’s gains. Hall’s 2008 compensation totaled more than $100 million, people familiar with the matter told the paper. And while we’re only halfway through 2009, Phibro is reportedly having a good year.

Also, until this year, Phibro’s financial year ended in September. But now the firm’s pay will be calculated to a full calendar year. That means Hall’s pay period will run a full 15 months from September 2008 to December 2009.

According to The Journal report, Hall and others on his team earlier this year threatened to leave if their pay was cut to accommodate government mandates.

Hall’s departure would be a huge blow to Citigroup’s effort to return to profitability.  The Phibro unit has at times accounted for the bulk of revenue at its parent company. Hall himself is credited with anticipating the sharp run up in crude oil prices and producing a healthy track record of large and profitable investment bets.

Citigroup does not report the details of Phibro’s financial dealings. However, the company’s annual report indicated that $667 million of Citigroup’s 2008 revenue from “principal transactions” related to commodities was largely the result of Phibro’s performance.

Regardless of Hall’s contributions, the government says $100 million in compensation seems excessive.

“One could easily come to the conclusion that that’s probably a bit out of whack on any pay scale,” said White House Press Secretary Robert Gibbs. “The justification of setting outsized salaries is this notion of simply a series of unique skills or traits that can’t be replicated by anybody on the planet. I don’t know that the president would necessarily buy that notion.”

Source: Will Citigroup Lose its Top Energy Trader?

“The total potential federal government support could reach up to $23.7 trillion,” said Neil Barofsky this week. He’s the special inspector general for the TARP — one of the government’s many bailout programs dumping billions upon billions. Say again… this whole mess could put U.S. taxpayers on the hook for just under $24 trillion.

Barosfky’s report was self-admittedly an overblown worst-case scenario… for example, it assumes that every mortgage loan on Fannie and Freddie’s books will go bad and that every government-aided bank will go bust. (Heh, we like this guy).

But we see why he bothered crunching all the numbers for a scenario that will never happen (or if it were to happen, no one would really care what the exact cost would be). This is what your government is willing to do in order to maintain the status quo. Votes for this year’s election are worth $24 trillion for tomorrow’s generation.

So when Congress asked, hey Neil, what’s your real guess? $3 trillion, he responded. Phew, what a relief!
“You cannot create prosperity through money printing and debt growth,” Dr. Marc Faber told us yesterday. Dr. Faber was the first speaker of our Investment Symposium and he preached an idea that is already becoming a theme of the event: Government fiscal and monetary intervention, “can postpone, but not prevent crisis…

“I believe next year’s economy will face even larger deficits. Their deficit is attempting to stimulate credit growth. Unless real credit growth returns, they will have to put more and more money into the system to maintain the status quo. All polices target consumption. That is a mistake.”

So what’s this mean for the market?

“The S&P 500 will not recover to 2007 highs. At the peak, 44% of the S&P was the financial sector. That is gone… not coming back.”
And since it’s our nature to cook things down and serve them in tasty little bits, here are some rapid-fire, take ’em or leave ’em themes to the first day of our Investment Symposium:

• Do not expect a V-shaped market recovery. The crisis aftermath will be long and volatile
• Short U.S. bonds
• Technology breakthroughs in DNA over the next few decades will be akin to the Internet and computing breakthroughs of the last 20 years
• Either invest like a contrarian or suffer like a victim (Rick Rule’s mantra)
• Buy alt energy, especially geothermal
• Buy commodities, particularly grains.

