Baltimore — (TFN): I don’t know whether to laugh or cry. Down in Chattanooga, Tennessee, a four-year-old boy managed to grab a beer, walk out his front door and break into a neighboring house to steal Christmas gifts.

True story. But it gets better.

Inside of one of those gifts, was a girl’s dress. The youngster donned the new attire and continued his late-night spree. His mom tells us it was all in an attempt to get in trouble so he could spend a night in jail… with his old man.

Smart kid. He’s going to have a great career as a banker some day.

Although the names and the ages are different, it’s essentially the same story on Wall Street and in Washington. Drunk on greed and wearing a stolen cloak of authority, our elected officials and the pigs that feed at their feet have stolen from you and I once again.

Remember way back when in the days when the financial collapse was still fresh on our minds? Do you remember the pundits warning that the federal government’s decision to buy a massive stake in Citigroup was a disaster in the making?

Washington poo-pooed the notion, saying it has to be done, right now, right here. The consequences of the future don’t matter today.

Guess what… the future is knocking and it’s not wearing a frilly little dress.

In an effort to get out from Uncle Sam’s massive shadow, the boys at Citigroup decided to offer up more shares of the company and even managed to convince Geithner and his gang at the Treasury to unload their shares.

Turns out, the free market wants very little to do with owning a stake in Citigroup. It’s over a year later and the bank is still just as financially repulsive.

With news like this, does anybody really believe the notion of economic recovery is sustainable? Not me.

Judging by the quickly strengthening dollar and the drastic drop in gold prices today, the situation across the globe shares similar pessimism. When the greenback looks like the best place to park your money, you know there is trouble brewing.

That reminds me. Want to know the best Christmas gift this season? Cash. It’s the only thing going up in value these days.

You can thank your leaders in the nation’s capital for that.

*** Actually, that is an oversimplified view. Of course cash is not the only thing going up in value. Put options are soaring, too. But so is one tiny, overlooked segment of the commodities market.

During the couple of summers I spent as a fishing guide, one of my good friends was a real-live Alaskan lumberjack. After a couple of tours in Vietnam, the woods were the only place he felt “comfortable.”

Although he is the foulest man I ever met, he has great insight. One day while we were tossing streamers in front of migrating silver salmon in Alaska’s Tongass National Forest, he looked around and said, “Yep, we’re surrounded by millions and millions of dollars.”

He went on to tell me North America’s forests aren’t worth much right now, but they would be as soon as “those Asians” started buying. His words, not mine.

How right he was. I plan on calling him up this weekend to ask if he heard the news out of Shanghai. China’s largest city just changed its building codes and opened the door to wood framing.

Almost overnight, it opens the market to a construction industry that is half the size of our domestic market. And that is just one city.

As the housing market comes back to life (hopefully with a little bit of juice from Washington), we are going to watch timber prices soar. When it happens, my lumber-cutting friend will be onto to something very, very big.

But so will we. Not only did I just recommend a set of timber-related options this morning to TFN Strategic Trader readers, but the group’s publisher, J. Christoph Amberger, recently pulled the curtain on his latest research.

He recommends three unique ways to play the upcoming boom in the timber industry to Hot Stock Confidential members. It’s a down-and-dirty report you won’t want to miss.

You’ve got to read his report.

*** Finally, we got out of the natural gas markets just in time. After locking in gains of 400% on the first half of one play, 100% gains on the second half, 50% on a separate play and 56% gains on a third natural gas pick, the sector has turned around and shot right back up.

Thanks to word of a record withdraw for this time period, natural gas prices are on the rise. While we are still holding a couple of related plays and half of an original position, the plays are far enough removed from the effects of rising prices that we don’t have to worry.

But going forward, with natural gas prices on the rise once again, we are on the brink of yet another major opportunity. With word this week that Range Resources (NYSE:RRC) has nearly quadrupled its Marcellus gas production, we have all the proof we need to say the gas industry is in for a rough ride.

It’s simple supply and demand. Now that natural gas is all over the place, and far easier to pull from the ground than once estimated, the markets will continue to be oversupplied.

