Now, I don’t care who makes what. That’s between bosses and their worker bees. But I do get a little peeved when Uncle Sam tries to tell some worker he can’t get paid per his contract.

Before you go shouting about how Washington saved Wall Street and therefore we, as taxpayers, get a say over pay, let me ask you this. Does your mortgage company tell you what color to paint little Johnnie’s room? Does your car loan provider tell you how fast to drive? Does your health insurance provider tell control your diet?

Didn’t think so.

If some congressman came barging in this office right now, demanding I slash my pay, his goons would have to hold me back as I try to kick the lunatic’s shins. But if the owner of the company came with the same request, I’d have no choice but to open my wallet (and possibly refresh my resume).

But that’s the way business works. The guys that own the joint make the decisions, not the banks and certainly not government. If the workers don’t like it, they leave. It’s supply and demand and nothing else.

As taxpayers, if we want to be angry about anything, we should be angry that our government used our money to cover somebody else’s dangerous bets.

But now that Goldman shareholders are asking the company’s top brass to reduce the size of the corporate bonus pool and pass the money onto shareholders, the company had better act. If not, the free markets are going to take charge.

Shareholders are going to hit the sell button. Prices will drop. Capital will be reduced. And Goldman executives will be in pinch once again.

That’s the way the business world really works, no matter what Nancy Pelosi and Barney Frank want.

When Obama was knocking on the door, Goldman said go away. But now that Mr. Common Shareholder is on the line, next Friday’s paychecks will have a few less zeroes.

Doesn’t that make you feel good? Capitalism is still alive.

***I have my eye on China and its quickly growing, yet fragile, economy.

Earlier today, I wrote a piece for TodaysFinancialNews.com that helps illustrate the potential of the Chinese markets. Instead of nervously awaiting every bit of economic data to hit the Street, savvy international investors are racking up big gains.

Here’s a bit of what I wrote:

You could say it is the tale of two economies. The best of times in Asia, the worst of times here in the States.

While domestic investors wonder when some rogue piece of data will kick out the wobbly legs supporting the top-heavy equities market, savvy Chinese investors are raking in gains from an economy soaring ahead a 7% per year clip.

Where would you rather have your money?

A look at two of today’s winning stocks will help you decide.

Zumiez is a sports-related retailer based in Everett, Washington. With 343 stores in over 30 states, its operations are as exposed to the nation’s economy as it gets. A look at the company’s third-quarter results prove how low our expectations have gotten.

Over the past three months, the $375 million company racked up profits of $5.1 million, down from last year’s corresponding figure of $6.8 million. The earnings-per-share figure of $0.17 beat expectations of $0.15, which helps explain why shares are up by over 10% so far today.

But that’s the only reason investors have to celebrate.

The company’s fourth-quarter expectations leave little room for joy. After booking revenues of $113 million last quarter, the company expects sales of just $122 million to $126 million over the next three months, which include the critical holiday shopping period. Last year’s Q4 was worth sales of $125.

Analysts, which were expecting a figure closer to $131 million, have plenty of reasons to feel disappointed with the news.

Of course, Zumiez is not the only retailer worried about a slower-than-expected fourth quarter. Keep reading here.

*** Finally, I cannot help but smile when I see the Associated Press reporting that gas prices have fallen by more than 15% so far this month. Here’s a hot tip for their reporters: It ain’t over yet!

As you probably know, over at TFN Strategic Trader, we’ve been all over this story. In fact, just yesterday we took profits on one of our four gas-related plays. But we didn’t dump it all. Instead, we sold half of our position, locking in gains of 400%.

Now we’re playing with the house’s money.

Want to know the move that led to these massive gains? Easy… read all about it here.

Well, it turns out my ultra-liberal, straight-ticket voting, French-guy marrying sister has a verifiable case of the pig flu. And guess who I had dinner with on Thursday night? You betcha, big sis.