Of course, we can’t hope to accurately summarize six hours of yesterday’s presentations in our humble 5 Min. That’s why you should check out the Symposium CD/MP3 set. It’ll have every minute of every presentation, notes from the private breakout sessions and all the specific stocks and funds our speakers recommend (we’ve already heard at least half a dozen.) Get details here… since it’s still early in the game, the set is priced at a discount.
The market rallied yesterday, in spite of Dr. Faber’s warning.The Dow and S&P 500 inched up 0.8% and 0.4%, respectively, led mostly by more blue chip earnings beats. The one that really caught our eye was Caterpillar. The company jumped 8% after beating earnings by a mile and issuing a pretty rosy outlook.
“Caterpillar is the crown jewel of American industry,”notes Jim Nelson. “It represents the engine of the blue-collar world — at least in the U.S. CAT makes everything from bulldozers — needed for nearly every road and construction project in the country — to turbines — needed to keep the lights on in the U.S.

“The company’s customer base reaches from Canada to Indonesia…from China to Chile. There’s almost no developed or even developing country in the world that doesn’t show Caterpillar some business.

“So what does this quarter’s profits mean for CAT, the U.S. and the rest of the world? It means that either the stimulus plans worldwide are starting to work or we are turning a corner on this recession…or both.

“We’re not calling for the recovery to start now, and we certainly aren’t calling for the bottom of the market. But we are pointing out the No. 1 indicator. We’ll know when the economy is back on track when Caterpillar starts performing like years past.”

Jim is at the helm of one of our newest publications, Lifetime Income Report. If you seek steady, dividend-yielding companies with long-term upside potential, he’s your man. Learn more here.
Yesterday also marked a big win for the year-to-date stock market. The major indexes have recovered from the muddling about over the last six weeks and are now at or near YTD highs. The S&P is now at its highest level in eight months. The Dow is close behind, at a six-month high.

The Nasdaq has been particularly strong lately, as you can see above. Its 0.4% rise yesterday marked the 10th day in a row of gains. The Nasdaq didn’t have a winning streak like that even at the height of the tech boom. You’d have to go back to July 1997 to find a track record like that.

Now, we don’t have anything against tech. In fact, after Juan Enriquez’s presentation yesterday — which completely redefined what we think about biotechnology — we’re excited for the future of tech. But a streak like that in an economy like this? Hmm…
The two biggest state pension funds in the U.S. have lost $100 billion, and they’re about to lose more. Yesterday CalPERS and the California State Teachers’ Retirement System revealed annual fiscal year losses of $56.2 and $43.4 billion, respectively. That’s about a quarter of the value of both portfolios.

CalPERS and California state teachers have it especially bad… unemployment in that state is higher than most, which will limit money flowing into the funds. And just yesterday, Gov. Schwarzenegger announced all kinds of plans to bridge the budget gap that will be detrimental to the funds.

But what really bothers us… both funds, and most around the country, are still counting on La-La Land returns for the foreseeable future. CalPERS, for example, needs a 7.75% annual return for the next two years or it will have to ask the government and municipalities to hike contributions in order to pay for new retirees. That’s no problem, as the fund said in a statement yesterday that its “long-term 20-year investment return remained positive at 7.75%.” Heh… so of course, it’s reasonable to assume the next 20 will be just as pleasant.
BTW, CalPERS sued Moody’s and Standard & Poor’s last week for its role in grossly overrating toxic assets during the credit boom.

“I will make a prediction,” said Barry Ritholtz, who is spoke in today’s session, “that CalPERS is going to torment these guys until someone is in prison.”

Barry himself has an interesting history with rating agencies. His book, Bailout Nation, included a scathing (and deserving) attack at the ratings agencies. When his publisher, McGraw-Hill (which also owns Standard & Poor’s) found out about it, they squashed his deal.
“Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending,” Ben Bernanke testified on the Hill yesterday. Should that continue, Mr. Bernanke so eloquently suggested that a recovery could “prove transient.” Wait… so if credit tightens, unemployment rises and consumer spending falls, the economy will get worse? Thanks, Ben.
After its recent fall, the dollar index has entered a tight range. It’s been bouncing between 78.6-79 all week.
“If the dollar goes back to where it was a year a go, gold will be $1,200 an ounce,” Frank Holmes forecast yesterday in his presentation. Mining Journal named Frank the best mining fund manger in the world… so when he talks gold, we tend to sit up and pay attention.