Even with today’s strong withdraw, storage levels remain well above five-year averages. I am convinced we will have yet another set of triple-digit winners on our hands in no time.

Baltimore — (TFN): Somebody get a bucket because I’m about to puke. I am having an impossible time trying to digest what I’m reading and hearing this week.

How could things have gotten this bad?

My sister is one of those liberal teacher types with an ideology that so many of us like to pick apart. It’s sort of a sport of mine, but she understands and takes it like any sister should take a sibling rivalry. She drops her kids off at my house with little to no notice.

With our divergent political beliefs, you should have no problem guessing my reaction when she recently told me she was applying for dual citizenship in France.

“I just want my kids to have the best opportunities available to them,” she said. I just about plopped my pants when she showed me the paperwork. Opportunities… in France? She’s got to be kidding me.

But it turns out, big sis may be getting wise in her old age. After the news I heard this week, I’m thinking about sneaking through her back window tonight and rifling through her drawers. I want to know the process.

France is starting to look like a libertarian’s dream.

What pushed me over the edge? It wasn’t mandatory healthcare. Or a global tax on Wall Street. Or a Nobel Prize. Or pay caps. Or Cash for Caulkers (but that was close).

It was the news that Congress is working on legislation that would force the NCAA to go to a playoff system.

Yes, just days after committing tens of thousands of young men to a savage war and in the midst of figuring out how to redistribute a vast percentage of the nation’s GDP, a House subcommittee took the time and the tax dollars to discuss the BCS bowl situation.

Normally a subject reserved for sports editors and afternoon talk show hosts, our leaders feel this is a vital move for the American people.

Darn I’m glad I’ve got such a visionary sister. She saw this coming months ago. I just hope there’s time to get out before they lock us all in.

*** I know, I know. Many of you are saying what in the world does this have to do with contrarian investing.

My answer… everything.

Just imagine this country’s future, economically and politically if we have a government that believes college football or even mandatory healthcare is any of its business. Do you think we’re ever going to see the Dow hit 14,000 ever again?

Not unless Obama makes it an order.

I know a lot of investors think gold is the answer, but it isn’t. Hopefully this week’s plunge helps illustrate the point. With just the stroke of a pen, Obama could pull a Roosevelt and suck it all back in. You remember Executive Order No. 6102, right?

The answer is international exposure. Just like my sister, your portfolio needs dual citizenship. If you’re sitting on nothing but domestic positions, you are sitting on a time bomb. Tick… Tick… Tick…

Fire your advisor then seek international diversification. My preference is anything Chinese, but Australia, with its rising interest rates, and even Brazil (it already beat Obama once) aren’t looking too bad.

*** Earlier today, I told TFN readers about a Chinese car retailer that’s been making strong headway (i.e. triple-digit revenue growth) over the last year. If you’ve been reading anything from the group’s publisher, J. Christoph Amberger, you know the Asia car market is red hot.

Here’s a section of what I wrote:

“While the Chinese yuan is anything but free-floating against the dollar, a stronger American currency will certainly have an impact on any country exporting goods to the States.

“That’s just part of the reason why shares of AutoChina International (NASDAQ:AUTC) are up by over 15% today. The other major catalyst is the company’s latest fiscal results.

“The Chinese auto retailer is a relatively young company with a market value of $270 million and some 25 dealerships spread across the country. In case you’re not familiar with the Asian market, it’s red hot right now.

“The quarterly figures prove it. Over the last three months, the company recorded revenues of $242 million, a whopping 110% increase over this time last year. It turned the sales into a bottom line of $7 million, yet another triple-digit increase over last year’s figures.

“If you are frequent reader of TFN articles, AutoChina’s action is not new. We’ve been tracking and writing about this stock for months, as it share price quickly climbed from just $7 to over $30 and back to $24 today.

“From here, you can expect shares to top out near the $30 range once again in coming months if current macroeconomic trends (including the strengthening dollar) continue.”

You can read the original piece here.

*** Finally, political incompetency doesn’t stop in Washington. Oh no, state governments are just as useless. Isn’t that right, Arnold?

