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.

• A parade of bellwether U.S. companies reported disappointing earnings results yesterday (Tuesday) and cut their outlook for the future. Caterpillar Inc. (CAT) reported its first loss since 1992 and cut its projection for the full year by 50%. Pharmaceutical giant Merck & Co, Inc. (MRK) and chemical maker E.I. du Pont de Nemours & Company (DD) said profits fell 57% and 59% respectively, as both cut forecasts for the full year.
• After acquiring Citigroup Inc.’s (C) Smith Barney retail brokerage unit, Morgan Stanley (MS) is considering buying U.S. regional banks in a move to boost the company’s retail brokerage operations, MarketWatch reported, citing an article in the Nikkei newspaper. “We are looking for potential opportunities to buy a bank that has a presence in an important market in the United States,” Morgan Stanley’s Chief Executive Offer John Mack said in an exclusive interview.
• Continuing to reel from the shift of advertising to the internet, the New York Times Co. (NYT) reported a first-quarter loss of $74.5 million, or 52 cents a share, MarketWatch reported. Excluding special items, the company reported a loss of 34 cents a share as first-quarter revenue tumbled 19% to $609 million. The Times, like many newspapers and magazines, is having a difficult time coping with an advertising downturn.
• Computer spies were able to copy and siphon data related to the design and electronics systems of the $300 billion Joint Strike Fighter project, The Wall Street Journal reported yesterday (Tuesday).  The newspaper quoted current and former government officials as saying the intruders have repeatedly breached the Pentagon’s computer networks, making it potentially easier to defend against the plane.  The spies could not access the most sensitive material, which is kept on computers that are not connected to the Internet. Lockheed Martin Corp. (LMT) is the lead contractor on the Defense Department’s costliest weapons program.
• Senior officials at the Federal Deposit Insurance Corp. (FDIC) have privately discussed who might replace Citigroup Inc. (C) Chief Executive Officer Vikram S. Pandit if the embattled banking giant needs additional federal capital infusions, The Financial Times and MarketWatch both reported. The FDIC identified Chief Financial Officer Edward J. “Ned” Kelly III and ex-CFO Gary Crittenden as possible successors. However, the published reports also state that any initiatives to change Citigroup’s top management will be initiated by the U.S. Treasury Department.
• The U.S. Treasury Department’s plan to excise $1 billion of so-called “toxic” assets from the balance sheets of U.S. banks is vulnerable to all types of abuse and fraud and needs the protection of tough conflict-of-interest rules, government bailout watchdog Neil Barofsky said in a report released yesterday (Tuesday). Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program (TARP), said subsidies for public-private investment partnerships (PPIP) to buy assets could expose taxpayers to higher losses – without offering accompanying increases in the profit opportunities this program is supposed to create, Reuters reported. During the rest of this week, the Treasury Department is accepting applications from asset managers to manage public-private investment funds to buy the hard-to-value, illiquid securities that are backed by troubled mortgages still owned by banks.
• In a report released yesterday (Tuesday), The International Monetary Fund (IMF) says banks and other financial institutions face aggregate losses of $4.1 trillion in the value of their holdings because of a global financial crisis that is “likely to be deep and long lasting.” In that Global Financial Stability Report – which has become a closely watched barometer of the severity of the crisis – the IMF estimated that financial institutions around the world will have to write down about $2.7 trillion worth of loans and securities that originated in the U.S. financial markets between 2007 and 2010. That estimate is up from $2.2 trillion in the fund’s report in January, and is way up from its October estimate of $1.4 trillion, according to The New York Times. Conditions have especially worsened in the emerging markets – and particularly in Europe – where banks face more write-downs and may require fresh equity, even as companies attempt to refinance existing debt. The IMF said banks will endure two-thirds of the write-downs, but noted that pension funds and insurance companies also face steep losses.
• The Reserve Bank of India yesterday (Tuesday) lowered its key borrowing rate by 25 basis points to 3.25% and its lending rate by 25 basis points to 4.75%.”The further policy rate cuts affected as part of this policy should be a definite signal for banks to reduce lending rates,” RBI Governor Duvvuri Subbarao said at a press briefing.

