Enough alliteration. Let’s talk business.

While I will never complain about a day that sends almost every position in our portfolio into the green, there are way too many red flags in the air for me to celebrate today.

Sure, the TFN Strategic Trader portfolio currently boasts six plays worth double-digit gains (47%, 44%, 50%, 10%, 29%… and 200%), but it’s a contrarian mix if I’ve ever seen one.

In other words, if our current portfolio is on fire (and it is), something is not right with the nation’s economy.

As with most things American, all we have to do is turn to The Donald for an answer.

Earlier today, Mr. Trump phoned his friends at CNBC. He had a bone to pick and he knew his the staff of “financial experts” – who gladly fill in when a Today Show gab is missing – would lend an ear.

Trump gets a lot of press time, but most of us agree the only thing he’s an expert at is bankruptcy proceedings. Taking his financial advice is like getting a clipping from a blind barber – another of Trump’s apparent flaws.

Sometime during the past few weeks, a bank must have looked at Trump’s credit record and said, “No way, Jose,” because the king of narcissism is angry at the banking industry.

He tells his audience that banks must be forced to lend more of that taxpayer cash they are sitting on. Trump believes the economy will never recover unless the banking sector loosens its standards and starts writing checks again.

Um, Mr. Trump, isn’t that what got us into this mess? Guys like you taking massive loans without a way to pay and then calling a bankruptcy lawyer.

Really, what could go wrong if we follow Trump’s advice and allow the government to force banks to lend?

Sure, most of those shaky loans will never get paid back and we’d be in a worse financial fiasco in eighteen months, but boy would it feel good now.

And there lies your problem. In a world where reality-show wannabes make front page news for embarrassing the White House and a golf star’s car accident gets more press time than Iran’s recent nuclear moves, it is all about feeling good now.

Who cares what tomorrow’s consequences will be? Somebody will bail us out. We feel good now.

It’s sad to say, but that’s the same logic driving the stock market these days.

Sure, the dollar is eroding fast, unemployment is above 10%, the national debt is off the charts, taxes are on the rise, and corporate earnings are stagnant, but dang it, it feels good to pretend it will be a “V-shaped” economy.

Anybody with half a financial brain knows it will all crash down someday, but too many of them just hope and pray that somebody will step in and fix it.

I know from the comments I received about my recent gold commentary, many Notes readily understand what’s to come. That’s why they are rushing to the “safety” of gold.

But let me warn you once again; gold’s recent run has as much to do with the nation’s feel-good-now mentality as the Salahis’ sudden rise to fame.

The collateral on both sides will not be pretty.

My advice? Go short. If it works for TFN Strategic Trader members, it will work for you.

*** With all of this talk about healthcare reform, Afghani strategy, White House crashers and gold’s 30% run, one industry has been greatly overlooked. And, once again, the action comes thanks to the folks in Washington.

The ethanol industry – which was recently plagued by bankruptcies and production shutdowns – is soaring these days as it awaits word from the EPA that ethanol allowances in gasoline could be raised from 10% to 15%.

Here’s a bit of what I told TFN readers earlier today:

“The ethanol industry is having yet another good day. After near political abandonment, the nation’s biofuel sector reeled from the pain of a wave of bankruptcy filings earlier this year.

“But now, thanks to some more political maneuvering the industry is once again finding itself on the leader board.

“Should you get used to it?

“Before we answer that question, let’s look at the catalyst for the action. Today was supposed to be the EPA’s deadline for a decision that would allow gasoline blends to contain up to 15% ethanol versus the 10% cap now in place.

“But word this morning says the EPA is not ready to make its decision quite yet. It now wants to make the decision by sometime next summer. Judging by the day’s pricing action, the Street views this as a positive sign.

“Companies across the industry are eager to push more of their product into the nation’s fuel source.

“One of the big winners today is Pacific Ethanol, the once highly touted California-based producer with subsidiaries in and out of bankruptcy court over the past year.

“Word that more ethanol production may be around the corner was enough for the company to pull the mothballs out of its Burley, Idaho production facility by January. The company owns a total of four production facilities, only one of which is currently operating.

