The arrogance reminds me of George Bush after 9-11, who similarly believed that history owed him a gargantuan war in the tradition of FDR. And look how that arrogance led to disgrace and loss, as he unwittingly presided over the destruction of American prosperity while searching for bugbears abroad.

It just goes to show you that the presidency is something like a drug. It makes people lose all connection to reality. Part of the reality that Obama needs to recognize is that the New Deal was a calamity far worse than the initial market downturn that began it. He needs to stop basing his policies on dumbed-down civics texts versions of events and consider the economic logic.

With his rhetoric and policies, he has decided to demonize private enterprise, just as FDR did, as a way to present government as the great savior. Now, think about this. If there is a way out of the recession, it will have to be provided by private enterprise. It will come by new businesses, business expansions, entrepreneurship, new technology, and this will be the source of lasting jobs and prosperity.

You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools! These activities amount to capital consumption. They are not sources of investment. You can say that they are stupid tasks or wonderful tasks, but it is not a matter of ideology as to whether such public projects will make us all wealthier. They will not. They drain the sources of wealth from society. They represent a cost, not a blessing.

That was also true of Bush’s dumb stimulus program. He was only bailing out his friends at our expense. The effect was to give a little longer life to institutions that were failing anyway. It’s pathetic that the Republicans ever went along with it. You will notice that the scheme didn’t actually work.

Well, Obama is doing the same thing, though rewarding a different set of friends. This is not wealth production. This is wealth consumption. Do enough of this nonsense and you can destroy the livelihoods of an entire generation.

Americans are proud of their system of government, but consider what it has given us this time around. We had an outgoing president who thought it was his right to grab as much as he could while leaving. Now we have a new president who thinks that the election entitled him to grab as much as he can, right from the beginning. We get looted by the state coming and going. It all amounts to one massive war on prosperity and freedom.

Particularly culpable here are the official historians who have for generations heralded FDR as the great savior. It is a case study in how a civic lie can appear and fester for decades. The fact is that the New Deal did not work. It prolonged what might have been a troubling two-year downturn into a horrifying blow to world prosperity that ended up in a war that killed countless millions. It was one of the greatest acts of wreckage in world history.

And Obama is inspired by this? He wants to repeat it?

I’m not so cynical about human affairs that I believe that errors must be endlessly repeated. Obama can put a stop to his madness. He needs to know – someone must tell him frankly and openly – that his current path is going to lead not to recovery, but to an extension of suffering, and untold amounts of it.

The biggest threat facing the American economy right now is rarely even discussed. It is the massive buildup of paper bank reserves in the last quarter of 2008. This was Bush’s doing. He ordered the Fed to print like mad. Fortunately for us, the banks are still holding on to these reserves. When they start lending again, the result could be hyperinflation of Confederate-dollar proportions.

Hence the priority of the Obama administration should be to first do no evil, and second to find some means for withdrawing those reserves from the banking system before they wash through the economic structure and destroy the dollar. There is still time. He must act. Yes, that will lead to bank failures. That’s good! It will lead to business failures. That’s good and essential too.

There simply is no choice. If he acts now, he could find that recovery will come before his second term. This is precisely what happened with Reagan. He was fortunate to have advisers who insisted that he let the liquidation happen rather than attempt to fix the recession of 1981-82 with huge new government spending programs.

In any case, the hardest work to do here is intellectual. Obama’s head is filled with myths and lies, not only about FDR and the New Deal but also about the government’s power to repair the existing economic problems. With this model in his head, he can only do evil. This must change.

Nothing is inevitable. He can turn on a dime. The main message: do not repeat the actions of FDR, lest you destroy what is left of American liberty and prosperity.

Source: Obama’s Wealth Destruction

If Darda is right, and our research seems to suggest he is, so-called “cheap stocks” may not be all that cheap. For proof, we can turn to some plain-old high school math. P/E ratios are calculated by taking the price of a stock (the numerator, or the “P”) and dividing it by earnings per share (the denominator, or the “E”). The higher the denominator, the lower the P/E ratio and, by implication, the cheaper a stock appears.

However, if higher denominators can make stocks appear “cheap,” then the opposite is true, too, and that suggests that stock prices may have a lot farther to fall – despite the fact that they’ve already tumbled 40% or more.