The dollar index’s low last year was around 72.3.
The dollar’s narrow trading band has given gold a small range too. Since rising to $955 Monday, the spot price has largely stayed put.
And if you’re on the hunt for a gold mining stock, check out this snippet from Frank’s presentation: “In all the research we’ve done, the key to success is finding miners with growth in production, growth in cash flow and growth in reserves. They are the three key value drivers. If the stock has positive momentum on top of it, even better.”
Oil’s holding steady too today, at $64 a barrel.
“Notwithstanding your expressed distaste,” writes a reader, “for some of the elements of California’s budget solution, I think at least part of you should be cheering the fact that the state did gore some sacred cows by reducing $15 billion in program funding and (because compromise is part of our government) having the taxpayers shoulder a smaller part of the burden in the form of $4 billion in new taxes. Is this not the sort of solution that we should all be encouraging our federal legislators to make to balance the national budget…. rather than this insane bailout strategy that they are following?

“My textbook learning on fiscal restraint indicates that when your revenues can’t cover all the legislated services and special interest programs so in vogue when times are good (and believe me, California leads the pack), you need to pare them back to what is affordable. Spread the pain. I’m sure you know already that our tax rates in California are quite a bit more than in most states, but it’s unrealistic to think program cuts will be the total answer given the diversity of interests out there… the ratio agreed to by the legislature and governor seems like a fair attempt to get the state back into operation.

“You were right to call out the accounting trick of pushing a payday forward — but if you really want to talk budget tricks, you could write a huge book on such things, as our national Congress has become expert in regarding unrealistic projections and other interesting devices to justify more spending. I’d like to see the other states in trouble work their own compromises and then all of us press our national government to show some intestinal fortitude to paring back programs until spending equals revenues.

“While taking issue with you on this one point — I’m extraordinarily thankful for your daily newsletter and your editorial courage… and our ability to disagree and still support each other in our larger goals for the nation!”

Source:  Total Cost of the Bailouts, Symposium Synopsis, How to Pick a Gold Miner and More!

You can rest easy today… the financial crisis is over.

CIT Group, the new epicenter of systemic financial risk, got thrown a lifeline this week from its bondholders. As we reported Friday, the company needed $3 billion — fast — in order to stay afloat. It was rightfully denied a government bailout, but was able to strike a last-minute deal with holders of its debt. Of course, the market rejoiced… the S&P 500 rose 1.1% yesterday largely on the news.
But again, we’re calling the market’s bluff. Anybody read the fine print of this deal? The loan was secured by “substantially all unencumbered assets.” That lawyer talk means CIT will have no collateral left over for a similar deal in the future. What’s more, the company will have to pay 13% annually on the $3 billion loan… no small order.

But most importantly, the whole deal is an ugly microcosm of 2008-2009. No problem has actually been fixed at CIT. The business still finances loans to tens of thousands of small businesses by borrowing from the credit market. CIT’s business model is still broken. They are still massively in debt. All they’ve done is create another liability.

(Just as we were about to publish today, CIT filed a warning with the SEC, saying that their bondholder rescue might not keep them out of bankruptcy. Wouldn’t you know it – they’ve got more bills coming due! On August 17th they’ll have to cough up another $1 billion. And so the madness continues.…)
Nevertheless, coupled with the recent earnings surprises from JP Morgan, Goldman Sachs and Citi, “investors were encouraged to see that the financial sector can take care of itself, without government bailout funds,” as CNN put it. Heh… right.
“Anyone who takes this as evidence of a recovering economy should work for the government,” sneers Bill Bonner. “Only a government economist or a mental defective (excuse us for being redundant) could believe that genuine prosperity can be built on a foundation of speculating by large financial institutions. You can see why by asking a simple question: Whom were they trading against?