“If the word from the EPA is positive, expect shares to continue to climb. As I write, traders are getting in (and out) at $0.87, up 56% on the day.

“Two more companies worth mentioning are…” To find out, keep reading here.

*** Finally, don’t forget about the question of the week: Is it a coincidence the weekly political roundtable programs air at the same time churches offer their weekly services?

We’ll discuss the various views on Friday.

Isn’t that a scary thought?

Just a couple of days after Obama touched down in Washington, China makes a very American decree. It’s telling its banks it had better shore up their capital situations or face strong sanctions from the government.

They say imitation is the sincerest form of flattery. America did it first, now the communists are following.

In case you missed the news over the past year or so, China’s economy is flat-out soaring ahead. While no figure that disseminates from Beijing is ever trusted, most analysts believe the country’s GDP is growing by a rate of 7% or so. Some even say it has eclipsed the 10% mark.

Just like here in the States, very little of that growth is organic. China’s government is just as fond of manipulating natural market forces as our friends inside the beltway.

And, of course, anytime the government gets involved, some unnatural and unexpected economic reverberations will be felt.

Just as their American brethren did over the past decade, China’s banks are taking advantage of a fixed currency and an optimal lending environment by sending all the money they can dig from the couch cushions into the streets of China.

As the economy grows, the leverage on their books multiplies. Like we learned just 13 months ago, the situation will eventually collapse under its own weight.

That’s why Beijing has stepped in and told the banks that they had better save some money for their backup coffers… or else.

This is bad, bad news for a country surviving on borrowed money (no, not us… this time). China’s economy has been artificially inflated by the government’s cash infusions. But now the leadership is starting to pull back, realizing enough is enough.

Continuing with Friday’s lead, this proves natural market forces are still alive and well. Better yet, it proves China is in for some bumpy traveling.

If you would have asked me early last week about China’s economic health, I would have told you I like what I see. But then something odd happened.

Obama visited. And it’s been downhill ever since.

*** I love it when the markets make a mistake. After some positive economic data from the consumer front this morning, the equities market put in quite a showing today. In fact, even the ultra-bearish natural gas sector followed the crowd of bulls today.

It has created another fantastic buying opportunity. Natural gas prices climbed by less than one percent, but much of the sector is up by two or even three times that figure. Investors mistakenly got caught up in the rally.

Over the next few days they are going to pay for it.

Late last week, we locked in gains of 400% thanks to the natural gas market’s recent selloff. Thanks to today’s action, investors that make their move now have yet another shot at triple-digit gains.

To find out how, read my updated report.

This is going to be a fun week for the energy markets.

*** Let’s face it, the dollar is in trouble. But so is the sun at the center of our solar system. The big question is which will implode first. Now that the dollar has slowed its decline, the race may be tighter than you think.

The dollar will eventually be tossed aside, but will it happen in the next million years?

Here’s a bit of what I told Contrarian Profit readers this afternoon:

“Is the drop in the dollar worth watching? Just like the sun will eventually shine its last ray of light, the mighty dollar will someday buy its last barrel of oil or its final container of Chinese imports.

“We all know it is going to happen, so why bother discussing it. Right?

“There is no doubt the world’s currency of choice has more pressure stacked against it than ever before. But even with $12 trillion in debt and nearly a trillion of annual interest payments due within the next decade, the greenback is still stronger than it was just sixteen months ago.

“While so many of us are betting against the dollar and calling for its demise, plenty more investors are using it as a security net, buying American treasuries to protect themselves in case the bottom really falls out.

“With the sun someday going to fade, I could sit in my basement and wait for the big day to come, or I could live my life without worry.

“It’s the same thing with the dollar. We could bet against the greenback and profit as it drops, or we could forget about the minimal return potential and keep our eyes looking forward, where the real money is at.

“Here’s the scoop. The dollar is likely to fade, at most, six percent below today’s value against the Euro. That’s major erosion for such a massively distributed currency, but six percent over a few years doesn’t stack up to a hill of beans in the grand scheme of things.

“I can list a couple of dozen stocks that are up by twice that figure today alone.

“No doubt, you should pay attention to the dollar, as a six-percent decay in the value of the world’s most important currency will change all sorts of valuations. But don’t invest in the cause, invest in the effect.” Keep reading here.