At home in Pennsylvania, we’ve got a gambling debate on our hands. Right now, slots and electronic forms of poker are perfectly legal, but bring that animated dealer to life and give him a good-paying job, and it’s illegal.

Of course, a political debate like this can’t go on without a little bit of leverage. Tied up with the gambling bill is funding for the state’s major colleges.

That’s right. While the local bozos determine what cut of gambling revenues will go to their campaign funds, tens of thousands of students are looking at higher tuition bills next month as schools like Penn State see their funding held as a political hostage.

In France, my sister’s kids won’t have to worry about tuition… it’s already included in the tax bill.

This story goes well beyond Murdoch’s decision to start charging for his company’s online news content. It is a debate about monopolies and the government’s role in protecting or destroying them.

In case you missed it, there is a great editorial in today’s Wall Street Journal by the CEO of Google, Eric Schmidt (scroll down for link). In the piece, the doctor doesn’t necessarily lash out at Murdoch and his recent attacks aimed at Google, but the desire to call Murdoch a crybaby is obvious.

Schmidt makes it clear that Murdoch’s woes are not Google’s fault, but are the fault of an industry that has sat on its hands for the last decade as competition quietly, but firmly snuck up to the back door.

Now that Murdoch owns a very expensive media empire, his plans are to use his massive industrial weight to keep the media industry from swaying in any direction. He’s certain that charging for his content will force his customers from straying to competitors.

Of course, Schmidt has something very different to say. Essentially, the CEO tells Murdoch to start getting creative. His company is dumping 100,000 clicks a minute onto the online news sector. If the industry can’t find a way to profit with some four billion hits a month, well, it’s not Google’s fault.

The answer lies somewhere in the middle. But of course, Washington thinks it can solve the problem. As you read this, Murdoch and his gang are discussing the “future of journalism,” with the Federal Trade Commission.

They are not down there asking for a bailout or inquiring about tickets to the next state dinner. They are asking for (or flat-out buying) protection from the anti-trust gang.

Just like a Manhattan businessman goes to Guido looking for some “fire insurance,” Murdoch and company are in Washington asking for protection from the ankle-biting competition.

What does Murdoch want from Obama?

He wants what every man wants, the ability to buy more. Under current regulations, Murdoch is unable to make purchases in certain rival publications and media outlets. But with the notion of critical mass on his side, if he could get the right to buy and control his rivals, he would have a much better shot at coercing the industry to move in the “right” direction. He could save journalism as we know it.

Will Washington bite?

Um, let’s see. With a horde of newspaper and television ad space on his side, does Murdoch have anything to give to politicians in exchange? This one’s a no-brainer.

If politicians can get on the good side of Murdoch or his competitors, the political campaign process may not be quite so expensive in 2012.

So here’s my first official prediction for 2010: Washington is going to take action and the media industry is going to be a hot one.

We got a first glimpse of what’s to come early today with the finalized deal from GE and Comcast. The next year, especially if Murdoch makes the right moves, will be filled with similar stories of consolidations and acquisitions.

Giants like Time Warner and Liberty Media are going to be players. And little guys like Virginia’s Media General and McClatchy will be in play.

It is going to be an interesting year as the industry finally gets serious about finding a clear strategy for the future.

Smart investors will make good money from the action and smart contrarians will know the money flows right back to Washington.

*** You have got to love the action from the natural gas markets these days. Even I, the bear of bears, wasn’t expecting yet another injection into the nation’s gas storage facilities this week, but what’s investing without surprises?

Thanks to today’s news, we were sitting on gains of as much as 415% on one of our three remaining natural gas plays. The lower gas prices go, the higher that figure will climb.

Here’s what I told TFN readers today about the nation’s natural gas glut:

“I am about as bearish as it gets when it comes to natural gas, but even I underestimated how bad the situation really is.

“While most analysts were expecting the year’s first official drawdown in the nation’s natural gas inventories, I conceded and said they were right. I expected a drop in supplies of one, maybe two, billion cubic feet of gas.

“Most analysts expected twice that figure as the nation starts to crank up its thermostat. After last week’s smaller-than-expected gas infusion, a withdraw this week looked like an easy call.

