Like a seething insect infestation that grows exponentially if left unattended, the recent proliferation of positive propaganda courtesy of the talking-heads over at CNBC is at best misleading and at worse dangerously irresponsible in its presentation. Many would have you believe that the recession is over, in fact many have purported that not only is the worst behind us but indeed we’re in a new bull market (say what?) and that a prosperous recovery interlaced with growth and renewed consumer confidence is right around the corner.

Quick, pour your money back into equities, and go buy a car, or a house (or both), and take out some new credit cards because you don’t want to get left behind! While I may subscribe to the theory that the worst of this recession has past I do not agree that we’re out of the woods. In point of fact, just because things are getting ‘less bad’ doesn’t mean they’re getting better…

Let’s look at this in several contexts: firstly, credit is still scarce both for consumers and businesses; banks have tightened their lending standards drastically and have raised their risk tolerance levels significantly. Until mainstream credit markets become more liquid one cannot call this a recovery.

Secondly; Q2 corporate earnings were touted as “strong”, and “beating expectations”. Let’s agree that the expectations were set artificially low in the first place, and let’s also acknowledge that profits earned as a result of cost savings are not the same as profits earned from an increase in revenue. You can’t save your way to profitability. At best these “earnings” which are a result of savings from massive layoffs, reductions in capacity and clever accounting entries are one-time events and cannot be repeated every quarter. Until demand for goods and services returns to the market place and corporate earnings are the result of incremental increases in revenues then one cannot call this a recovery.

Thirdly, and perhaps most important, is employment (or lack thereof). The equity markets rejoiced in the “reduction” of June unemployment from 9.5% to 9.4%. Are you kidding me? A tenth of a percent drop in unemployment is by no means a cause for celebration; similarly, the fact that only 250K people lost their jobs last month is equally no reason to call this a recovery. While the unemployment number was less than expected, it only suggests that the pace of job loss is slowing (which is good) but does not show job creation which is a critical component to any recovery.

Unemployment might be bottoming but lets not forget that this economy has shed nearly 7 million jobs and the Obama administration planned their recovery and fiscal budgets on 8.5% unemployment (which they said we wouldn’t surpass) which we’ve blown through like a runaway train. Unemployment is supposed to top 10.5% next year and while, yes, this is a “lagging indicator” in a technical sense it’s still a very real component in a physical sense when you picture the 7 million people sitting at home every day not working.

What I’m trying to say here is don’t believe the hype. The equity markets have come too far too quickly with no reasonable fundamental explanation. Don’t rely on the news anchors alone to tell you this recession is over, and certainly take everything CNBC says with several grains of salt. Until we start to see credit flowing again, incremental increases in corporate revenues based on real demand, and job creation (and not just Government jobs) it is not fair for anyone to call this a recovery.

Sound Off: Do you think the economy is actually getting better, or just less-bad?

Thomas Jefferson was arguably one of the greatest men in our country’s founding history, and was a brilliant thinker – a true renaissance man. It has been said the greatest volume of sheer brainpower in one place occurred when Jefferson dined alone…

Below are some quotes from Thomas Jefferson, which are as relevant today as they were when he stated them. They pertain not only to the issues which were prevalent during the first few decades of our country, but they are important now as conceptually our country may be on the verge of either making significant mistakes with serious implications or potentially changing the future for the better (for once!) [Especially read the last quote from 1802.]

“When we get piled upon one another in large cities, as in Europe,
we shall become as corrupt as Europe.”
Thomas Jefferson

“The democracy will cease to exist when you take away from those
who are willing to work and give to those who would not.”
Thomas Jefferson

“It is incumbent on every generation to pay its own debts as it goes.
A principle which if acted on would save one-half the wars of the world.”
Thomas Jefferson

“I predict future happiness for Americans if they can prevent the
Government from wasting the labors of the people under the pretense of taking care of them.”
Thomas Jefferson

“My reading of history convinces me that most bad government results from too much Government.”
Thomas Jefferson

“No free man shall ever be debarred the use of arms.”
Thomas Jefferson

“The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.”
Thomas Jefferson

“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”
Thomas Jefferson

“To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.”
Thomas Jefferson

Thomas Jefferson said in 1802:
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered..”

IS THERE ANOTHER “THOMAS JEFFERSON” OUT THERE? WE SHOULD HOPE AND PRAY THERE IS ONE!

Sound Off: Do you feel that these quotes rendered over 200 years ago are relevant in today’s context given our current economic and political environment?

It’s up – it’s down – it’s flat… Oil supply is building, wait, it’s decreasing. The weak dollar is effecting prices, no, wait – it’s the speculators, or maybe demand…

The foregoing jibber-jabber is a small sample of the back-and-forth opinions being presented recently over the relative spike in oil prices from the lows over the winter through the current period. It has been difficult for oil to pick a solid direction recently, though; it is decidedly up over 100% in the last six months.

The uncertainty in the price of oil and, therefore the tremendous differentiation of opinion by pseudo-economic experts alike is predicated on a series of significant discrepancies in the underlying fundamentals, or lack thereof.