Source: Global Investment News Briefs Wednesday April 22, 2009

…since it is concerned primarily with providing information and news about stocks and bonds so that you will be motivated to constantly buy and sell stocks and bonds.

So I was surprised to read where it starts out with, “Large investors, including some who anticipated deep troubles for the housing and financial sectors, have been buying gold, concerned that moves by governments world-wide to shovel money at problem areas could cripple leading currencies.”

This is exactly true! That is exactly why I am buying gold, and why smart people are buying gold and why large investors are buying gold!

Well, since the WSJ is traditionally concerned with stocks and bonds and so is historically unconcerned and disdainful of gold, I figure that Mr. Zuckerman will follow that “gold bug” news with some disparaging remark like “which only proves how stupid large investors are, since everyone knows that gold is for morons and raving lunatics like, for instance, The Mogambo, who is forever wailing about how you should be buying gold, silver and oil with your very waking breath because the Federal Reserve, which caused all of the world’s problems by their decades-old regimen of constantly over-creating money and credit which produced massive inflations in the prices of stocks, bonds, houses and size of government, is now going to make the money supply go Freaking Super-Nova (FSN) with even MORE excess creation of money and credit to accommodate the panicky, unbelievable, desperate deficit-spending plans measured in the multi-trillions of dollars by the incompetent, brain-damaged Congress and the ridiculous Obama administration comprising, as it does, the worst of the worst, and that means consumer prices are going to explode one day – say people like The Mogambo, within a year or so, and for a long, long time afterward, too.”

Although Mr, Zuckerman does not mention me directly, he says, “For years, big gold fans were fast-moving traders and so-called gold bugs, a crowd of bears ever-convinced that the underpinnings of global economies and markets were set to crumble” which not only describes me to a freaking T, but is exactly what happened!

He also describes me pretty well, too, when he says, “Gold has disappointed some investors because it hasn’t been a home-run investment despite continuing financial ills” which is also the fault of the Federal Reserve, which is on record as saying that “the Fed stands ready” to dump as much gold onto the market as is needed to keep its price from rising.

And the reason they are openly manipulating the price of gold, which is the advice of former Fed chairman Paul Volcker, is because they are concerned about the price of gold rising, which is a clear signal that inflation is raging because the Fed is a bunch of money-maddened morons and the economy is in Big Freaking Inflationary Trouble (BFIT) because of them and their mismanagement of monetary policy with their ridiculous neo-Keynesian econometric stupidities! Hahahaha!

And it is going to get worse, as Junior Mogambo Ranger (JMR) Wayne T. sent a clip from ft.com that announced that “Barack Obama’s top economic adviser has urged world leaders to pump more public money into the economy in a coordinated effort to boost demand and lift the world out of recession.”

And how are we going to do this amazing feat? By engineering a “global demand-led recovery” where everybody starts buying! Buying! Buying!

And in fact, Laughable Larry Summers thinks, “There’s no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda.”

I cannot believe what I am reading! Perhaps in a feeble attempt to make me shut up my screaming in outrage at the inflation in prices that such irresponsible economic stupidity will cause, he does allow that, as ft.com terms it, “While the US and other western nations should return to living within their means in the medium term, everyone should raise spending sharply now.” Hahaha! Unbelievable!

And why in the hell would anyone in their right mind say such a bizarre thing that is directly contraindicated by the entire stinking corpus of world economic history for the last 4,500 years which proves that, 100% percent of the time, increasing the money supply of a fiat currency with government deficit-spending has been what we in the economics biz officially call a Big, Big, Bad, Bad, Bankrupting Bust (BBBBBB).

Well, don’t look at me for an answer as to why someone would say such a ridiculous thing and make us laugh with scorn and contempt, but, “In an interview with the Financial Times, Lawrence Summers said the urgent need for a short-term increase in spending by governments temporarily overrode the longer-term goal of tackling the global imbalances many economists believe caused the financial crisis.” Hahahaha!