The dollar is going to fall, but you and I may not live long enough to get rich off the move. The smart money is looking somewhere else. I say we follow.

According to good old Wikipedia, confirmation bias is “an irrational tendency to search for, interpret or remember information in a way that confirms one’s preconceptions or working hypotheses.” Put simply, it means you look for information that agrees with your own perspective.

In our case, we guess that means ignoring idiots like Paul Krugman, who tells us that we can spend our way out of a depression and the do-gooders in the Obama administration, who tell us that everything will be okay and that we’re about to witness a miraculous V-shape recovery. (Just like when President Hoover told Americans in 1932 that “prosperity was just around the corner.”)

And we guess it means paying attention to those who called this crisis ahead of time… guys like Will’s father, Bill, Porter Stansberry, Peter Schiff, Nouriel Roubini, Marc Faber, Doug Casey, James Dale Davidson and the rest of the “doom and gloomers” the mainstream ridiculed during the boom years.

Do we seek out information that agrees with our perspective? Of course we do!  And we’re not the only ones. Is this healthy behavior? Perhaps not. But the important thing is we’re aware of it... and we sincerely hope you are, too.

See, here at Notes our mission has always been to give you the other side of the economic story. The real danger, in our humble opinion, of succumbing to confirmation bias is to only listen to what the mainstream has to say. Because if you fully swallow what the mainstream has to say you’re going to get killed in the markets.

That doesn’t mean the underground always gets it right. It doesn’t. But it gives you a fighting chance, at least. Don’t forget, at the height of the boom years, you didn’t hear the talking heads on CNBC talking about the coming depression… or the Fed for that matter… or the geniuses in President Bush’s economic team.

To have had any ideas what was coming, you would have had to tune into a very different stream of opinion. You would have had to read Will’s father’s The Daily Reckoning, for instance, where Bill told readers of his “Trade of the Decade” (to sell stocks and buy gold). If you’d done so, you’d be sitting pretty right now.

But it is important to be aware of the tendency for self-confirmation, whatever you’re reading or whoever you’re getting your information from. Here are five things you can do to overcome confirmation bias (hat tip, The Financial Philosopher):

1. You can begin by attempting to give equal time to information sources with which you agree as to those with which you disagree. No mind has ever grown without stretching beyond its comfort zone. Is it not the blunt stone that sharpens the blade?

2. Also beware of the mainstream media because it tends to attach itself to the bias of the herd. Have you noticed a recent shift in the media’s overall sentiment from bearish to bullish? The popular view seems to be shifting toward stating “The Recession Is Over.” This is the same media that said, less than one year ago, that the US Economy was headed for “The Next Great Depression.”

3. When you find yourself overwhelmed with reasons to make a decision to do something, force yourself to come up with reasons why you should not do it (or remember the third alternative – deferring the decision to a later time).

4. Simply be aware of what information you consume. If information were food, would your “diet” be healthy? Is it balanced?

5. Don’t be mentally lazy. Complacency is a breeding ground for other potentially damaging behaviors, such as greed and hubris.

The former NASDAQ chairman’s December arrest – with collapsing U.S. and overseas stock markets as a backdrop – kicked up a firestorm that has forced investors to take a much-closer look at who was managing their investments. Scores of investors have lost their life savings, retirees found their nest eggs gone and countless charities discovered that they were essentially out of business; the cash that they once handed out to worthy causes had disappeared.

The scandal whipped up a flurry of investigations, and within three months, more than half a dozen others accused scammers found themselves in handcuffs, as guests of the state.

Through it all, the victims of Madoff and these other schemers have repeatedly come to one realization: This didn’t have to happen – not even to the scores of individual investors who were among the hardest-hit victims.

The best way to combat financial scams is to understand how the scammers think and to be aware of the schemes taking place.

So let’s take a look.

Scams Go Global

Scammers typically prey on the greedy, desperate and gullible. And right now, as job losses mount, retirement funds drain and the stock market falls to levels not seen in 12 years, many consumers truly are desperate right now, making them perfect targets for financial scams.