There we have it: cause and effect.

Fortunately, my head case was short-lived. By the time my venison sausage and eggs were off the front burner on Saturday morning, I was back to my old self, almost knocking my O.J. off the table stomping my fist over a local political battle.

In Friday’s edition of notes, I quoted the following paragraph from Callum Robert’s book The Unnatural History of the Sea:

If any trawling ground be over-fished, the trawlers themselves will be the first persons to feel the evil effect of their own acts. Fish will become scarcer, and the produce of a day’s work will diminish until it is no longer remunerative. When this takes place (and it will take place long before the extinction of the fish) trawling in this locality will cease, and the fish will be undisturbed…

I used it to show that unregulated free markets often fail to self-police until it is too late.

More importantly, I promised to discuss how regulations are equal failures when it comes to the subject of protection from ignorant and greedy market forces.

I can list dozens of examples, but I will stick to the aquatic motif.

Recently, the federal government enacted an emergency ban on sea bass fishing here on the East Coast. From Cape Hatteras to all points north, the staple of the recreational fishing industry is off limits.

“Big whoop,” you say. “There’s other fish in the sea.”

That’s the problem. There are other fish in the sea, like tautog.

You see, NOAA tried to remedy the effect, not the cause.

The cause of the problem is there are too many greedy fishermen. But no government entity would ever want to anger somebody by telling them to put their $50k boat on blocks, so they simply close a specific fishery.

Meanwhile, the fleet, with its limitless supply of greed, moves a couple of miles and targets another species. Along the mid-Atlantic, the next species is tautog, a slow-growing habitat sensitive species.

Thanks to NOAA’s short-sightedness and must-act-now mentality, tautog are witnessing fishing pressure like never before. It is unsustainable, no matter how you measure it.

I have already given up hope on catching the species next year. Like I said on Friday, given the chance, fisherman will catch the very last of a species and then start asking, “now what?”

If you paid attention to last fall’s meltdown, you know much of the problem stemmed from the derivatives market.

The market for credit default swaps, mortgage-backed securities and a host of other credit-based derivatives went largely unregulated without notice until the weight of massive credit collapsed the shoulders of the market.

Now that hundreds of billions of dollars in wealth have disappeared, folks like Nancy Pelosi and Barney Frank want to regulate the market.

I say don’t bother wasting the ink.

The markets have already caught the last fish and will simply move onto something else. It always does.

Unless Congress bans all investing or the amounts we can stick in the market, bubbles are going to inflate and bubbles are going to pop.

The more the government tries to regulate the natural forces of the market, fear and greed, the bigger the bubbles will get and the harder they will fall.

Get used to it. It’s the way things work.

*** In Friday’s edition, I asked for comments on the notion of regulations. Wow. Ask and you shall receive!

Oddly enough, except for the guy that called me a commie (jokingly, of course), the response was quite bi-partisan. Overall, as was expected, the tone was overly anti-regulation.

By now, those of us that have paid any attention have learned regulations just won’t cut it. Now, if somebody would let Congress now.

Here’s a few of the most telling emails I received. Keep them coming.

“The problem is deeper than regulation as you know. Structurally it has been skewed and morphed into a large horse racing parlor where we place bets on the horses. Marx postulated that ‘man had become disassociated with his work’ and I believe the investors no longer invest, but  place bets on companies. They are no longer ‘investing in the company’. This was not what was intended when the word was ‘investing’.

“Another issue is the legal system we use has shifted from a ‘Constitutional’ based law to a ‘case’ based law. This helps make the system overly complex and contingent on the specific words and phrases used, and judges interpretation of this wording.

“Complexity leads to failure and we have ‘vested’ interests in keeping complex.  More regulation will not help.” –  Dave E.

“Get the wolves out of the sheep pen!

“Those who caused the meltdown should be fired or jailed, not running the institutions, agencies, and departments responsible for what we are facing for the next decade (or more). Legislators should not be permitted to legislate this problem away, they should be empowered only to assemble a committee of real experts to debate and recommend a course of action.