Just how much farther is anybody’s guess, but the outlook is not good.

For instance, according to Forbes writer James Clash, “more than a year into the market downturn that threatened Morgan Stanley’s (MS) survival, the 17 analysts covering the company cut their 2009 mean earnings estimates by 36% to $3.63 per share.” Given Darda’s observations, there may be another 35% to go, which would put total expected earnings cuts at 71%.

That sounds harsh, but it may not be out of line. Thompson IBES reports that the analyst community as a whole has cut 2009 earnings expectations by only 7.5% for the Standard & Poor’s 500 Index. If they are to be believed, that means that the analyst community expects the average S&P 500 company will have to grow earnings by 15% next year to $91, according to Clash.

We don’t know about you, but a time when recessionary flags are flying, we have a hard time buying that (pun absolutely intended).

That’s why – at the risk of igniting an e-mail firestorm – we point out that analysts are paid to have opinions and a huge body of evidence suggests that they’re strongly encouraged to make them bullish. Not only is this a cozy relationship for investment bankers in general, but it has historically helped Wall Street generate huge commissions from an anxious retail investing public that is desperately seeking good news. This bullish predisposition may be especially true at a time when investors are not inclined to buy – and with good reason.

Compounding the problem is the fact that many analysts focused on specific industries or companies tend to become quite myopic. Far too many don’t think outside the box and, as a result, are all too frequently surprised when macro-level events come crashing in on their little world and down on the companies they follow.

Investors who rely heavily on Wall Street analyst estimates are, in effect, driving down the highway using only their rearview mirror. The results are all too predictable.

Among the more infamous examples of these errant estimates was the group of analysts who, back in 2001, continued to recommend Enron Corp. stock all the way into bankruptcy and congressional hearings, based solely on their own “optimism.” Only when Enron shares were trading at less than $1 did the majority of analysts change their recommendations to a “hold.”

When it comes to Wall Street, the fox clearly does guard the financial hen house, so to speak.

In the interest of fairness, we should mention that there were “accounting irregularities” in the Enron case. But that really shouldn’t let anybody off the hook.

What’s happening now – and why we’re leery that things may not be as they seem – is that overall business and economic conditions are deteriorating faster than management is willing to publicly acknowledge (although we’re now watching these same management teams slash work forces and shutter plants at a rate we haven’t seen in years). And since management “guidance” (the sarcasm you detect is intended) is what drives and shapes Wall Street earnings estimates, this is why things are probably going to get worse before they get better. The earnings figures used in most P/E calculations haven’t yet been reduced.

As for the ratings agencies such as Standard & Poor’s, Moody’s Investors Corp. (MCO) and A.M. Best Co., these, too, are problematic when it comes to the earnings and the ratings that help drive them. Supposedly independent, it’s been common knowledge for years on Wall Street that firms wanting higher ratings need only coddle the agencies using a combination of fees and information. Of course the agencies will deny this but history suggests that’s like the pot calling the kettle black.  Historically, for example, Moody’s, S&P and Fitch Ratings Inc., have each earned huge amounts of income from fees being paid by the issuers whose credit they’re supposedly rating. That’s changing, of course, but as the credit crisis has highlighted so aptly, probably not fast enough.

So what does work?

P/E ratios are a start. But that longstanding indicator should be regarded as a relative measure of potential price and performance rather than the do-all stock-screen selector so many investors utilize them as.

When we analyze a company, we prefer to see expanding sales, advancing earnings and plenty of cold hard free cash flow. There’s an old saying on Wall Street that “nobody ever went broke on accrual accounting,” but clearly plenty of companies have figured out lately that they can go broke without cash. The best example may well be Detroit’s Big Three, which are grappling with this seemingly new reality even though we, as individuals, deal with it every day. As my six-year old son recently stated: “No cash … no dinner.”

One other excellent indicator is a so-called “PEG” ratio (the P/E divided by the growth rate) of less than 1.0. While it’s more commonly viewed using 12 month trailing earnings, we find it much more stable when viewed against a historical stream of data that’s a decade or more in length. Not only does this help screen out the volatility associated with much shorter time periods, but we find that companies with low PEG ratios calculated in this manner seem represent good value over the longer term.