“I was so certain, I recommended TFN Strategic Trader members lock in gains on a couple of our natural gas plays. We locked in gains of 56% by selling half of our position in one play and 50% gains by unloading another play in its entirety.

“It looks like we jumped the gun.

“According to the Energy Information Agency’s latest report, released at 10:30 this morning, the nation managed to produce more gas than it consumed once again.

“This time last week, the agency showed a gain of one billion cubic feet. This week, the figure doubled to a weekly increase of two billion cubic feet.

“Under normal circumstances, this would not be much of an issue. But the nation’s storage facilities are 99.9% full and pipeline pressures are rising as suppliers try to squeeze in as much of the fuel as possible.

“So far, natural gas futures have not reacted too strongly to the news (which helps prove my theory about selling yesterday). December gas contracts are down by just $0.035 so far, which puts the price at $4.495.

“As the winter rolls on and investors and analysts finally realize this winter will be unlike any other for the natural gas market, that price will sink lower and lower.”

Keep reading here to read about several of the ways to take advantage of the situation.

*** Finally, there’s a celebration in my hometown tonight. We got word early this morning that Harley Davidson has officially decided to keep the doors open at the factory that employs nearly 2,000 local workers.

Of course, at least half of those workers will be asked to leave over the next couple of years and the remaining workers will be working harder and getting paid less, but isn’t that the way it works these days?

Maybe we shouldn’t blow up the celebratory balloons just yet.

Earlier today, the Treasury auctioned off yet another chunk of American debt. This time it offered seven-year bonds to the tune of $32 billion. In all, the nation will go in hock for yet another $118 billion this week.

It may sound like a lot, but it’s just another busy week of financing Washington for Geithner and his crew.

While so many of us in the financial punditry business are worried about a lack of foreign borrowers, it is far from the case today. Yesterday’s $42 billion five-year auction came with a bid-to-cover ratio of 2.81 (alarmingly high) and today’s auction boasted a ratio of 2.76, proving there are still plenty of buyers willing to “enable” Uncle Sam’s spending addiction.

If you are a bullish investor, this is not good news.

Let me repeat… this is not good news!

Here’s the deal, plain and simple. When hundreds of billions of dollars are flowing to Washington, they are not flowing to Wall Street. When Geithner passes his hat, there is that much less money to boost up share prices.

Fine, you say. I invested in gold. With low interest rates and a weak dollar, my gold position will soar.

Wrong!

Why are most gold speculators buying? Because they think countries like China and India are dumping the dollar and pouring into gold.

Well, according to the folks that walked out of the Treasury empty handed this afternoon, their precious metal buying may be less robust than many thought. That certainly is not good news for gold bugs. Gold is a purely speculative bet right now.

If you own any, sell it.

I know that is a sore subject with many readers, so we’ll deal with the topic on Friday.

Just about the only thing Washington’s ever-increasing debt is good for is propping up the housing market. As mortgage rates drop to all-time lows once again (thanks to dwindling bond yields), potential buyers still have a significant incentive on their side.

While Uncle Sam may stash $6,500 in a buyer’s pocket, a 30-year fixed rate of 4.99% will ultimately put much, much more cash in their accounts.

A young friend asked me this morning, “I’ve got sixty grand in a savings account. Should I max out my IRA or buy a house?”
Buy the house!

The markets are setting a trap. And it’s a darn good one. Most investors have no clue it’s there. But if you pay attention, the trip wire is obvious. We’ve got stagnant, if not falling, interest rates, soaring national debt, all the workings of a gold bubble and, guess what, your taxes are going up.

If you think the Dow will hit 14,000 anytime soon, you had better think again. Somebody is about to hit the reset button and it’s not Hillary.

*** Before I go any further, let me tell you that my wife has one of those cushy union jobs. She pays about half a nickel in monthly insurance premiums, she gets a raise in January and her job is as secure as it gets these days.

With that off my chest, let me tell you this.

I hate unions!

They are the reason I have to call India to fix my laptop and why I drive past empty factor after empty factor on my 55-mile commute to work.

But like anything well played, even a union can make a savvy investor money.