“The banks’ core business is actually getting worse! The core business of banking is lending to people who are capable of paying it back — out of earnings. If the borrower is counting on higher house prices… or higher stock prices… to allow him to refinance on better terms, the lender is asking for trouble. Prices may go up… or they may go down. And if they go down, down goes the lender’s collateral too… and his hope of getting repaid.

“The banks made big mistakes in the bubble years. And now they’re paying the price. But so far, they’ve only made the first installment payment. Subprime loans started going bad two years ago. Then, people began losing their jobs… and loans of all sorts were in trouble.

“There is no sign that this process is over. Instead, it is merely proceeding in good order… just as you’d expect.”
The stock market rally has been tempered today. Ben Bernanke is testifying on the Hill — as good a reason as any for traders to sell a few shares. As we write, the S&P 500 is down 0.5%.
“Here’s a way to take some risk out of biotech investing,” says our small-cap adviser Greg Geunthner. “Check out the clinical testing sector. Companies in this industry oversee and review tests performed by the big pharmaceutical corporations, as well as biotechs. Usually, these firms offer full regulatory compliance, as well as laboratory services for a variety of clinical tests.

“Thanks to a regulatory environment that’s becoming increasingly difficult to navigate, drug companies large and small are outsourcing research and development spending more often. In fact, R&D outsourcing is increasing 17% per year. This puts clinical testing firms in prime position for tremendous growth.

“That’s why we’re looking at a virtually unknown clinical testing industry leader right now. It’s been in business for two decades, and it’s about to kick its business into high gear. It’s taking its newfound cash flow and investing it back in its business. Management has also laid out an aggressive plan, which includes the company completely paying off its long- and short-term debt by the end of the fiscal year, as well as growing its biomarker services division to meet growing needs in the industry.”

Want the ticker? Check out Greg’s Penny Stock Fortunes.
The California budget crisis has come to and end, but it looks like the whole mess is really just beginning. State lawmakers closed their $26 billion budget gap last night in a manner that will likely irritate every single special interest group in California and send shivers down the spines of the other states still facing similar crises.

So how’d the Governator and his brood pull it off? $15 billion in budget cuts, including mob-inducing measures like cutting health care benefits for underprivileged kids and cuts for welfare, education and municipal governments. Almost $4 billion will come from “new revenues,” aka higher taxes. $2.1 billion will be borrowed and the remainder will be “fixed” with good old-fashioned accounting fraud… no kidding. For example, the government will shift the last state payday of the current fiscal year into the next. Save that little problem for 2011!
No surprise, California’s faux budget fix failed to inspire a dollar rally. The dollar index found a new six-week low early this morning at 78.6.
When it comes to the fate of the U.S. dollar, “Two tsunami waves are crashing in to one another,” Rob Parenteau told us last night, “debt deflation on one side, and policy inflation on the other.” Rob delivered quite a speech at our first ever meeting of the Richebacher Society, amid the spectacular views of the hotel’s rooftop lounge. Our highlight came during a period of open dialogue between Rob and Riche Society members when he was asked how will we know when deflationary period is over and inflation — or hyperinflation — begins?

The answer, said Mr. Parenteau, is found in credit and wages. No matter how inflationary the government may be, true hyperinflation can’t be had until the consumer has access to excessive credit and his wages rise as the value of money falls. In the current environment, where credit is tight and wages are falling, rapid inflation would only be possible if there were a true crisis of confidence in the dollar. If that were to happen, he assured us, it’d be pretty obvious.

(We apologize to Rob if we hacked up his much more eloquently phrased explanation. Regardless, the first meeting of the Richebacher Society was a notable success. If you’d like to be around for the second, look here.)
Gold is holding steady after yesterday’s rally. The spot price hit $950 yesterday and has stayed put since.
“Around the world, miners are finding out that a mine is only worth something if you can keep it,” warns Chris Mayer. “And mining companies are finding it tougher to keep them as governments seize them or rewrite deals.

