And in the latest addition to his Obamanomics plan, the president-elect has also proposed a massive stimulus package of as much as $775 billion over the next two years as part of a historic infusion that’s aimed at overhauling America’s infrastructure, schools, broadband networks and energy use, a Congressional source told MarketWatch.com yesterday.

But making the Schapiro nomination official was considered a key move. In its Thursday morning issue, Money Morning reported that Schapiro had been chosen and that an official announcement would be made later in the day. And that’s just what happened.

Obama named Schapiro as his choice for the top SEC post and nominated former Treasury undersecretary Gary Gensler to run the Commodity Futures Trading Commission (CFTC), which regulates trading in the commodities markets, and called for an overhaul of the U.S. financial-regulatory system in the wake of the credit and economic crisis.

“My priority is to create a regulatory structure that stops future problems in the financial system,” Obama said at the press conference where he announced the identities of the two latest nominees for his team. “Financial regulatory reform will be a top priority of mine.”

In a move that helps further define the Obamanomics platform, the incoming president indicated that a key mandate for both Schapiro and Gensler would be to reign in the multi-trillion-dollar derivatives market, which functions largely outside of the traditional equities market and is mostly unregulated.

“There is a huge amount of money sloshing [around] outside of banks and that is a problem,” Obama said.

A Merger in the Works?

Schapiro, 52, may have one of the toughest jobs in the new Barack Obama administration, for the SEC has come under increasing fire for allegedly failing to demonstrate much initiative in attacking the current financial crisis.

Currently, Schapiro is the chief executive of the Financial Industry Regulatory Authority (FINRA), the largest non-governmental regulator for all securities firms doing business in the United States, MarketWatch reported. FINRA was created in July 2007 through the merger of the National Association of Securities Dealers (NASD) and the member-regulation, enforcement and arbitration functions of the New York Stock Exchange.

Schapiro is also a former head of the CFTC and former member of the SEC. She has been appointed to top finance-related government posts by two Republicans presidents and – now – two Democratic chief executives.

If confirmed by the Senate, Schapiro would take over as head of an agency that has been roundly criticized for failing to detect signs of trouble on Wall Street, where enormous derivatives losses have led to the collapse of the investment banking sector, caused a near collapse of many top commercial banks, and forced the U.S. government to engage in a bailout effort that will end up costing taxpayers trillions of dollars.

Because Schapiro has experience in merging regulatory organizations, and because she’s held posts with all the key players, many observers believe that her nomination signals that the incoming administration is serious about merging the SEC and the CFTC. In fact, outgoing Treasury Secretary Henry M. “Hank” Paulson Jr. has called for the two regulatory agencies to be combined as an interim step in his “blueprint” for a regulatory reorganization in Washington.

Interestingly, Schapiro has publicly supported that “blueprint” for overhaul, both in speeches to organizations, and in testimony in Washington. She is well known for being a strong advocate of the rights of individual investors.

“If the Obama administration decides to merge the SEC and CFTC, Schapiro has the experience at both the agencies to make that transition happen,” Barbara Roper, director of investor protection at the Consumer Federation of America, told MarketWatch.

But Schapiro’s insider experience and knowledge of key regulatory players may also make it more difficult for her to make the tough decisions that will be required if the merger strategy is called for, Roper noted.

“Even though she has a great deal of policy expertise at both the CFTC and SEC, I’m not sure she will be prepared to bring in the broom that the agency needs. She has long years of relationships with people at this agency,” Roper said.

A Solid Resume

Schapiro has plenty of operational, management and regulatory experience. Before FINRA was formed, she had most recently served as chairman and chief executive officer of the NASD, an appointment that took effect in December 2006. Before her appointment as chairman and CEO, Schapiro had spent five years serving as the vice chairman of the NASD and president of its regulatory and oversight division. She’d been with the NASD since 1996.