Here’s a bit of what I wrote for the TFN site this morning:

“For Harley Davidson, unions have been an unreachable thorn in its side. The problems are almost mirror images of the woes in Detroit: not enough flexibility, high wages, top-notch benefits and a constant threat of a strike.

“This economic downturn is just what the motorcycle maker was prayer for. It gave the company all the leverage to say shut up or get out. More specifically, Harley told the union shut up or we’ll get out.

“The company’s largest manufacturing facility is located in York, Pennsylvania. The union’s current labor contract is set to expire early next year. Knowing the company had a major battle brewing, executives went proactive.

“They started a search for a replacement factory, one with better technology and, more importantly, a cheaper workforce.

“It’s basically a reverse strike. Sign the contract or the factory walks.

“While nothing has been signed just yet, there is a very good chance York’s union will vote in favor of ratification on December 2. When it does, Harley shareholders will be in a good spot.

“I got a peak at the contract last week. It gives the company just what it needs… flexibility.

“While pay is an issue, Harley has no problem paying top dollar if it means high-quality workers. But Harley can’t afford to pay some gray-bearded grump to sit in the break room. That’s why the new contract cuts the labor groups to a mere fraction of previous levels.

“No longer can a worker claim, “I’m a welder. I don’t touch a wrench.” Now, if he’s working, he’s doing what the boss says. It will allow Harley to cut the factory’s headcount nearly in half, saving massive annual labor expenses.

“The new contract also calls for Harley to put about $90 million into modernizing the current facility. While it will be an added line on the expense sheet, you can bet executives are counting on a quick payback.

“I wish I could claim to be the only investor watching the action unfold, but I’m not. Over the last few days, shares of Harley have climbed steadily, sending shares to new 52-week highs.

“Over at TFN Strategic Trader, we took full advantage of the action. Last Friday, we entered a set of the company’s December call options. And yesterday, we sold them for quick-and-easy gains of 60%.

“For once, I have a reason to be thankful for unions. They made us money.”

Can’t complain about that. Keep reading here.

*** Before I go, let me remind you to take time to give thanks for what you’ve got. It’s more important to count our blessing now than ever before. We may not have them tomorrow.

Here’s just a glimpse of what I’m thankful for…

A lovely wife, a baby on the way, a roof over my head, a freezer stuffed with food, friends that would kill their prized pig for me, a steady job, family, the freedom to say I don’t like our government, anything with peanut butter in it and of course, a loyal group of readers that are not afraid to let me know their thoughts.

It’s the same way for politicians. Give them some cash and they’ll have it spent in no time flat, even if they can’t find anything worth buying.

Take, for example, the infamous Troubled Asset Relief Program, TARP in informal nomenclature. Passing the $700 billion program was a matter of financial and economic life and death according to Washington.

They gave us the same panicky “must-have” arguments as a six-year-old in the toy aisle.

But once they got what they wanted, their “toy” sits unused in the corner. As I write, TARP has over $140 billion in uncommitted funds and $300 billion that has yet to be spent.

Yep, they really need that money, didn’t they?

But the story gets even better. Fully expecting a miraculous recovery by the end of this year, our policymakers set TARP to expire on the final day of the 2009. They figured Obama would certainly prop all 300 million of us on his shoulders and carry us to safety by year’s end.

Now that the economic situation is not nearly as rosy as Obama promised a year ago, Washington is crying once again how badly it needs the money. It’s just how little Johnnie cries and moans when little Janie plays with the toy truck he hasn’t touched in months.

Geithner and his team have hundreds of billions of borrowed money up their sleeves with few viable ways of spending it. But now that we are asking for the money back, they say they need it… at least through next October (definitely not through November elections).

Do we ever grow up? It’s like a bunch of kids playing with very expensive toys in Washington.

*** Have you noticed a lot of Washington’s “economic recovery” programs are up for renewal these days?

TARP, the housing stimulus and all sorts of unemployment benefits have been or will be extended. I’m surprised we haven’t seen the resurgence in Cash for Clunkers.