“Temporarily overrode”! Hahaha! This is the economics of Larry Summers? Hahahaha! No wonder he wound up in the Obama administration! Hahaha! No wonder we are so freaking doomed!

I am struggling to contain my laughter, as I want to make sure that I write this down because people in the future are not going to be satisfied with me merely recalling the moment and laughing and guffawing all over again, but probably drooling more than I do now.

So I officially make note that Larry Summers, “Barack Obama’s top economic adviser” thinks that things will be better by having the government spend more money! Hahahaha!

This is after, I assume, getting it from the Federal Reserve, which can merely push a button to create all the money and credit one can even imagine, at perpetually low interest rates, so that untold trillions of dollars of new money can be borrowed from banks so that untold trillions of dollars in new Treasury bonds can be bought, worsening horrific imbalances that are already so staggering that they could only have been produced during rampant government corruption and/or pandemic stupidity! Hahaha!

I knew I could not get into the interview itself, and, as usual, am stopped long before I can even get near, although sometimes I can break free of the grasp of security guards long enough so that you can barely hear me in the background yelling, “We’re freaking doomed, you morons! The damned increase in the money supply by government deficit-spending will increase prices and produce Really, Really Weird (RRW) economic distortions!”

Well, this is not one of those times, and I couldn’t hear a thing they were saying, and thus they could not hear me, and I had to read in the Financial Times article that Mr. Summers says, in another of those things that must be written down because nobody is going to believe it, that “The US administration had no choice but to take strong public action to ‘save the market system from its own excesses.’” Hahahaha!

“Save the system from its own excesses” with more excesses! Hahahaha!

But this is not about how much disrespect I have for Mr. Summers’ opinion (because, as Milton Berle said, “Never trust the opinion of a man in trouble” as to the necessity of more governmental deficit-spending to correct the bankrupting imbalances of previous governmental deficit-spending until fully half – half! – of the economy is now composed of local, state and federal government spending, which is not even to mention all the borrowing by the local and state governments floating bonds to pay for sewers and fire houses and playgrounds where most of the “children” are probably drug-addled adolescent criminals and brain-damaged mutants, judging by the way they look, dress and act.

No, this is about how you should buy gold; but perhaps the best reason to buy gold is provided by Mr. Zuckerman himself, who says, “Since 1971, the dollar has been backed not by gold but by faith in the U.S. government”! Hahaha! Faith in the U.S. government! Hahahaha!

If anybody has any faith whatsoever in the U.S. government, then they have not been paying attention and deserve to lose their money, as the price of freedom, they say, is eternal vigilance, but that is not exactly true. It looks like the saying should be “The price of freedom is either eternal vigilance or all your money.”

The good news is that the real, lazy man’s secret is that gold is “eternal vigilance” in a handy, compact yellow metal, and sometimes, like now, you will actually get richer in terms of fiat money due to the depreciation of the over-produced fiat money!

Whee! This investing stuff is easy!

Source: There’s No Place Like Gold

The venture – Areva Newport News LLC – will emanate from a $360 million investment, and will lead to the construction of a 300,000-square-foot production-and-engineering facility, the two companies said yesterday (Thursday). It will employ 500 workers when completed in 2011, according to an MSNMoneycentral report.

Mike Petters, president of Northrop Grumman Shipbuilding, the unit that has signed on to work with Areva, told The Wall Street Journal that “we’ve watched manufacturing wane in shipbuilding and we’ve watched for other opportunities to go into adjacent areas…We think a nuclear renaissance is coming and we have the work force.”

The facility will promote U.S. market sales of Areva’s “evolutionary power reactor,” or EPR. Areva is seeking to get the reactor design certified by the Nuclear Regulatory Commission (NRC) for use in the U.S. market, The Journal reported.

The deal is also the latest illustration that commercial nuclear power – which has been on a more or less permanent hiatus in the U.S. market since the 1979 near-meltdown at the Three Mile Island nuclear powerlant near Harrisburg, Pa.— may finally be making a comeback in the energy-starved U.S. market.