“Maybe in this way our representatives will be unable to do things like repeal Glass Steagall, enable Barney Frank to overextend loaning money to home buyers who can’t afford to pay rent, etc., etc.,etc.” — Bill S.

“The key to the dilemma is this.  Stop trying to find an ‘ism’ to subscribe to.  Life is a lot less crazy-making if a person isn’t trying to make sense of a situation by looking to ideologies such as liberalism or conservatism for explanation or guidance.” Kirk W.

“Unfettered free markets always devolve into feudalism. Excessive regulation always leads to collectivism. These are the two extremes in distribution of wealth. History has demonstrated that every society is on a watershed which tends to move slowly toward one or the other.” – Peter A.

More on the subject tomorrow. For now, keep the comments coming.

Can’t you hear Nancy Pelosi saying to some farm-belt democrat, “What’s it going to take to get you into this climate bill tonight?”

One of the easiest “outs” for a potential car buyer is to say, “I like it, but let me go home and talk to my wife.”

It is no different with shoddy legislation. “I like it,” say our fence-sitting lawmakers, “but let me go home and talk to my constituents.”

Knowing if a customer leaves the lot, he may never come back, House leaders are working overtime to ensure the latest nefarious piece of legislation to come off of Capitol Hill gets a vote before our elected officials head home for the Independence Day break.

If these guys go home, the deal is off the table, possibly for good. You can count on it.

That is why we will likely see a vote on Cap-and-Trade legislation on Friday. It is the oldest trick in the sales book; rush it through while the emotions are high and don’t give them time to think about it.

The tactic worked perfectly with the trillion-dollar stimulus plan. Remember how many legislators read the actual legislation? We all know how that deal is working out.

All we can do is hope our leaders learned from their mistakes.

The market has spoken

Studying Wall Street, the market appears to have already cast its vote. With most energy stocks well in positive territory so far today, investors are not worried about potential new emissions regulations.

The industry that best indicates the market’s sentiments is the coal industry. While Daryl Hannah is getting arrested outside a Massey Energy (NYSE:MEE) facility, the sector is moving ahead as if the threat of strong obstacles ahead is nowhere in sight.

Massey, Arch Coal (NYSE:ACI), Consol Energy (NYSE:CNX), and my favorite coal producer, James River (NASDAQ:JRCC) are all making strong gains today.

The action is the Street’s way of saying Washington won’t be driving House Bill 2454 off the lot anytime soon.

But the market is not always right.

If it is wrong, savvy traders will have a strong profit opportunity on their hands. If the coal industry suddenly forces great headwinds, today’s prices could look downright expensive.

It is a gutsy bet, but as the week progresses could be one worth taking.

Options players have the best shot at profits. Front-month put contracts will soar in value if the above-mentioned companies take a blow later in the week.

This legislation is moving far faster than most pundits would have imagined just last week. That means the market has had very little time to study the situation and digest the estimates. It also means there is plenty of room for increased volatility.

When the markets are unprepared, just about anything can happen.

That is exactly the way Nancy Pelosi wants it.

Source: Right Out of the Used-Car Sales Book

Earlier this week, The New York Times posted a recipe for something called “the Bacon Explosion.”

This “massive torpedo-shaped amalgamation,” as the Old Gray Lady refers to it, consists of “two pounds of bacon woven through and around two pounds of sausage and slathered in barbecue sauce.”

I think I felt my arteries constrict just typing that sentence. If you want to see a close-up of the Bacon Explosion in all its coronary-inducing glory, check out the NYT piece here.

Now, two pounds of slathered pork might be a big deal in Kansas City (where the Bacon Explosion finds its roots). But in Washington D.C., that’s kid stuff.