There’s even a bill that would tax Wall Street to the tune of $150 billion annually to help create new jobs. It’s called, get this, “Let Wall Street Pay for the Restoration of Main Street Act of 2009.”

All these extensions and new programs are a surefire signal that all is not grand in the economic world and Washington had absolutely no idea what it was getting itself into as it spent nearly three trillion dollars to supposedly prop up the nation’s economy.

With Congress continuing its reach into the chest of the domestic economy, its no wonder gold prices are hitting new records day after day. By the time Washington is done, nothing “American” will have any intrinsic value left.

But just as I said yesterday about investing in the dollar’s downturn, be cautious of jumping on the golden bandwagon. It could be trouble.

So far this year, gold’s Street value has increased by 32%. It’s a strong gain when compared to historic moves, and it beat’s the S&P 500’s year-to-date climb of 22%, but how far will the bulls take it before they say enough is enough and the bottom falls out once again.

After all, gold really isn’t worth a lick.

You can’t eat it. It won’t fuel your truck. It won’t give you shelter and it won’t protect your house (unless you’ve got a good arm). When the dung really hits the fan, gold’s only strongpoint is it’s more valuable than a fancy certificate that says you own 1,000 shares of XYZ.

But even then, it’s only valuable because we say it is.

Let’s be flat-out honest with each other here. What are the chances of full-on economic calamity? I mean the kind of situation where you will dig your gold out from beneath the old oak tree and take it to the grocery store to buy a slab of bacon.

In other words, what are the chances you will actually use gold for its “emergency” purpose?

Slim to none, and I’m more pessimistic about this economy than any Roubini-following perma-bear.

Gold’s a trap, especially for the folks buying at today’s prices and actually paying to store the rare metal in some vault.

If you absolutely have to own gold, keep your ownership to a minimum, a few grand worth of coins or so. Nothing more.

Better yet, take advantage of the gold rush of ’09 and invest in the world’s gold miners. They are the ones fleecing the bandwagon riders and creating the ultimate market-beating profit potential.

In this market it is more important than ever to not be a clueless sheep merely following the herd.

Be the shepherd and lead the lambs to slaughter.

*** As options investors we love to lead the pack. That’s why over at TFN Strategic Trader, we are all smiles today. After locking in gains of 400% last week, we sold another set of call options for quick-and-easy gains of 60%.

On Friday I sent out a buy alert. This morning I said sell. Traders that followed my advice locked in three-day gains of 60%. Way better than gold.

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.

No more Chicken Little

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.

The devaluing of the dollar is no surprise. Even a fifth grader can see what’s ahead over the next decade. That’s why there is so little investment potential directly in the currency. Yet, our stubbornness and human greed will not let our eyes focus on anything but taking advantage of the move.

Let that stuff up to the emotional investors.

While they are focusing on gold and the dollar, investments that will provide double-digit returns at best over the next few years, rational investors need to focus on the many other powerful market forces are at work.

The domestic equities market is a wonderful place to be right now, especially if the dollar is collapsing as fast as we believe it to be.

First, anybody exporting goods will see strong top-line growth as the dollar drops. A six percent fall from our currency equals an automatic six percent surge in revenue growth, without the need for any company to do a thing.

Next, if you are a follower of the green-energy craze, you had better be hoping for a weak dollar. The only thing that will ever wean this country from its dangerous addiction to oil is if crude becomes too expensive relative to our alternatives.

With a dollar that is still in demand across the world, dollar-denominated currencies like crude remain fairly inexpensive. But as Uncle Sam’s reserves dwindle in value, crude prices will move inversely. That is good news for all you folks that took Obama’s advice and invested in the “green” sector.

Finally, the markets run on a risk/reward relationship. The higher the risk, the higher the reward. The lower the risk, the lower the reward. Simple stuff.

If we all know the dollar should weaken, where’s the reward potential? But don’t even begin to think there is no risk in the play.

With Washington in charge, especially the current group of legislators, anything is bound to happen. And now that Obama has is political eye set on “saving the dollar,” the road that lies ahead could be very foggy.

My advice? Watch the dollar. Take note of its moves. But invest in anything but the currency. There is better return potential, with much less risk, elsewhere.