There hasn’t been a single new nuclear plant built since the Three Mile Island accident; this new manufacturing facility will be the first of its kind built in this country in 35 years, the Newport News Daily Press reported.

The state-run Areva is trying to compete in an industry in which Japanese firms – such as  Hitachi Ltd. (ADR: HIT) and Toshiba Corp. (OTC: TOSBF), have come to play a large role. No surprise, too, that China is building up its nuclear capabilities, and has global objectives for that business.

“Our target is 80% U.S. content” for U.S. nuclear power plants, Anne Lauvergeon, chief executive of Areva, told  The Journal. Lauvergeon believes Areva’s linkup with Northrop will give the French company a competitive advantage over rivals that are more reliant on imported goods. That’s why she said that she’s emphasizing the need to have 80% of the content for U.S. reactors to be built domestically.

Orders from U.S. nuclear operators could top $100 billion in coming years, and some are hoping that a wave of nuclear construction could also bolster the U.S.’s ailing manufacturing sector.

Areva’s Lauvergeon said her company’s existing heavy manufacturing facility at Chalon/Saint Marcel, France, is operating at capacity with a five-year backlog of orders. Nucelar plants built with Areva’s design are under construction in France, Finland and China. Three U.S. utilities have selected Areva’s design including Constellation Energy Group Inc. (CEG), PPL Corp. (PPL) and Ameren Corp. (AEE).

With its decision to invest so heavily in the U.S. market – and to involve a partner – it’s clear Areva is highly confident that plans to build new nuclear plants in North America will move forward, The Journal reportedSource: French Nuclear Giant Areva Links Up With Northrop in Groundbreaking Production Venture

I got a real kick out of The Week Ahead column in the Wall Street Journal on Monday, as Sudeep Reddy starts out saying, “Inflation is too high because of soaring global commodity prices.” Hahaha!

Apparently this doofus does not know that inflation in prices comes AFTER inflation in the money supply, and so while “inflation is too high”, it is NOT because of soaring global commodity prices: It is because the staggering increases in global money supply have created so damned much money that all that dough has to go somewhere, and it is going into the marketplace to bid up the prices of things, like commodities, creating the higher prices!

But stupidity about inflation is so rampant that I actually tried this fascinating philosophy that very day as I was driving along in my car. I had the radio blaring and the “pedal to the metal” as I happily raced along, passing other cars with a big “whoosh!” and honking at the pretty girls hoping that they would say, “Oh, you are so handsome! Take me for a ride and I will let you do whatever you want, over and over again, until you are exhausted!”

After a while I was pretty grumpy because none of the girls wanted to go for a ride and most of them threatened to call the police if I did not stop bothering them and honking the horn at them, which was prophetic in its own way because the police soon pulled me over.

Anyway, the thought of being pulled over by the police would normally have me in a panic, but this time I was ready! So as I pulled over to the side of the road, I smiled smugly to myself as the grim-faced cop came sauntering up to my car, whereupon he started predictably yammering about giving me a ticket for speeding.

Coolly, and with a sneer on my face, I told him that it wasn’t my fault! I explained that, yes, I had my foot on the accelerator, but the car went fast all by itself! In fact, the more I stepped on the accelerator, the faster the car went! It’s obviously one of the mysteries of the universe!

He just kept calmly writing out the citation in that damned little pad of his, and I kept explaining how this is the exact same scenario that Ben Bernanke, chairman of the Federal Reserve and Sudeep Reddy, ace reporter for the Wall Street Journal, keep yammering about! They say that roaring inflation in prices, like the roaring inflation in my vehicle’s speed, happens all by itself, and if he wanted to hand out tickets for mysteries of the cosmos like this, then why doesn’t he get his fat, stupid cop butt back into his stupid little cop car and arrest Ben Bernanke, Alan Greenspan and Sudeep Reddy?

Of course, I naturally figured that with these kinds of references, he would soon see the powerful validity of my argument about how I was right that the speed of my car was not my fault, and send me merrily on my way, again happily speeding, the radio blaring and honking at the pretty girls. But he didn’t. He started giving me a hard time! The bastard!