That Ain’t Nuthin’

We saw a much bigger – and far more nauseating – “Bacon Explosion” this week when the new 647-page, $825 billion stimulus bill passed the House.

To give you a “taste” of what this pork-laden monstrosity contains, check out this excerpt from Speaker of the House Nancy Pelosi’s appearance on CBS.

CBS: Can you honestly say that every program in this plan is solely to stimulate the economy?

Pelosi: (nods) Yes I will.

CBS: How does $335 million in STD [sexually transmitted disease] prevention stimulate the economy?

Pelosi: I’ll tell you how – there is a, uh… I’m a big believer in prevention. And we have, uh – there’s a, uh, part of the bill on the health side of it that is about prevention. It is about, uh, it being less expensive to the states to do these prevention measures…

Okey dokey, Ms. Pelosi. I guess she took the word “stimulate” to mean something else there… hoping folks will loosen up and have a little more fun perhaps?

(Say, could this be the Democrat version of W’s exhortation to “go out and shop” after 9/11?)

A Real Disappointment

Let me put the snark aside and be serious for a second here: This bill is a real disappointment.

A number of commentators – including many of my fellow scribes in the newsletter-publishing world – were ready to judge President Obama a failure even before he took office. I was not one of those.

If you had to peg me somewhere on the political spectrum, I would call myself a pragmatic libertarian with a strong aversion to sound bites. It’s my experience that pretty much every political ideology – heck, maybe every ideology period – delves into unworkable extremes when pushed too far into “true believer” territory.

Left-wing, right-wing, socialist, libertarian, Chicago school, Keynesian school, you name it. (When it comes to economics, I’m partial to the Austrian school myself… but even there I take things with a grain of salt.) There are many flavors of kool-aid, and anyone with a fill-in-the-blank answer for how to fix the world’s problems in three easy steps is probably drinking some. As H.L. Mencken once said: “There is always an easy solution to every human problem – neat, plausible, and wrong.”

So, with that in mind, I was willing to give President Obama some benefit of the doubt.

In the course of his campaign, Obama showed a high degree of technical proficiency (important in a leader, as we learned disastrously via Bush’s lack of it)… he showed that he could run a tight ship… and of course the guy proved himself to be an excellent communicator, especially under pressure.

For all that, would the new guy be just like all the rest? Would the “change” prove to nothing but hot air?

Certainly possible, I thought to myself. Professional cynic that I am, though, I still found room to be open-minded.

After all, America really does need hundreds of billions to trillions worth of infrastructure upgrades… we really could benefit from a jump-start of the right alternative energy solutions as a bulwark against peak oil… Washington really could benefit from a new emphasis on intelligence and pragmatic real-world experience in policy making as opposed to blatant cronyism… and so on.

Snow Job

Sad to say, my small helping of “hope” has proven to be short-lived – like an asphalt daisy in the path of a steamroller.

Based on the status quo handling of the banking crisis thus far, the overwhelming “business as usual” nature of the stimulus plan, and the clear triumph of the old-school Hacks on the Hill, it looks like the Obama team is getting snowed. Bigtime.

In a scathing critique titled “A 40-Year Wish List,” the Wall Street Journal dissects the pork-laden plan:

We’ve looked it over, and even we can’t quite believe it. There’s $1 billion for Amtrak, the federal railroad that hasn’t turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There’s even $650 million on top of the billions already doled out to pay for digital TV conversion coupons.

In selling the plan, President Obama has said this bill will make “dramatic investments to revive our flagging economy.” Well, you be the judge. Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.

The WSJ also offers a handy summary of the proposed “transfer payment increases:”

Not to put too fine a point on it, this stinks.

And “less than 5 percent of the total allocated to fixing bridges or other highway projects?” That doesn’t just stink, it sucks. It sucks like an Electrolux.

I don’t fault the Democrats for being civic-minded. As mentioned with John Thain and the “greedy banker” meme, that would be like faulting a leopard for having spots.