Last summer we saw the price of oil reach an all-time high near $147 a barrel. This was attributed after the fact to speculators as opposed to a genuine increase in prices based on increase in demand. Now, the price per barrel is more than half that price but has increased drastically of recent, perhaps in a similar speculative fashion.

The problem at large is that the supportive fundamentals in the marketplace are not there. There has been a drastic reduction in capacity coupled with a complete retreat in spending by the consumer. Unemployed people tend not to drive too much…

Furthermore, though OPEC has reduced production in an effort to maintain price stability they have been unable to match the pace with which demand has paired off. We have seen a significant build in oil supplies and a relatively little increase and, in fact, a general decrease in demand which has attributed to the price reduction per barrel.

However, one cannot ignore the recent spike in prices. Of course, the bulls insist that higher oil prices are supportive of an overall recovery due to the return in demand. I don’t buy it. We cannot rely on Joe Consumer anymore to lift us out of the economic hole. This is evidenced by the recent run in oil to the mid $70’s followed by a retreat to $60.

As far as long term projections there is some agreement that prices will likely go up. Many are calling for a return to oil north of $100 by 2011/2012. If this is accurate, then I would suggest you buy some Exxon/Mobile (ticker: XOM), or United States Oil Fund (ticker: USO) as long term investments – meaning, buy them now and don’t watch them day to day but have it in your mind that in three years they’ll yield a significant return.

If you’re looking for more short term exposure (arbitrage) in the volatility of oil prices I would stick to the ETF’s; namely UCO (long oil) and SCO (short oil). However, be weary of the news and learn to read between the lines. If you choose to play short term then keep watchful eyes on inventories including crude, distillates, and gasoline. Do your homework and know when the inventory data gets reported and be prepared to be nimble and execute trade orders promptly.

Adhering to the later strategy helped me add a 20% return in one month using the same ETF’s I stated above.

Happy Investing.

Sound Off: Do you believe that oil prices are going up in the short term? Long term? Do you believe that it’s mostly speculation, or genuine influence from supply/demand?

As we saw just a week ago, Bernard L. Madoff was sentenced to 150 years in Federal prison. While him going to jail with effectively a life sentence closes one chapter in the Madoff drama it leaves other chapters without closure.

However, I ask the question, “What has really changed”? Are we to believe that because Madoff went to jail, or, Alan Stanford is about to go to trial (and likely to jail) that we as a general investing public are any better off than we were before? Is our money somehow less at risk because these men were caught? I’m sure that the stories of Bernard Madoff and Alan Stanford will be taught in business schools as famous examples of fraud; likely topping the former king fraudsters of Kenneth Lay (Enron) and Jordan Belfort (Stratton Oakmont). However, no one can guarantee that other people will not perpetrate another fraud similar to these aforementioned characters.

In point of fact, there has been a party to all of these frauds past and present which has gone largely unpunished: the Securities and Exchange Commission (SEC). The SEC received warnings about Bernard Madoff in the late 90’s, and as recent as 2004/2005, yet they did nothing. The SEC received notices and began “probing” R. Alan Stanford’s bank and associated businesses as far back as 2000. Yet, nothing was pursued vigilantly and nothing came to light until arguably too late and too many people got hurt.

So what has changed? Is the Securities and Exchange Commission better prepared to spot fraudulent investment schemes in the future? I doubt it. Unfortunately the SEC is a mish-mosh of red tape and political cock-fighting which, in my opinion, does nothing but get n the way of effective regulation and thus ultimately harms the individual investor in the process. The victims of these frauds need to be made whole or, to the extent possible be compensated for their losses (though by no means do I support the Government bailing out fraud victims). BUT… the SEC needs to take some blame beyond their quiet admission that they ‘may have dropped the ball’.

In my opinion the Securities and Exchange Commission has not properly leveraged in assets in terms of its ability to properly regulate, investigate, and protect the investing public. I’m happy that Bernard Madoff went to jail and Stanford will get his too, but I’d like to see someone over at the SEC catch more heat than being “reassigned” to an alternative sub-department and actually accept some responsibility.

Sound Off: Should people who had knowledge of, or, ignored the signs of Madoff and other fraudsters be sent to jail also?

Today was judgment day for Mr. Bernard L. Madoff, the poster child of ponzi scheme’s. Arguably the largest investment fraud, ever, Bernie Madoff – who operated Bernard L. Madoff Investment Securities duped investors out of purportedly $65 Billion.

After all is said and done, the judge threw the book at Madoff today handing down a ridiculous sentence of 150-years. Let’s be clear: We here at theymadoffwithyourmoney.com applaud his arrest, guilty plea, and subsequent sentencing. While we agree that Bernard Madoff deserves to spend the rest of his life in jail the actual number of years handed out doesn’t really mean anything (the guy is 71 years old – even a 30 year sentence is a life sentence).