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.

In the days following Obama’s inauguration, Washington quickly passed a wide set of tax reforms. Part of the legislation included a $400 tax break for the country’s working class and increased healthcare funding for the country’s poor, unhealthy children thanks to increased taxes on the tobacco industry.

It is no surprise neither measure has worked out as planned.

According to reports today, more than 15 million of us will have to pay back the $400 we saved in taxes over the last few months due to an error on Washington’s end.

I hope Uncle Sam doesn’t expect interest on his loan come April.

The news out of the tobacco industry helps us continue our discussion on regulations. The good and the bad.

Winston Churchill once said, “If you have ten thousand regulations, you destroy all respect for the law.”

The great orator hit the notion perfectly. With Congress working on reform after reform, the American people eventually became deaf to the noise from Washington.

Worse yet, we became savvier at circumnavigating weak legislation. Just ask the tobacco industry.

In an effort to fund children’s healthcare, the Obama administration levied a massive 2,000% tax hike on the nation’s roll-your-own cigarette industry. Taxes for the tobacco used to roll a custom smoke rose from $1.10 per pound to $24.78 per pound.

Washington figured the massive increase would deter smoking and create well-needed revenue care of the folks that refuse to kick the habit.

As you can likely deduce, it didn’t work.

What happened was manufacturers ripped off one label and slapped on other. Roll-your-own tobacco production plunged while pipe tobacco production, with its $2.83 per pound tax, soared.

Before the tax, pipe tobacco demand was just 270,000 pounds per month. Just a few weeks later, it hit 1.7 million pounds.

Turns out Washington had no idea pipe tobacco was so similar to the roll-your-own stuff that it could be considered a direct replacement.

The mistake is now costing the government some $384 million annually in lost tax revenues.

Once again, it proves the markets are always a step or two ahead of new regulations.

Barney Frank may think he can write a law that tells Wall Street to behave, but in reality all he’s doing is pushing the action from one unlit corner to the next.

I can’t wait to see what they come up with next.

The response from the “real world” is almost always ingenious, like a classic Tom and Jerry cartoon.

*** I sure hope the Fed knows what it is doing. With Big Ben stubbornly clinging to record-low overnight rates, the top inflation cop needs another trick to keep market forces at bay while still enticing a skittish economy to come out of its shell.

His latest trick? Paying interest on banking reserves left with the Fed. It is a trick used at other central banks to create a “corridor” that keeps rates from sinking too low or rising too high.

But many pundits don’t think the Fed is ready for such management “tricks”, especially as it sits on a massively inflated balance sheet.

I am one of them.

I am against the measure not because I feel it won’t work. It most certainly will work and has in the past.

I am against it because who in the world wants to give anybody in Washington any more power?

The Fed already owns the banking industry and now it wants to create even more opacity.

Over the last three days, we have seen more than enough examples of how increased government power fails. The more we mess with the markets, the harder they are to control and predict.

For all of you that constantly shout, “Fire the Fed,” here’s a tip of my hat. I’m starting to see the light.

Judging by the sudden rise in fame of Levi Johnson or Balloon Boy’s antics, the human brain is far feebler than we give credit.

And so are the markets.

If you have taken a basic finance class anytime between 1965 and the present, you have likely studied Eugene Fama and his efficient market hypothesis.

Essentially, the University of Chicago professor created a cult-like following of investors and academicians that believe markets entirely reflect all known information and instantly react to new information.

For example:

When I told my ever-optimistic, ever-“hopeful” colleague, Laura Cadden, the news the majority of Obama’s infrastructure stimulus would finally be doled out sometime early next year was already priced into the market, I was showing my belief in efficient markets.

When she gave me a look that curled my toenails, I knew she didn’t believe in such “nonsense.”

The difference between efficient market “believers” and “non-believers” is as strong and divided as the difference between the Left and the Right. In many cases, in fact, the same arguments are involved.

It’s obvious these days that the Left does not believe in Fama’s theory. Why else would it build new regulations and reforms in an effort to limit market freedom?