Claire Rosenzweig, president and CEO of the Better Business Bureau of Metropolitan New York told Money Morning that her NYC metro office received 60,000 complaints last year alone – many of them involving mail-order schemes or check-cashing scams.

Scams were already a worldwide problem, but have proliferated as the global financial crisis has spread, says Peter Kell, chairman of the Australasian Consumer Fraud Taskforce and deputy chairman of the Australian Competition and Consumer Commission (ACCC).  In fact, the first week of this month was named “National Consumer Fraud Week” in Australia.

“One in 20 Australians will fall victim to a scam this year, costing the community a total of more than a billion dollars,” Kell said. “Over 12 months, the ACCC has seen an alarming 60% increase in the number of complaints and inquires about scams, with a 67% increase in people reporting money lost.”

Globalization has caused the number of financial scams from overseas to multiply at a stunning rate, the U.S. State Department said in a 2007 report. And the financial gambits have literally run the gamut, ranging from Internet dating to “overpayments” for purchased products – and including such long-running standbys as inheritances from long-lost relatives, bogus fees for work permits and even money-laundering schemes.

Advances in technology – especially the Internet, and such developments as online auctions – have enabled new types of scams. Money lost in Internet crimes topped $240 million in 2007 – a $40 million increase over 2006, and a new high – the FBI and the National White Collar Crime Center reported, citing the most recent figures available.

The Most Prominent Scams Out There

By far, the No. 1 type of investor scam is the Ponzi scheme, Rosenzweig said. But scammers are running a plethora of scams out there right now. In fact, the Better Business Bureau has compiled a comprehensive list of common scams consumers need to watch out for, including:

• Ponzi or Pyramid Schemes: A promoter usually makes an unrealistic promise of future returns to get investors on board. Using their money, the promoter pays off earlier investors. The illusion continues so long as the promoter can keep bringing new investors on board. The lesson: If it sounds too good to be true, it probably is.

• Boiler Rooms: Scammers call from telephone banks (”boiler rooms”) to pitch worthless investments such as penny stocks, which are cheap to buy and that can be manipulated using the cash flows the boiler-room players are able to raise from their victims. The Lesson: Beware of cold callers.

• “Pump-and-Dump” Penny Stocks: The scammer buys up a mass of penny stocks, and then launches an all-out promoting campaign, pitching the stock to investors over the phone, Internet, and e-mail. As investors pour in and the stock price moves up, the scammer dumps his shares and collects his profit. Those sales deflate the share price, often leaving the victims with shares in a worthless shell company. (For more information, Money Morning recently published a guide to penny stock pitfalls and profits).  The Lesson: See Boiler Rooms.

• Promissory Notes: Promissory notes are investments that offer above-market, fixed returns. Some are legitimate, and some are fraudulent and worthless. The Lesson: Do your homework before you buy.

• Fraudulent Bank or Currency Investments: Investors are promised very high returns – typically well above the prevailing market returns – for investing in fraudulent bank or currency-related investments. The BBB notes that scammers used to call this a “prime bank” investment and often mentioned foreign banks that actually might not even exist. But recently, banks aren’t mentioned as often; scammers instead float the term “risk-free guaranteed high yield investment” or some variation. The Lesson: Don’t invest in something you don’t understand.

• Fake Promises of Initial Public Offerings (IPOs): With the economy sinking, IPOs are very rare. So if the chance to invest in one is offered, even the smallest bit of research will help verify if the company in question actually exists and, if it does, whether there are really plans for it to go public. The Lesson: A little “due diligence” goes a long way.

• “IRA-Approved or IRS-Approved” Investments: Bottom line, there is no such thing as IRA-approved or Internal Revenue Service (IRS)-approved investments, so avoid any and all. The Lesson: Make the phone call. If an investment is supposedly “IRS-Approved,” it would take but one phone call to the IRS (which has a “scams” section on its Web site) to discover that this is a product that doesn’t really exist.

• Investments in Fraudulent Businesses: The BBB notes these offers often involve work-at-home businesses, or the sale of vending machines, pay phones, or ATMs.

Protecting Yourself From Scams

The most at danger are new investors and seniors. Inexperienced investors are usually the most eager and open to taking risks, and scammers use that to their advantage. Many of their older counterparts have seen their life savings eviscerated and are desperately searching for an investment that will help recoup their losses.