Then I decided to play my trump card, and told him that I can’t be given a traffic citation because I had already given myself a pardon for any crimes I may have committed, including traffic infractions, just like Bush and Cheney have given themselves a pardon-in-advance against being charged with war crimes of which they are obviously guilty.

My argument is simple: If these two despicable creeps could pass legislation that trumps international laws and conventions to which we are signatory members, then surely I can be above the law, too! It’s just a matter of creating the right pieces of paper!

It didn’t work. He knew I was an idiot. And I know a couple of other idiots, but they didn’t get tickets for speeding. See the kind of discriminatory crap I have to put up with every damned day of my life it seems?

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Source: Monetary Joyride

• The U.S. Treasury Department announced yesterday (Wednesday) that it would bring back the one-year Treasury bill at its next quarterly refunding auction, MarketWatch reported. “The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term,” a panel of experts said in a government report, stating the next option could be to bring back the 3-year note as well.

• United Online Inc. (UNTD), the owner of Internet service providers NetZero and Juno, announced it would acquire online florist FTD Group Inc. (FTD) for about $456 million in cash, stock and notes, The Wall Street Journal reported. “This transaction will meaningfully diversify our revenue base within a large global market experiencing significant migration to the Internet,” said United Online Chief Executive Mark R. Goldston.

• Descendents of oil scion John D. Rockefeller, the founder of Standard Oil from which both Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) can trace early roots, have called upon Exxon to be more environmentally conscious, despite the company’s record recent profits, Forbes reported. Neva Rockefeller Goodwin, a great-granddaughter of John D. Rockefeller, said yesterday (Wednesday), “The truth is that Exxon Mobil is profiting in the short term from investments and decisions made many years ago, and by focusing on a narrow path that ignores the rapidly shifting energy landscape around the world, including developing nations.”

• Slowing demand and increasing competition are to blame for Garmin Ltd. (GRMN), navigation device maker, to miss market estimates for the first quarter. Garmin’s shares dropped as much as 14.4% on the day to its 52-week low of $39.75 a share as it posted a profit of $147.8 million, or 67 cents a share. Analysts expected the company to earn 74 cents a share, according to Reuters Estimates.

• Soft-drink titans PepsiCo. Inc. (PEP) and The Coca-Cola Co. (KO) continue to push their battle into uncharted waters, as Pepsi announced it acquired V Water, Britain’s vitamin-enhanced bottled water, for an undisclosed amount. V Water is very similar to vitaminwater, which Coca-Cola bought last year for $4.1 billion. Sales of non-carbonated drinks are growing considerable faster than carbonated beverages, and Pepsi already owns SoBe Life Water, Gatorade sports drink and Aquafina bottled water. 

• Brazil’s Bovespa stock index jumped to a record after Standard & Poor’s unexpectedly raised the country’s credit rating to investment grade. The Bovespa Index of the most-traded stocks on the Sao Paul exchange surged 6.38% to 67,896.13 at 3:32 pm EST, its biggest gain in three months.

• Kraft Foods Inc. (KFT) reported first-quarter profit of $608 million, a 13% drop from a year ago, yesterday (Wednesday). Though sales improved 21% despite economic pressures and rising commodities prices, as Kraft raised prices on 90% of its products.

• Kellogg Co. (K) reported yesterday (Wednesday) that first-quarter profit fell 2% despite recent price increases. Net earnings fell to $315 million compared with $321 million a year ago. Earnings per share increased from 80 cents a share to 81 cents a share because of a $650 million share-repurchase program, the Associated Press reported.

According to the WSJ, there is a “rapid rise” in default rates on ARM mortgages,  mortgages that give borrowers with good credit several different monthly-payment options, reports. And a report by Citigroup says losses on ARMs may be “close to subprime” in some cases.

These mortgages, which are sometimes known as “pick-a-pay” or payment-option mortgages but are generically called option adjustable-rate mortgages, are turning out, in some cases, to be even more caustic than subprime loans, in part because the loan balance and the monthly payments on some loans is growing even as home prices are falling.