But what do these transfer payment increases actually have to do with stimulus? What could this course of action possibly be construed as other than the fulfillment of a “wish list,” as the WSJ points out? Where are the long-term positive investment impacts from creating much-needed jobs… getting small businesses back on their feet… upgrading the creaking backbone of our nation’s much-frayed transport networks and fossilized energy systems?

Change We Can’t Believe In

Call me naïve for half-expecting good things I suppose.

For those who aren’t yet ready to write Obama off as “just another politician,” I further suppose there’s room for him to turn this snow job around.

Maybe the new administration will be like Microsoft – getting the early versions clunky and wrong, but then pounding away with unlimited time and effort until they get it right.

My fear, though, is that even if team Obama gets their act together down the road – cracking down on the brainless hacks and setting the financial system on a better track – a short-term evaporation of the high expectations that peaked on inauguration day could cause a trap door to open beneath the current market rally. (If it hasn’t already done so, that is.)

Source: Say It Ain’t So, Mr. President

The bailout package bill for General Motors Corp. (GM), Ford Motor Co. (F) or Chrysler LLC was passed by House lawmakers by a vote of 231-170. Democrats said they reached agreement with the White House on the details of the plan yesterday.

“If we do nothing, we take the risk that, sometime soon, there’ll be no American automobile industry,” House Majority Leader Steny Hoyer, D-Md., told MarketWatch.com.

The $14 billion is a long way from the $34 billion now being sought by the Big Three. And that $34 billion was well in excess of the $25 billion in loans the carmakers said they would need. Of the three companies, GM and Chrysler are in the greatest need of cash. Ford says it is seeking a long-term line of credit and doesn’t need money in the short term.

The House bill, if enacted, would do several things. It would:

• Grant the U.S. government warrants for nonvoting stock equal to 20% of the value of the loan it makes to each company.
• Create a White House-chosen “car czar,” an appointee empowered to hold the companies accountable for developing long-term viability plans. The czar would be able to require immediate repayment of the loans if the companies don’t make adequate progress by Feb. 15.
• Require GM, Ford and Chrysler to submit “final” restructuring plans by March 31.
• End such financial standard fare as dividends for shareholders and “golden parachutes” and bonuses for executives – in the interest of conserving cash.

House Speaker Nancy Pelosi, D-Calif., said the bill is “tough love” for the industry but offers the Big Three “a chance to get back on track.”

The Bush Administration said yesterday that the “car czar” would have the power to revoke the loans and develop a new plan – including one that would have the Big Three seek Chapter 11 bankruptcy protection if the carmakers don’t make progress toward long-term viability by March 31.

“If there’s not a plan that makes these firms viable, the government gets its money back,” Joel Kaplan, deputy White House chief of staff for policy, told reporters.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., unveiled a bill similar to the House measure late yesterday. A vote in the Senate may not come until the weekend, Senate Majority Leader Harry Reid, D-Nev., said yesterday. Congress has been working on this for several weeks.

Shares of GM closed at $4.60 each yesterday, down 2%. Ford shares advanced 2 cents, or 0.62%, to close at $3.25. Chrysler is privately held, with private-equity firm Cerberus Capital Management LP holding a controlling interest. Before Cerebrus bought it, Chrysler had spent years as part of Germany’s Daimler AG (DAI).

Throughout the day yesterday, House and Senate Republicans repeatedly said that a Big Three bailout wouldn’t lead to a long-term viability or competitiveness for GM, Ford and Chrysler. In fact, U.S. Sen. Richard Shelby, R-Ala., who is the ranking GOP player on the Senate Banking Committee, vowed to block the legislation with a filibuster.

“Unless Chrysler, Ford and General Motors become lean and innovative and competitive in the marketplace, this is only delaying their funeral,” Shelby told journalists yesterday.