While there are many different scams out there, nearly all can be avoided by following Rosenzweig’s advice: “If it seems too good to be true, it could be a scam.”

That’s the guiding principal of many of the following tips from the Securities and Exchange Commission (SEC), the Better Business Bureau (BBB) and the Internal Revenue Service (IRS) to avoid being the victim of an investment scam.

From the SEC and IRS:

• Use the SEC’s EDGAR Database: The SEC’s EDGAR Database is a free service where anyone can access and download audited financial statements from all U.S. companies with more than 500 investors and $10 million in net assets.

• Ask Questions: The SEC also compiled a list of 10 questions to ask both yourself and whoever is seeking your money under the guise of investment purposes. The IRS has posted an entire page of scam gambits, questions to ask, warning signals to watch for, ways to report scams, and even additional resources to check out. It’s definitely worth a look.

• Get Background on the Seller: The Financial Industry Regulatory Authority (FINRA) set up a Web site and hotline (1-800-289-9999) to check the disciplinary history of a broker or firm.

From Investment U:

Investment U, an investment newsletter that reaches hundreds of thousands of readers daily, offers “Six Simple Steps to Protect Yourself From Financial Fraud.” Consider them part of a “sniff test” to tell if something is legitimate.

• Sounds Familiar: Does it look like anything you’ve ever heard of or seen before? It’s amazing how many versions of pyramid schemes or Nigerian scams there are out there.

• Trusted Sources: Does this investment come from a trusted source? This is the hardest hurdle for most to get by. Bernie Madoff seemed to have an impeccable resume and background, and that’s why his fraud was able to remain undetected for so long (even after some folks warned that something wasn’t quite right). Do your own reference checks.

• The Pudding: As the old adage says, “the proof is in the pudding.” If you ask for performance results or documentation to back up claims, they should easily provide the information. Information should be available on a quarterly basis. Any protests or delays should serve as a red flag.

• Information Demands: If someone were to walk up to you and ask for your credit card number, you’d say no. But you’d be surprised to find out the number of people who give up sensitive information – like bank account numbers, Social Security numbers and all ors of other personal data – for an “opportunity” to collect untold millions. When someone requires something like this without a reasonable expectation, view it as a warning sign.

• Your Uncle: Imagine you had a skeptical uncle (some of us don’t have to imagine it). If you presented the opportunity to him, what would his response be? If your uncle doesn’t approve, then neither should you.

• Embarrassment: Would you have any qualms about sharing this investment with your friends and family? What about if it went badly and you suffered a major loss? Would you be embarrassed to tell others what you’d done? If that’s the case, that should tell you something.

From the Better Business Bureau:

• Buy only from licensed or credentialed financial professionals. Avoid buying investments from people who aren’t licensed to sell stocks, bonds and mutual funds.

• Review your account statements: Make sure the name of the company cashing your check matches the name on your statements. If something seems incorrect, ask questions immediately. If questions aren’t answered and complaints aren’t addressed, notify authorities.

• Make sure you are buying registered investment products: Most legitimate products have to be registered with the SEC and with the state in which they are sold. Check these both out before you buy.

• Ignore spam e-mail: E-mail filters are already sending many of these spurious “investment opportunities” to your junk/spam folder. But that doesn’t mean the ones that reach your inbox are legit. It’s best to just avoid all of these, as many link to fake Web sites and blogs set up specifically to provide false information – and to separate you from your hard-earned savings.

• Never make an investment payable to the salesperson: Always make your payment to the investment company.

Rosenzweig, the Metro New York BBB president, says “I don’t care what age you are, educate yourself about investments,” says the BBB’s Rosenzweig. “Don’t be afraid of it. I won’t say it’s easy, but there’s enough info out there that’s written for you and me – easy to digest and puts you in the position of control. Why not make good decisions?”

And if you’ve seen or been the victim of an investment scam, click here to learn how to report it to the SEC and local authorities.

Source: As Financial Scams Go Global, Here’s How to Avoid Being Stung

Editors Note: This is the sixth installment of a new series that is exploring ways for investors to recover from the U.S. financial crisis.