The Right, on the other hand, with its unending determination to “let the markets handle it,” believe efficient markets will govern and regulate themselves as long as politicians keep their busy hands out of it.

Most of Wall Street tends to follow the Right’s path, realizing the more we know about an investment, the better the decisions we can make.

But it doesn’t matter what you and I think. We aren’t in charge.

Right now, the Left is in charge.

That means free market economics have got to yield to big governments and ever-increasing regulations.

That makes guys like Chris Dodd happy.

Just a few of hours ago, the Senate Banking Committee’s chairmen released an 1,100-page draft bill that takes the very notion of efficient markets and capitalism working hand in hand and tosses it out the window.

Instead of letting a Darwinian-style market separate the strong from the weak, Mr. Dodd wants the government to do the work.

His monstrous bill, which is still nearly 50% shorter than Pelosi’s anti-market healthcare package, finally calls for the “change” so many folks voted for last November.

The Feds power to regulate banks is eradicated. The FDIC role is limited. A new consumer protection agency is created. Executive compensation is in play. Credit-rating agencies will get new guidelines. And of course, the derivatives industry will be re-tooled.

Welcome to the new America, my comrades.

Washington is working to do everything it can to make the markets as inefficient as possible.

It is one more piece of information that proves that human mind is greatly overvalued.

*** Just to prove that efficient markets are still at work and new information can make or break a portfolio, the natural gas industry is reeling today as the International Energy Agency officially warned of a global glut of the vital energy source.

Gas prices are down to their lowest levels in weeks after the agency warned of a strong decline in demand this year and a massive spurt in new production.

As I write, natural gas is trading for $4.483 per MMBtu. Less than a month ago, that figure was just shy of the $6.00 mark.

It’s a downward trend with no end in sight.

Fortunately for TFN Strategic Trader, the news means just one thing, big gains.

I recommended four ways to play the situation recently. Earlier today, all four picks were worth double-digit gains, with one doozy up by 324%.

There’s still time to get in on the action. Read my exclusive report right here.

As you’re reading this, I am nowhere near my computer. In fact, I’m not even in the office today. I spent the last three days increasing my “wealth.”

We all have different definitions of the word. Some of us give it a strictly monetary connotation. There is nothing wrong with that. In its most straight-forward definition, wealth is the abundance of money.

But if I can take the risk of getting touchy-feely for a minute or two, I’d like to take it a bit further. To me, wealth is the abundance of everything good in our lives.

If that truly is the case then move over Warren Buffett and Bill Gates, I am one wealthy guy. I bet you are too.

Like I said, I just spent the last three days with my beautiful, young bride and her equally stellar mother.

We spent the weekend at the beach. It’s Alaskan mother-in-law’s first trip to waters of the Atlantic. The opportunity to share my life-long passion with somebody that has never witnessed its majesty before is something I wouldn’t trade for even the hottest of stock tips.

But we had to cut our trip short. You see, in just a couple of hours, I’ll get the first snapshot of my largest investment yet (literally and figuratively). My wife is just ten weeks into what is going to be a lifetime love affair. She gets her first sonogram at five this afternoon.

Talk about wealth.

I could go on and on, but you don’t care. What you care about is your own wealth. There has never been a better time for an audit.

With soldiers killing soldiers, hedge fund managers stealing billions, a government that has lost its way and a country that appears to have dropped all moral responsibility, it is vital for folks like you and I to figure out how we value ourselves.

What is it that we want?

Health. Family. Stability. Food. Love. Life. Liberty. Happiness.

Of course, financial wealth plays a large role in all of those things. After all, if money is the root of all evil, isn’t the foliage of that is good?

As so many of us out here in the world of finance fight against Washington’s latest moves, it is important to set the issue of money aside. Too often, our political thoughts hinge on the question, “What’s this going to cost me?”

But what about all those other things?

How is healthcare reform going to affect my unborn child? How is a bigger government going to make it easier for me live a stable life? How are bonus caps going to make it easier for me to stay in love with my wife?

None of those things impact our real “wealth,” yet our government is hell bent on the idea that they are going to make all of our lives better.

Like I said last week. Vote ‘em all out. You’ll be wealthier for it.