Of course, as MarketWatch reported, Shelby’s home state of Alabama has provided millions of dollars in subsidies to attract Japan’s Honda Motor Co. Ltd. (ADR: HMC), South Korea’s Hyundai Motor Co. (PINK: HYMLF) and the Mercedes-Benz unit of Germany’s Daimler AG, to build plants that provided 48,457 jobs in 2007. The Toyota Motor Corp. (ADR: TM) factory in Huntsville, Ala., makes motors for SUVs and pickup trucks.

The Wall Street Journal reported that a breakthrough in the negotiations between the White House and Democrats came after Democrats agreed to scrap language that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states.

Reid told MarketWatch that that he needs 60 votes to get the plan through the Senate. A key Democrat, Finance Committee Chairman Sen. Max Baucus, D-Mon., actually came out against the bill, since it contains a tax provision he said that he opposes. Democrats control the Senate by a narrow 50-49 majority.

Dodd said the Senate bill is “a far cry from a blank check to the industry.”

Said Dodd: “The legislation requires these companies to make painful, fundamental changes if they are going to be competitive internationally and viable in the long term.”

Source: Auto Bailout Passes House, Faces Hostile Senate

Once again, politics are getting in the way of running the nation’s businesses. I will give you one guess which party is behind the shenanigans. Yep, it is Nancy Pelosi and her business-hating Democrats.

Apparently, their only political goal is to not allow anybody to get rich until the nation is free from poverty, a trip to the doctor is free, and every person (whether they are willing to work or not) makes the same middle-class income.

As long as Pelosi has control of the big chair in the House, you might as well hang up your goals of becoming a rich businessman. In her eyes, profits are something you can only get if you steal from your neighbor.

Colombia has poor people too

By now, you must have heard of President Bush’s goal of lowering trade barriers with Colombia. With the possibility of being a key ally in Latin America, his administration wants to ensure free trade and continued economic cooperation.

Rational thinkers see there are very few ways, if any, this deal could hurt Americans. But Pelosi and her left-leaning posse are not known for their rational thinking.

Nope, they see this as a political opportunity to stand up for the little guy. You know the guy I am talking about. He has no education, four kids, does not like the way work makes him feel, and has a killer HDTV setup. Until the American taxpayer buys him a pain-free life (and he is locked in as a Democratic voter), international policy is on hold.

Pelosi says she opposes the free-trade deal with Colombia because of the way the country treats its union leaders. They tend to get killed.

I can understand why she feels that is a bad action to support. But has anybody wondered if those labor groups would have to fight less if we let natural economic laws run their course? If free trade were allowed with Colombia, those union leaders would not have time to fight. They would be too busy working.

Vote the “right” way

Let’s face it. In November, we have a very big decision to make. To the right, we could go with a pro-business, free-market protecting leader. And to the left, we could go with a pro-citizen, big-government kind of leader.

For decades, maybe even centuries, most economists have understood that money is best (most efficiently) spent by companies. After all, they have limited funds and a bottom line to protect. Governments, on the other hand, have the ability to continuously raise their revenues and have no profit margins to worry about. So why would they care about efficiency? It isn’t their money.

That is exactly why the Government Accountability Office just announced more than 40% of all federal credit card spending during a 15-month investigation period was unauthorized of fraudulent. Your hard-earned tax dollars were spent on things like custom suits, massages (no comments Mr. Spitzer), and even lingerie.

In all, it adds up to $14 billion of our money flushed down a golden toilet.

This figure tells us that nearly 40% of our tax dollars are being wasted. How many houses would not be in foreclosure, or how many people would be able to pay their health insurance bills, or how many kids could go to college if that money stayed in the hands of the folks that earned it?

If we want the American economy to rebound and be successful, we cannot raise more trade barriers. We need to eliminate them and let natural economic laws work. Even more importantly, we need to limit the size of our government and keep the nation’s money in the hands that earned it.

So Ms. Pelosi, I hope you kept the receipts for that lingerie. We want our money back.