“Rio Tinto, for example, was knee-deep in a $6 billion iron ore project in Guinea. The government just stripped it of 50% of the mine. Guinea said Rio Tinto was moving too slowly.

“The problem is that as commodity prices have crashed, companies have cut back and slowed down new projects. But governments in these developing countries, which granted the rights to mine in their countries, were banking on getting all kinds of royalties and taxes. Plus, governments don’t want to see job losses, which in a lot of these countries could be seeds for unrest.

“China, for instance, is threatening to revoke a coal license from ArcelorMittal after the company warned it would cut jobs. In South Africa, the largest trade union wants the government to nationalize all the mines. In Zimbabwe, in Zambia and other countries, miners face all kinds of political threats.

“In short, political risks are on the rise. It’s fallout from the economic bust. Times are tight everywhere, but only governments don’t cut back. They just figure out new ways to grab money. So for now, focus on valuable resource companies in safer jurisdictions.”
Last today, a (little bit creepy) sign of the times: The depression has caused a revival of the DIY home burial.According to The New York Times, there are now at least 45 organizations around the country that help families bury their loved ones in their backyards, compared to just two in 2002. The rag says the average American traditional funeral costs about $6,000 and, naturally, families and the soon-to-be departed are looking for ways to save. The family the paper interviewed spent just $250 on their father’s burial.

Our favorite bit from the story was a fellow named Chuck Lakin. The humble old carpenter specializes in multipurpose coffins for home burial. After all, if you’re going to shell out a couple hundred bucks for a pine box to rot in, might as well have a place to store some of your favorite books while you wait for the hereafter.

How morbidly convenient!

“We’ve been looking around in Florida at foreclosures/short sales,” writes a reader, “and talking to people and have come to realize that the housing stats y’all get grossly underestimate the direness of the situation. We came across an approximately 300-unit condo project in Panama City Beach that purportedly cost the builder (bank) $66,000,000. These units were being pushed by a realtor for less than $200K each (159-199K). This realtor led me to believe that there are very few of these available (as in these are being ‘released by the developer’). Another realtor told me they are a bunch of short sales. I later learned that 15 are owned by individuals (sold in the past year), 20 are owned by some company in New York and the rest are owned by the apparent developer in Texas. It was like a beautiful ghost town. These condos do not show up as foreclosures or anything close.

“Talking to another realtor in Orlando, he had stories of people living in their homes for at least 18 months without making a payment and not receiving foreclosure notices. These also do not show up in the distressed numbers. The banks are using very creative ways of keeping from flooding the market and propping up prices as much as they can just to get whatever they can. We’re going to rent and figure the whole nasty thing out. Buyer beware.”

The 5: Thanks for your note. You are likely the first person to ever accuse us of grossly underestimating the housing bust. Considering vintage promotions like this, we don’t know how we could have rang the bell much louder.

Source: Banks on the Mend? Biotech Safe Haven, CA’s Budget Crisis, DIY Funerals and More!

Great news: The Federal Reserve will retain its right to operate in secrecy.

“Thank God for Rule 16!”

Late yesterday, the Senate majority put the kibosh on a last-hour provision in the 2010 spending bill that would audit the Fed. Not because it’s a bad idea… but because of the arcane Rule 16, which prohibits policy legislation from being added to spending bills. (The kind of “rule” that’s only evoked when the majority gets uncomfortable.)

“The Federal Reserve will create and disburse trillions of dollars in response to our current financial crisis,” said Sen. Jim DeMint, who spearheaded the failed audit addition. “Americans across the nation, regardless of their opinion on the bailout, want to know where the money has gone.” Under his proposed plan, the Government Accountability Office would take a look into the Fed’s discount window lending, various funding “facilities,” bank bailouts and agreements with foreign players.