According to some reports, because the NASD was an industry group, there were often accusations that it overlooked instances in which broker/dealer abuses trampled individual investor rights. Given the more-retail-oriented focus many markets have taken in recent years – with a majority of U.S. workers actually owning stocks via mutual funds or through their employer retirement plans – many industry insiders felt that a new organization was needed, especially one that would view protection of the public as paramount. The creation of FINRA was one offshoot of this push for increased indvidual-investor protection.

In a speech in June, Schapiro talked about the growing complexity of the financial markets and warned that highly sophisticated new products will only make matters even more challenging for individual investors. The upshot: bankruptcies and home foreclosures could jump, and many investors could find themselves facing a future in which they have little in the way of a financial cushion.

“In tough financial times, many investors feel pinched for cash – and some may search for different, often-risky ways to make ends meet, or to maintain a certain lifestyle,” Schapiro told listeners at a “Women in Housing and Finance” conference in Washington. “Troubling trends include investors leveraging or prematurely depleting their retirement savings, trading in their insurance policies in transactions known as ‘life settlements,’ and tapping their home equity through reverse mortgages. We are concerned that some investors may be risking their most valuable assets in an effort to raise cash—including those in or near retirement, who may not have time to recover their losses.”

And the other unfortunate part of that problem, Schapiro said, was that “some unscrupulous financial professionals—many of them unregistered—feed into this investor anxiety, pushing strategies and products that promise to provide balance and safety, but that often end up haunting an investor for a lifetime.”

Schapiro will bring skills – as well as experience – to her new post as head of the Securities and Exchange Commission.

In late 2006, at the time of her appointment as NASD chairman, Richard F. Brueckner, the presiding governor of the NASD’s Board of Governors, described Shapiro as a “highly respected and effective regulator who has proven herself time and again to be a strong investor advocate.”

“She is a proven leader and is uniquely qualified to take over as the head of NASD as it continues to execute its vital mission of protecting investors and ensuring market integrity,” said Brueckner, who was also the CEO of financial-technology provider Pershing LLC.  “I am confident the securities industry will work closely with Mary and support NASD’s efforts to make regulation both more efficient and effective.”

A Career Regulator

Schapiro joined the NASD in 1996 as president of NASD regulation and was named vice chairman in 2002.  As head of NASD’s Regulatory Policy and Oversight Division, she served as the primary regulator of 5,100 securities brokerage firms and the nearly 700,000 registered brokers who were doing business with the public.

The division was responsible for writing rules that governed the conduct of virtually all aspects of the securities industry, including sales practices and financial and operational integrity; examining firms for compliance with those rules; and enforcement of NASD rules as well as those of the Municipal Securities Rulemaking Board and federal securities laws.

At that time, the NASD also had regulatory responsibility for The NASDAQ Stock Market, the American Stock Exchange and the International Stock Exchange.

Before joining the NASD, Schapiro was the chairman of the CFTC, a post to which President Bill Clinton had appointed her in 1994.  The CFTC is the federal agency responsible for regulation of the U.S. futures markets, including the financial, agricultural and energy markets.

As chairman, Schapiro participated in the President’s Working Group on Financial

Markets with the U.S. treasury secretary and the chairmen of both the U.S. Federal Reserve and the SEC.

Prior to her time with the CFTC, Schapiro served for six years as an SEC commissioner. She was appointed in 1988 by President Ronald W. Reagan, reappointed by President George H.W. Bush in 1989, and was named acting chairman by President Clinton in 1993.

At one point, Schapiro was an active member of the International Organization of Securities Commissions (IOSCO) and was elected Chairman of the IOSCO Consultative Committee in 2002 and 2004.

Schapiro currently serves as the “lead director” of Kraft Foods Inc. (KFT), and has been a board member since last year. She’s also a director of Duke Energy Corp. (DUK), a post she’s held since 1999.

Schapiro is a trustee of Franklin and Marshall College.

Obama Stimulus

In discussions with Congressional leaders, President-elect Obama has outlined the basics of a stimulus package worth in the range of $675 billion to $775 billion over two years to Congressional leaders, the published reports state. Obama talked to House and Senate officials Wednesday, but it’s believed the package will likely grow in size.