Especially when compared to a deflated “E” – earnings.

Source: Stocks May Not be Cheap Enough, Yet – And Here’s Why

According to published reports, 25 members of the U.S. Congress have reported on their financial disclosure forms that they own stock in – or have other capital interests in – the Big Three, based on data compiled from the Center for Responsive Politics, a Washington, D.C., research group that tracks money in U.S. politics. [Editor’s Note: Fox News senior information specialist James Farrell pulled the data displayed in the accompanying chart, which was created by Money Morning staffers].

Details of the Bailout

The Big Three initially sought $25 billion in loans – and were almost laughed out of Washington after the chief executive officers of the three companies traveled to Capitol Hill in their corporate jets. And while the new plans include such politically palatable moves as salary cuts for top-tier executives, the sale of cushy corporate jets and the elimination of moribund brands, the three embattled U.S. automakers are also now seeking government aid of as much as $34 billion – which is as much as $9 billion more than that initial $25 billion figure that had been on the table from the very beginning of the industry’s bid for bailout money.
Here’s the breakdown:

• General Motors, the largest domestic automaker, said late yesterday that it is seeking as much as $18 billion to survive into 2010 – and that it needs $4 billion of that cash just this month in order to dodge a bankruptcy filing. GM is seeking a loan of $12 billion. It’s also requesting an additional $6 billion line of credit to provide more cushion, should the severe current market downturn persist.
• Ford is asking for $9 billion. The Dearborn, Mich.-based carmaker hopes it won’t need to utilize the federal loans, and that it just wants to have access to the capital as a backstop. Ford is aiming to return to profitability by 2011.
• Chrysler confirmed its previous request for a $7 billion loan that its executives detailed during Congressional hearings two weeks ago. But it now says that it needs the loans by the end of the year if it’s to survive, because its projected year-end cash reserves of $2.5 billion won’t come close to covering its projected major first-quarter expenses of $11.6 billion, Dow Jones Newswires reported. The loans – coupled with Chrysler’s ongoing restructuring efforts – would keep that carmaker operating through the end of March. But it will need to access the capital before the end of this year.

Ethical Issues?

According to Fox News’ Farrell, judicial ethics rules “prevent any bankruptcy judge with holdings in a company from presiding over a bankruptcy case. Essentially deciding whether the company has to file seems to be a little different.”

Added Farrell: “If GM files for bankruptcy, the stock held by the politicians becomes essentially worthless overnight because they would be unsecured creditors at the absolute bottom of the bankruptcy food chain,” noting that, at a minimum, all shareholders “would get a significant haircut.”

So why is this an issue for Congress? Currently, the bailout of the U.S. auto industry bailout is actually being debated as a specific piece of new legislation. But whether it gets enacted as an amendment to the initial legislation that actually created the Troubled Asset Relief Program (TARP) is not yet clear.

But if it is new legislation, all of Congress will have to vote on it.

Already, U.S. Sen. Elizabeth Dole, R-N.C., who lost her re-election bid, and U.S. Rep. Michael Castle, R-Del., and a number of other Congressmen who own stakes sit on committees that conducted the first hearings on the auto industry bailout request prior to Thanksgiving, Fox News reported.
U.S. Rep. John Campbell, R-Calif., said he only will vote “present” on any automaker bailout, since, as the former owner of a car dealership, still owns land on which his former business sits. According to Rep. Campbell’s staff, Campbell doesn’t even want the appearance of a conflict of interest. But a report indicates Campbell voted “yes” on the financial bailout.

The information on the lawmakers’ holdings came from Congress’s 2007 financial disclosure forms, filed in May 2008, the most recent data available. Members of Congress are not required to report actual dollar sums. Instead, they are allowed to report dollar ranges.

Note: The wife of U.S. Rep. John Dingell is the executive director for public affairs for General Motors, and a descendant of the Fisher brothers, who founded the company that became General Motors 100 years ago, Fox News said.

While Dingell’s spouse, Deborah Dingell, does not lobby Congress or the administration on GM’s behalf, “she makes the case for the company, the auto industry and the state of Michigan in public and in private,” a recent New York Times story says.

Source: Congressional Members Hold Stakes in the “Big Three”