Shame on Mr. DeMint for such an outrageous request. Down-to-the-wire appropriations should be reserved for truly exigent causes… like protecting the makers of wooden arrows designed for use by children. Why bother wasting the time of the GAO with a simple audit of the most unaccountable monetary body in the world?

You can watch Mr. DeMint get what’s coming to him here. Ron Paul’s bill– that other shameful attempt to audit the Fed — now has 249 co-sponsors in the House. Wonder what brand of parliamentary fine print Barney Frank or Nancy Pelosi might summon to quash that one.

The number of U.S. consumer loans in default has hit a record high, reports the American Bankers Association. The ABA just polished off its first-quarter delinquency report (little late on that one, fellas) and revealed some disturbing results: Of all the consumer loans in America, 3.23% are more than 30 days in arrears. That’s the highest level since at least 1970, when the ABA started keeping track.

Of course, it’s no shocker that things got tough in the first quarter. But what of the most recent three-month stint, during the best of the sucker rally? “The No. 1 driver of delinquencies is job loss,” hints ABA’s chief economist, James Chessen. “When people lose their jobs, they can’t pay their bills. Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround.”

So practically no one expects the unemployment rate to stop its accent until at least 2010. And just as many are willing to admit there are boatloads of souring loans still on bank balance sheets. Hmmm….
While certainly better off than the U.S., Canada could face a consumer debt crisis of its own, reports the Bank of Canada. In its biannual Financial System Review, the BoC said yesterday that “There has been a further deterioration in the financial position of the Canadian household sector.” The average ratio of debt to income has hit a record level for Canadians… household debt there is averages roughly 140% of disposable income. Here in I.O.U.S.A., it’s closer to 170%. Suffice to say neither ratio is desirable.

We don’t want to say too much here, but when it comes to a few select Canadian financials, our short analyst Dan Amoss has his finger on the trigger. Stay tuned for more.
China has taken yet another “World’s No.1” title from the U.S., reports Chris Mayer.

“In 2000, China’s exports to the Arab world came to just $6 billion,” says Chris. “Last year, China’s exports to the Arab world climbed to $48 billion, which nearly passed America’s $50 billion in exports to same region. Earlier this year, China finally passed the U.S. to become the Arab world’s largest trading partner.

“This is a historic shift. What we’re seeing here is the New Silk Road in action…

“Today’s traders are following in the footsteps of their ancestors. The bookends of the new Silk Road are China and the Middle East, especially the Arab world. The Eastern bookend gets all the press, but what many people fail to appreciate about the rise of China is how it also sired the rise of the Arab world.

“What does this new Silk Road mean for investors? I believe the New Silk Road gives us a framework for looking at markets and sniffing out opportunities in energy, water, food and more.”
And just how Sino-centric has the Arab world become?“Dubai, for example,” continues Chris, “houses the DragonMart. It is the largest building to sell exclusively Chinese-made goods outside of China. It measures nearly 1.6 million square feet! And China seems to go out of its way to make Arabs feel at home in China — even using state money to build mosques. According to Ben Simpfendorfer, the Chinese will issue visas for visiting Egyptians in 24 hours. It takes 18 days for an Egyptian to get one for America.”

The “New Silk Road” is one of the pillars of Chris’ current investment approach. For specific ways to invest in this sea change, click here.
Back in the U.S., lawmakers are looking to make it harder for traders to buy and sell the Middle East’s largest export. The Commodity Futures Trading Commission said late yesterday that it’s mulling limits on position sizes in commodity contracts – namely, for crude oil. No doubt the move is aimed directly at Wall Street, which played a significant role in driving oil to $145 this time last year… and back down to $33 in January.

“The CFTC is barking up the wrong tree,” opines Dan Denning, “if it wants to blame high energy prices entirely on speculators. One factor in oil’s rise is clearly investment demand from traders and institutions that foresee the decline of the U.S. dollar. Another factor subject to much debate is Peak Oil itself (that global oil production is peaking).