The package does not consist of another rebate for taxpayers, Congressional sources say. Instead, a number of other programs – such as infrastructure, schools, energy efficiency and health care – will be targeted.

States also will receive aid, and the package would assume more of the cost of Medicaid – perhaps even as much as $100 billion.

Obama transition team officials have declined comment on the financial plan, but Congressional leaders already are calling for a passage of the package. House Majority Leader Steny Hoyer, D-Md., said a package similar to what Obama proposes was needed in light of the Labor Department’s report yesterday that another 554,000 Americans filed for unemployment benefits.

“This package must renew our infrastructure, stimulate our economy by extending unemployment insurance, invest in new energy technologies, and help cash-strapped states protect vital services like education and health care from damaging cuts,” Hoyer said in a prepared statement.

The Wall Street Journal reported there is concern the package could expand to as much as $850 billion as it works its way through Capitol Hill. But Obama is trying to keep the stimulus below $1 trillion, an important psychological barrier, as those on Capitol Hill and Wall Street would be wary of what one insider referred to as the “Dreaded T Word.”

Obama has said that the stimulus needs to be just that – a stimulus, and one that’s actually big enough to “jolt” the wheezing U.S. economy and put it back on a path to growth. Since the just-declared recession actually began back last December, almost 2 million workers have lost their jobs, and more than 500,000 jobs were shed in November alone, according to government data.

Passage would allow Obama to knock out a number of problems with a single blow. The president-elect wants to jump-start the economy on one hand while fulfilling a number of campaign promises with the other. In an ideal world, Obama would like to be able to sign the legislation immediately after he’s sworn in. The Republicans, however, have apparently been quite dismissive of such a time frame.

Obama actually hopes to get lawmakers to assemble a package that could be put before both the House and Senate when the 111th Congress convenes Jan. 6. The president-elect is to be inaugurated on Jan. 20.

“Congressional Democrats urge President Bush to drop his opposition to the recovery package; but if he does not, Congress will ensure that President-elect Obama can sign it soon after taking the oath of office,” Hoyer, the House majority leader, said in his statement.

Source: Obamanomics: President-Elect Taps Career Regulator Mary Schapiro to Head SEC, Proposes $775 Billion Stimulus

Good day… And a Terrific Tuesday to you! Now that was quite the Investment Conference I just attended and gave two presentations to! Someone sent me a headline that appeared on the internet prior to the Conference that read: Three Kings of the Financial World on Tap to Speak for the Next WMI M2… And guess what? They considered me as one of those in the headline! WOW! OK, no… I’m not getting a big head, I’ve got my beautiful bride to keep me humble. She responded to hearing about this article with a heaping helping of, “OK King, take out the trash!” HAHAHAHAHAHA!

“The currencies continued their assault on the dollar today as investors felt more comfortable returning to the higher yielding currencies. Brazil was the biggest mover, advancing over 6 percent vs. the US$. Sweden also advanced for a second day, moving up over 5% against the greenback. The only currency which gave ground vs. the dollar was the Japanese Yen which was sold as investors moved back into the carry trades.

There really wasn’t a single event which sent the dollar down, but instead the currencies steadily increased throughout the day. Bad housing data in the morning confirmed that house prices are continuing to fall and while sales have tumbled. The median price of homes in the US fell 11.3 percent from a year earlier, the largest drop on record.

But equity investors weren’t frightened by the data, and were actually encouraged by President elect Obama’s call for a large stimulus package. With the stock market rallying, currency investors felt comfortable enough to pick up some bargains in the Brazilian real and other higher yielding currencies. This is the pattern which we have been seeing over the past few weeks, and one which looks to continue through the end of the year. I don’t personally think this is the turning point for the dollar, as we will likely see some more safe haven buying before the end of the year. But longer term investors can still take advantage of the prices on some of the beaten down currencies which still have good fundamentals. I would include the Nordic currencies of Sweden and Norway along with the commodity currencies of Australia and Brazil.”

Thanks Chris… That makes my job a bit easier this morning!