These loans have become the focus of investigations and a spate of lawsuits by borrowers who believe they were misinformed about the mortgages’ complicated structure.

“Buying real estate isn’t a popular view right now, says Floyd Brown, over at InvestmentU.com. “But that’s what being a contrarian is all about.”

Floyd thinks we could be closer to the end of the bear market in real estate, than the beginning. “This doesn’t mean we are out of the woods yet, but its time to start scouting for under-priced values in real estate, especially in the commercial sector…”

Floyd has found a way to buy $10,000 worth of real estate for $6,700. To find out more, click here.

In my blog I said that misses the main point. Factories make things. They add to the material wealth of the country. Hospitals don’t. You visit a hospital. You get better (or you don’t). The GDP goes up by $50,000 to $150,000, which is nice for politicians to point to. But the economy doesn’t have anything tangible to show for it.

True, hospitals are hard assets. But you need to understand this important fact: Operators that invest their own cash in hospital real estate never generate revenue from the investment. The hospital gets nothing out of owning it. No rental fee. No usage fee. They make money from using that space to offer additional services…

But, at a fraction of the cost, they could have rented out that empty building on Main Street and offer those same additional services. Hospitals are the very definition of a non-earning asset.

But now I’m having second thoughts. If hospitals are just so much deadweight on the economy, then what about other entities that cater to health? What about spas? They’re like new-age hospitals, aren’t they? If we’re including spas, then are hotels that much different? And aren’t hotels just big restaurants with beds?

Really, it comes down to the fact that hospitals are in the service industry. Should we condemn them for that? At least they try to improve or prolong valuable earning assets … namely, us. Doesn’t that count for something?

I think I owe the Wall Street Journal an apology. Hospitals popping up all over the country are no better or worse than Starbucks appearing on every other corner. Starbucks already had their run when they made investors a ton of money. It’s hospitals’ turn now.

But it’s complicated, says the paper, because today’s inflation is “coming at a time of sharply reduced interest rates in the US, the opposite of the usual response to rising inflaton.”

Consumer prices in the U.S., Europe and other rich countries are projected to rise 2.6% this year, the highest inflation rate since 1995, the International Monetary Fund said Wednesday. In the U.S., consumer prices in February were 4% above year-ago levels. The 15 countries that share the euro currently see inflation of 3.5%, a decade high and well above the European Central Bank’s preferred range. Even Japan, long plagued by flat or falling prices, is seeing modest inflation.

“We are freakin doomed!” says a perplexed Mogambo Guru, who reckons we’re all perched on an economic fautl line of mammoth propotions.

“The Fed deliberately created so much money and credit, for so long, totally distorting the economy of the United States and the world into a grotesque, twisted, cancerous monstrosity so that the entire financial system is choking to death on the poison of un-payable debt loads, and now this same Federal Reserve is going to get MORE powers to create MORE weird distortions and more inflation in the money supply and more inflation in consumer prices like food?”

— Here we go again. The private equity firm TPG announced this morning it’ll be tossing Washington Mutual, the nation’s largest savings and loan, a $5 billion subprime lifeline.

Seems like only Thursday Ben Bernanke testified before Congress he thought Bear Stearns was the worst…and that the worst is behind us. Oh yeah, it was only Thursday. Granted, “The government was not directly involved in forging a deal as in the recent purchase of Bear Stearns,” reports The Wall Street Journal,
but still…

The plan would dilute current WaMu shareholders’ shares, which are already down 74% over the last year. But in keeping with today’s market logic, WaMu is up over 18% since the opening bell.

— “The core of the subprime problem,” comments Alan Greenspan in this morning’s Financial Times, “lies with the misjudgments of the investment community.”

Since the end of his book tour, Greenspan has been busying himself trying to deflect blame for the global housing bubble away from the U.S. Federal Reserve.

“Subprime securitization exploded because subprime mortgage-backed securities,” he writes, offering the entire sentence with a gravity-defying two monosyllabic words, “were seemingly underpriced…at original issuance. Subprime delinquencies and foreclosures were modest at the time, creating the illusion of great profit opportunities. Investors of all stripes pressed securitizers for more MBSs.