“For now, we’d say this is another sign of increasing government control of the markets. Some people think this is good and long overdue. Some people don’t. Either way, it looks like the world we’re headed to. And it looks to us like a sure sign that the U.S. government wants to have a lot more control of what you do with your money (capital controls). We reckon the oil trading will just move to London.”
Commodity traders continue their crude oil sell-off today. The front-month contract fell as low as $61 a barrel this morning. That’s almost a 14% fall just from this time last week.

And look for oil to be under even more pressure for the rest of the day. The Energy Department announced late this morning another uptick in oil and gas inventories.
“In the West, we are WAY too focused on our own oil demand,” says Byron King. Before we allow him to continue, a quick tip of the cap: Byron called the oil top almost to the day last month when he told you to take oil profits. Bravo.

“People look at U.S. inventory numbers, for example, and then think that the U.S. supply-demand situation ought to control oil prices. But that’s ancient history now.

“This year, we’ve encountered a new situation. Oil demand from the developing world is about equal to the demand from the developed world. That is, the developing world is using half the world’s daily oil output. And that developing-world demand is growing.

“China’s oil demand was up 12% in one year (May 2008-May 2009), during a time when the world’s economy fell off a cliff. It makes you wonder what the increase might have been if the world economy had not fallen off a cliff. And the volume of increase — 800,000 barrels per day — is TWICE the amount that passes daily through the Alaska Pipeline.

“These kinds of dramatic numbers out of China bolster the case that oil prices will continue to rise in the face of overall rising world demand.” Energy economist Michael Economides of the University of Houston expects to see $100 oil by the end of this year.

Will your portfolio benefit? Click here for Byron’s favorite oil plays.
Oil and energy stocks led the market down again yesterday. The major indexes fell about 2%.

Stocks today are drifting … we suspect any real moves will come after the closing bell when Alcoa kicks off the second-quarter earnings season. Of course, we’ll keep an eye on it for you.
The dollar, and subsequently gold, have been a pretty dull trade this week. Today we’re seeing just a bit more action, with the dollar index trending up to 80.6 and gold falling a few bucks, to $918 an ounce.
“The insane suggestion that we need more government stimulus,” writes a reader, “is similar to someone asking for more paper because the initial bonfire isn’t big enough to burn America to the ground fast enough. That’s the first insanity, but there’s more.

“Instead of cutting taxes on small businesses, where 90% of most profit-producing (hint: nongovernment) jobs are created, the feds plan on imposing a federal health care program that will cripple business’s ability to keep or add jobs. But that’s still not enough.

“There’s one more insanity to go: cap and tax. Here the perfect triple storm of economic disaster becomes complete. The feds will now add unnecessary energy taxes that will resonate throughout the economy, driving prices higher, profits lower and people out of work and ushering an era of perpetual penury for the vanishing middle and systemic lower classes. All this from the wiser and smarter-than-the-rest-of-us people in Washington, D.C., who started the dismantling of the greatest economic engine in history by deciding to get into the mortgage business and awarding homes to people who couldn’t afford them.

“I continue to reread the Declaration of Independence and see history repeating itself once again. Government tyranny is destroying our nation, and if we do not throw it off, it will crush us.”
“What if Barney Frank were Californian?” asks another reader, in reference to Moody’s recent downgrade of California’s credit rating.

“I haven’t seen it yet, but I imagine we will soon see politicians vilifying those Fitch rapscallions for self-serving, anti-American greed, arbitrarily lumping them into the same group with those evil capitalist ’speculators.’

“It wouldn’t be funny, but we’d still laugh and laugh.”

The 5: It would be humorous if the ratings agencies finally tasted some congressional wrath — not for their totally illogical/unethical ratings for financials over the last three years, but for their legitimate downgrades of U.S. municipalities. But you’re right… it wouldn’t be “funny ha-ha.” More like “laugh ’cause it’s easier than crying.”

Source: Audit the Fed, China’s New No. 1, Short Canada? and More!