I did receive a note from a chartist that mentioned that the S&P 500 index was nearing a very critical level last week, and the timing of the Citicorp bailout couldn’t have come at any better time for this index. On a side bar… I told the over 300 people in attendance at the Wealth Masters Conference on Saturday, that they should market this down… “I fully expect the Gov’t to make a Capital infusion / bailout in Citicorp next week.” WOW! Was I bang on with that call or what? OK, or what, I hear you! But getting back to the bailout… I was wondering….

How this is all gets paid for without impacting the dollar negatively… And then that made me wonder just how long this “rally” can last given all the rot on the vine, and that the problems still don’t have any answers to them! But…. I guess we should enjoy this for now, eh?

And then there’s Gold… Talk about a rally for the ages since last Thursday! Gold traded up to and over the $800 figure in the past two trading days. However, in keeping with the thought above regarding just how long this “rally” can last… It looks like the shine is off the new car as stock futures are down 1% this morning, and Gold has lost $16 since the London Morning Fixing, which took place while we were all sleeping. Even me!

The euro has given backeuro

1-cent too… So, I guess I’m answering my own question with this update of the prices, eh?

I guess a lot of people are wondering what I think of the new Obama Economic Team… I would say that with Larry Summers, it quite strong… But shoot Rudy, you never know what these guys will do under pressure… I mean, it sure looked as though the Bush Administration did well with Henry Paulson after Paul O’Neil told them to shove the job where the sun doesn’t shine… Oh, you don’t know about that story? Well… I suggest you either find where the movie I.O.U.S.A. is playing right now, or pick up the book at Amazon… It’s all there…

Getting back to Bush’s pick of Paulson… And for that matter, Bernanke… The Un-dynamic duo, have really let the country down, but given their credentials you would have never imagined this quagmire we’re in would happen under their watch, when they were first appointed, would you?

So, I’ll reserve judgment until I see what the color of their economic plans are… If it’s more of the same-o, same-o, stimulus plans, rate cuts and no cut in Gov’t spending, then you can rest assured I’ll go after them with the same brush that I use to tar the current knuckleheads…

I just have to hope that they can pull a Bullwinkle, and have something up their sleeve! The data continues to leave a sour taste in one’s mouth, and now with Citicorp needed Gov’t money, you’ve just got to figure the other Big Banks are lining up to get their heaping helping of Gov’t money… Of course, we all know that it’s not really “Gov’t money” right? IT’S OUR MONEY!

Speaking of data… Today, we’ll see 3rd QTR GDP, which is expected to be negative… Did we expect anything else? This will be a preliminary number and is expected to be -.5%… I fully expect this number to jump big time into negative territory when the updates/ revisions are eventually printed. We’ll also see Personal Consumption for the 3rd QTR, which is expected to also be negative (-3.2%). But that’s not all, if you order now, we’ll also send you these lifetime guaranteed Ginsu knives!

No wait! What I wanted to say is that’s not all, we’ll also see the S&P/CaseShiller Home Price Index for September, which is expected to continue to show more home prices falling. Probably to the tune of around -16%! Consumer Confidence will also print today, (Whew! This is a ton-o-data, eh?) and some other second tier data will also print.

I think the markets looked at the data Calendar and decided to take some profits on some items that had rallied for two days, because none of this data is going to give anyone a warm and fuzzy… No way, no how! UGH!

In Canada last night… Finance Minister, Flaherty, said that the worst of the financial crisis is probably not over and that he may take fiscal stimulus measures before the end of the fiscal year, which is next March… Folks, this is Central Bank parlance for “there will be more rate cuts”… Too bad for the Canadian dollar / loonie… Every time it looks like it could build some steam, either the Finance Minister or Bank of Canada come along and release the steam.

Our long time friend, Jim Rogers, was back in the news yesterday, as he gave an interview to Bloomberg… Here are some snippets of the interview… Jim Rogers…

“The dollar is going to lose its status as the world’s reserve currency.”
“it will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.”
“If I were doing it today, and what I have done today, is buy the yen.”
“But, it is also an artificial move, it’s a difficult problem to find out what is a sound currency.”
“In Mid-October, I started buying commodities.”
“It’s astonishing how low some of these prices (in commodities) are.”