“Securitizers, in turn, pressed lenders for mortgage paper with little concern about its quality. Even with full authority to intervene, it is not credible that regulators would have been able to prevent the subprime debacle.”

Dr. Googly defends his tenure at the Fed

“We have tried regulation ranging from heavy to central planning. None meaningfully worked. Do we wish to retest the evidence?” Indeed. We happen to agree with him…but still wonder, aren’t arbitrary interest rates also a form of regulation?

— In the wake of those “misjudgments,” Greenspan’s recession-o-meter still reads greater than 50%…meaning he expects the U.S. to contract for a couple of quarters in 2008. But so far, he hasn’t found any evidence in the data to suggest the recession has begun. Yet.

— For what it’s worth, Greenspan endorsed Sen. John McCain for president last week. Perhaps he’s returning a favor. “The issue of economics is something that I’ve really never understood as well as I should,” McCain said a few months ago. But he’s trying to make up for it by reading Greenspan’s biography. At least we know this Republican candidate can read.

— “Pundits calling for a housing and financial bottom have been wrong for six months,” writes our Dan Amoss. And they “will probably keep making the same ‘Fed/Congress/Fannie Mae will save housing’ argument well into 2008.”

“Here we advise: Be wary of these arguments. “Comparisons to 2001 and 1990 bottoms are misplaced: They fail to address the still-enormous gap between household incomes and house prices.”

The continuing difficulty of the middle and working classes to afford their homes is causing what you might call a “balance sheet depression” among banks. Dan’s Strategic Short Report
readers have already generated healthy returns from put options on unhealthy financial and housing shares. See what banks he’s got in his sights next, here.

— Traders are feeling optimistic as the week begins — a carry-over from last week, when the Dow industrials rose 400 points. The S&P 500 starts the new week about where it left off after a big-time rise last Tuesday.

— Asian traders, too, are feeling their oats. The Shanghai Composite jumped nearly 4.5% overnight. And India’s Sensex rose by 2.7%.

— A volatile market like the present one is the perfect environment for holding companies investing in “distressed assets,” our nimble managing editor Chris Mayer told BusinessWeek
this morning. “Bear markets are often when these guys plant the seeds for their next big winners.”

“Such scavengers,” the magazine glows, “scour the market for stocks, bonds or whole companies to buy on the cheap, paying less than they think the company’s assets are worth. A subspecies, known as vulture investors, aims even lower. These investors pick at carcasses of companies in or approaching bankruptcy, often amassing sizable stakes in order to wield influence in a restructuring or liquidation.”

That is to say, they follow the philosophy Chris lays out in his book Invest Like a Dealmaker. The BusinessWeek
piece highlights some of Chris’ favorite plays in this sector, including Leucadia National, which is up 142% from his initial recommendation, and Brookfield Asset Management, up 82%.

— Oil prices have begun the week edging upward. Light, sweet crude is up nearly $1.75 per barrel, to $107.94. OPEC’s chief blamed the weak dollar for expensive goo yesterday, squelching any talk of raising output to ease prices.

“Oil supply to the market is enough,” says OPEC Secretary General Abdullah al-Badri, “and high oil prices are not due to a shortage of crude, but rather it is because of the decrease in the dollar’s value, shortage of refinery capacity and some political tensions in the world.”

— Why should OPEC increase production? We ask innocently.

For the first time, planned “infrastructure” projects in the six Gulf Cooperation Council nations — Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman — will top $2 trillion in value…double the combined GDP of those countries.

The biggest single project — a new city in Kuwait — will cost $77 billion. What better way to spend all the petrodollars flowing in from the West?

— “Cheap food, like cheap oil,” writes Paul Krugman in The New York Times
today, “may be a thing of the past.”

Despite our best efforts, we like Paul Krugman. Granted, the solutions he proposes to economic conundrums are silly, but they don’t hold a candle to those proposed by his brain-dead compatriot Thomas Friedman. And he’s often on the same wavelength as we are.

“There have already been food riots around the world,” he writes, picking up on a theme we were exploring last week. “Food-supplying countries, from Ukraine to Argentina, have been limiting exports in an attempt to protect domestic consumers, leading to angry protests from farmers — and making things even worse in countries that need to import food.

“How did this happen? The answer is a combination of long-term trends, bad luck — and bad policy.”

“The basic premise of corn-based ethanol’s expansion was flawed from day one,” wrote Kevin Kerr in Outstanding Investments
a month ago. “The vast amount of water, arable land, fertilizer, transport, etc., etc., that goes into creating corn-based ethanol is mind-boggling. The idea of transporting ethanol from Iowa to Los Angeles, or Illinois to New Jersey, in specially designed rail cars and tanker trucks is absurd. There are so many problems with this concept it’s hard to imagine how it ever got the traction it did.

“Playing with our food supply in order to reduce oil prices is simply too much of a gamble, and the consequences of such a wasted effort may prove to do far worse damage than anyone ever imagined.”

Kevin, for what it’s worth, will be a featured guest discussing this very subject on CNBC Asia today…and on Larry Kudlow this evening, since he’ll “be hanging around in 30 Rock this evening anyway.”

— Gold inched up to $914 over the weekend.

“I believe that gold will find strong support above $850,” wrote our gold man Ed Bugos on Friday, countering cable news chatter that gold is in a bubble, “regardless of what the U.S. dollar does. The major gold share index, HUI, will find support above 415.”

In the near term, a rising stock market should be very good for the junior miners.

“Small-cap precious metal shares are likely to rally with the Dow,” says Bugos. “The risk-to-reward ratio and relative valuations favor small over large caps. This correction might be just what the doctor ordered to broaden the rally and fix the enormous gap between large- and small-cap returns.”

— In an era when thieves are stripping copper pipes from foreclosed homes and stealing wheat from Kansas grain bins, we guess this next bit should come as a no surprise. And yet…

Police in Morgan Hill, Calif., arrested a tanker truck driver last week after he was seen siphoning grease from a storage tank behind a Burger King. Officers figure he was planning to take it to a nearby refinery, where a full tanker of the glop — 5,000 gallons worth — would’ve fetched $6,750.

“Our guess is it’s a biodiesel fuel thing,” the Morgan Hill police chief said. “It’s like someone stealing copper wire. This might turn into something that starts to occur more frequently.”

Yummy.

— “After this deal is consummated, the shareholders will lose 93% of their stock value as of last June,” writes a reader, objecting to the media’s use of the term ‘bailout’ when referring to the Fed-backed, but as yet unconsummated, J.P. Morgan/Bear Stearns deal.

“Employees and managers invested in Bear stock have big stock losses, most of which was earlier compensation. They predict that only 7,000 of the 14,000 Bear employees will be out of a job. The former CEO sold his stock that had been worth close to a billion dollars last summer for $60 million recently.

“The idea that Bear Stearns’ business partners have benefited is absurd. As with any bank, once the Fed stabilized the company, it could withdraw any cash or securities it had on deposit; however, if it has losses on those securities, the losses still remain.

“Owners, managers, employees and customers all got hammered, so where is the ‘bailout’?”

The 5: We can only surmise they either work for or owned shares in Bear, which is unfortunate.

— “Since the taxpayers indirectly will be paying for the Bear Stearns bailout,” another reader writes, “I suggest the Treasury just buy all the shares and distribute them to all of the U.S. taxpayers. I would imagine most people would sell them for cash and spend it, creating a glut of stock supply. The brokerage would have windfall commissions, the economy would be stimulated and astute investors could buy the shares on the cheap. Win-win-win. Bloody brilliant, eh?

“On the other hand, I dread that Congress will elect itself as the board of directors.”

— Lastly, Whiskey & Gunpowder’s
Greg Grillot forwarded this bit of levity from The Washington Post
this morning:

Best,

Addison Wiggin

P.S.: Byron King’s play on the Chinese attempt to corner the “rare earth” market is already up 5% in a week. Stranger things have happened. Look for more on Energy & Scarcity Investor
later today…cheers.