Well… I’ve always enjoyed listening to or reading what Jim Rogers has to say, and this is no different…

Another old friend, Thom Calandra, is back in the newsletter writing business, and Thom was kind enough to put me on his mailing list. Thom gave me and our currencies a huge lift back in 2002, when at the time, he was the editor of CBS MarketWatch, and wrote about our currency CD’s, especially Aussie dollars… Glad to see you back Thom!

Currencies today 11/25/08: A$ .6410, kiwi .5410, C$ .8070, euro 1.2875, sterling 1.51, Swiss .8330, rand 9.8955, krone 7.0250, SEK 8.0250, forint 202.70, zloty 2.98, koruna 19.76, yen 96.35, baht 35.25, sing 1.5150, HKD 7.7539, INR 49.99, China 6.8260, pesos 13.38, BRL 2.2860, dollar index 86.12, Oil $52.50, Silver $10.39, and Gold… $812.50

Source: Citi Gets More “Gov’t Money”…

The people of the United States of America prayed for a political messiah. Now that he has stepped forth, we are left to wonder, what next?

Politics is not really our beat here at the Rude Awakening, so we won’t be offering up any four-legged sacrifices for the promise of financial salvation. In the harsh light of economic reality, miracles are hard to come by, even for those claiming to posses the kind of optimistic foresight that defies rational explanation.

A cursory glance toward the economic horizon reveals some perilous obstacles ahead. As we walk through the valley of 5-year market lows, the shadow of the death of consumer spending looms particularly large. American consumers, upon the backs of whom almost two-thirds of the world’s largest economy rests, cut spending by an annualized 3.1% for the third quarter. For perspective, that marks the first quarterly decline since 1991, as well as the largest quarterly decline in 28 years, according to the U.S. Commerce Department.

Meanwhile, prices of goods and services purchased by US residents jumped 4.8%. That’s on top of a 4.2% increase in the second quarter. Even excluding food and energy, prices were still up by 3.1% in Q3.

As the consumer-driven economy grips the emergency brake and higher prices put the squeeze on employers, jobless rates continue to skyrocket. The Department of Labor is expected to announce the loss of 200,000 jobs for the month of October when it meets on Friday. That would drive unemployment to 6.3%, up 0.2% from September.

Shrugging off all these annoying statistics, however, the market continue to mount a herculean rally. After posting its worst month since 1987, the Dow surged an impressive 300 points Tuesday in anticipation of Obama’s victory, topping off double-digit gains for indexes across the board last week.

Could we be witnessing a miracle in the making here? Is it possible that a new tablet of financial commandments might render the age-old saws of saving and producing nothing more than outdated or even, dare we say, profane?

We wouldn’t dare offend any divine and future superintendent of the financial universe by asserting otherwise…but we reserve the right to remain unconvinced.

In the absence of proof that what goes up need not come down, we will continue to seek our financial guidance from within the “boring” confines of reality. And so, we turn to the inimitable Rude Readership for the results of our latest Group Research Project.

A couple of weeks ago, we asked readers to submit their favorite “chicken longs.” Put simply, we wanted to know what stocks readers would like to have in their portfolio should the heavens open up and curse the earth with a great financial flood. Such stocks might derive their buoyancy by paying a large dividend, enjoying a competitive position in a relatively “high ground” sector or through some other means of protection.

We have no clue as to whether the President Elect will perpetuate the current state of fiscal delusion or merely usher in a winter of slightly milder discontent…but it is probably best to be prepared for either scenario.

Reader “Bradbarb69″ kicks off our newest Rude Awakening Group Research Project with the following cheerful suggestion:

“I like prison stocks. There will never be a shortage of lawbreakers at any level, and governments must maintain prisons for the public good. As crime rises (as it inevitably will) these stocks will be good holdings. I also like [the cemetery operator] Stonemore Partners L.P. (NASDAQ:STON) for its high dividend and for the fact people will always die no matter what the economy does. Personal protection stocks are also on my list of “buy at the right price.” I’m thinking in particular of Smith & Wesson (NASDAQ:SWHC) and Taser International (NASDAQ:TASR).

[Editor's Note: Although Bradbarb69 did not provide any specific names in the prison sector, a couple that come to mind are Geo Group (NYSE:GEO) and Corrections Corp. of America (NYSE:CXW).]”

Reader Tom Winstanley recommends Weir Group, a Scottish company that trades in the U.S. over-the-counter market under the symbol, (PINK:WEIGF).

“This company makes boring old pumps,” Tom explains. “Energy and Water are two areas that simply will not wait upon the recovery of the world economy. Come hell or high water, governments know that if they cannot keep the lights on, provide as much fresh water as their people are used to having available and treat waste water to high standards, then they will be more trouble than they can handle. Pumps might be boring but try getting by without them – whatever the state of the economy!” [Editor's Note: Weir trades for less than eight times estimated earnings and yields 4%].

Reader Susan Vander Voet likes the Brazilian oil giant, Petroleo Brasileiro (NYSE:PBR), also known as Petrobras. The stock was trading around $21 when Susan submitted her email to us. Today, the stock is around $30.

“I’ve been watching this company for about a year,” Susan writes, “and the reasons for my recommendation are:

1. Active and with interests in several Latin American countries (Brazil, Ecuador, Chile, Peru) in exploration, production, distribution and retail;
2. Huge offshore resources discovered in Santos Basin;
3. Active in several African countries (Angola, Tanzania);
4. Stock is trading well below the moving average, which has trended upward for 5 years;
5. As oil prices are projected to recover (in 2009), I see this stock at least doubling its current value ($21).”

Reader David Myrhre identifies Harvest energy Trust (NYSE:HTE), a Canadian investment trust, as his “current fave.” The stock, which was trading below $8.00 when David submitted his email to us, is now north of $11. But even at the current quote, the stock is well below the $18 price tag it fetched in September. What’s more the indicated yield on the stocks is a whopping 27%.

“I’ve heard worries that the dividends will go down because oil prices have gone down,” David explains “But these oil producers sell on annual and multiyear contracts.  Dividends didn’t go up when spot oil prices spiked and they won’t go down just because spot prices did.”

Elsewhere in the Canadian investment trust sector, reader Greg McLean highlights Peyto Energy Trust (PINK:PEYUF), a stock that yields about 14%. Greg also likes Hanfeng Evergreen, “HF” on the Toronto Stock Exchange. “Hanfeng is a small Canadian company that makes slow release rice fertilizer in China,” explains Mr. McLean. “Hanfeng has decent earnings and cash, little debt and is trading close to book. I feel confident betting China will continue to grow rice.”

Another high-yield energy stock is Atlas Pipeline (NYSE:APL), which is a stock that reader Don Gish favors. “My favorite bear market stock is Atlas Pipeline (APL),” Gish writes. “The sudden drop of the energy market and other market sell-off factors have driven APL unrealistically down.  [At the current quote, the stock yields about 20%].  I believe APL’s focus on natural gas pipelines with no exploration/development costs and long term contracts has created an excellent long term dividend with significant potential for future stock price upside.  I love this position, so I have to resist my desire to buy more.”

Lastly, reader Scott Lovinghood writes: “I have a suggestion for a chicken long: Blackrock Municipal Income Closed End Fund (NYSE:BKF).  It is primarily invested in tax free municipal bonds.  At current prices the yield is just a hair under 8% TAX FREE!!  The fund covers many different states and markets.  California is the largest concentration at only 11% of the fund.  The majority are longer dated bonds, so unless municipals are totally wiped out, the monthly pay outs should continue.  The shares were hammered recently due to the credit freeze. The stock’s NAV is $10.15.  But the stock is only $9.20…Not a bad deal.”

And so concludes Part I of our newest Rude Awakening Group Research project.

Source: Chicken Longs