Though largely symbolic, the sentence does not offer the victims of Bernie Madoff any restitution or closure other than the obvious knowledge that Madoff will die in prison. Many investors will never see their money returned, especially those who invested through feeder-funds or funds-of-funds; the Securities Investors Protection Corp. (SiPC) is not recognizing losses related to Madoff that were incurred through investment with third parties (like feeder funds).

So what does this all mean? Sadly, essentially nothing. While Madoff will rot in a dank jail cell for the rest of his years, his wife and kids will continue to live free (for now) and the victims will largely never be made whole. The trustee overseeing the liquidation of Bernard L. Madoff Investment Securities, Irving Picard, has only recovered slightly more than $2 Billion which is nowhere near the amount purportedly absconded with.

This is a horrible case, and has caused tremendous heartache, stress, and has destroyed peoples families. We’re glad he will spend the rest of his days in jail, but this is just the closure of one chapter. The real recovery for the victims has yet to begin.

Sound Off:

Do you feel 150 years means anything other than the symbolic meaning? Do you think Madoff deserved more/less?

Have you ever heard of Lou Pritchett? He is the former Vice President of Procter & Gamble (retired in 1989); he also wrote a very well recognized business book in 1995 entitled, “Stop Paddling & Start Rocking the Boat”.

Lou Pritchett recently wrote an open letter to President Obama. He sent this letter to the New York Times who ignored the letter. It was only through exposure on the internet that Lou Pritchett’s letter received any acknowledgments.

In my opinion his letter is right on. It emphasizes concerns and fears that I believe many Americans are starting to develop about our current President and, more specifically, the agenda he seems to be pushing and what the long term implications of that agenda are.

What troubles me about how Lou Pritchett’s letter was treated by the New York Times, for all intensive purposes an extremely left wing publication, is that as our country made this supposed leap of “Hope” it has become apparent that anyone who doesn’t “Believe in Change” or at least, the kind of change being promoted by the current Administration, is wrong. In point of fact, as I watch the mainstream media go through the motions of the current events and topics, it is apparent that any discussions opposing the ideology of the current President and his Administration is quickly suppressed or worse, dismissed as irrelevant.

Being conservative, or event moderately conservative in our current political environment is viewed as a faux pas. People like Shaun Hannity, Glenn Beck, and Rush Limbaugh get castrated for giving their opposing points of view. Worse, the only defense that the Probama liberal lunatics seem to be able to muster up is, “Hey, we won”, or, “We’re still cleaning up after the last eight years”. Poor excuses and explanations without any sustentative merit.

I fear that if this mentality continues that we’ll be in jeopardy of destroying our core values as Americans and adopting a socialistic, suppressive environment which will be not result in prosperity for all but rather a few who know how to play politics (more on this concept in posts to come). The following are the words of Lou Pritchett in his open letter to President Obama:

Dear President Obama:

You are the thirteenth President under whom I have lived and unlike any of the others, you truly scare me.

You scare me because after months of exposure, I know nothing about you.

You scare me because I do not know how you paid for your expensive Ivy League education and your upscale lifestyle and housing with no visible signs of support.

You scare me because you did not spend the formative years of youth growing up in America and culturally you are not an American.

You scare me because you have never run a company or met a payroll.

You scare me because you have never had military experience, thus don’t understand it at its core.

You scare me because you lack humility and ‘class’, always blaming others.

You scare me because for over half your life you have aligned yourself with radical extremists who hate America and you refuse to publicly denounce these radicals who wish to see America fail.

You scare me because you are a cheerleader for the ‘blame America’ crowd and deliver this message abroad.

You scare me because you want to change America to a European style country where the government sector dominates instead of the private sector.

You scare me because you want to replace our health care system with a government controlled one.

You scare me because you prefer ‘wind mills’ to responsibly capitalizing on our own vast oil, coal and shale reserves.

You scare me because you want to kill the American capitalist goose that lays the golden egg which provides the highest standard of living in the world.

You scare me because you have begun to use ‘extortion’ tactics against certain banks and corporations.

You scare me because your own political party shrinks from challenging you on your wild and irresponsible spending proposals.

You scare me because you will not openly listen to or even consider opposing points of view from intelligent people.

You scare me because you falsely believe that you are both omnipotent and omniscient.

You scare me because the media gives you a free pass on everything you do.

You scare me because you demonize and want to silence the Limbaugh’s, Hannitys, O’Relllys and Becks who offer opposing, conservative points of view.

You scare me because you prefer controlling over governing.

Finally, you scare me because if you serve a second term I will probably not feel safe in writing a similar letter in 8 years.

Lou Pritchett

Note: Lou Pritchett is a former vice president of Procter & Gamble whose career at that company spanned 36 years before his retirement in 1989, and he is the author of the 1995 business book, Stop Paddling & Start Rocking the Boat.

Mr. Pritchett confirmed that he was indeed the author of the much-circulated “open letter.” “I did write the ‘you scare me’ letter. I sent it to the NY Times but they never acknowledged or published it. However, it hit the internet and according to the ‘experts’ has had over 500,000 hits.

Sound Off:
Do you think that the liberals in our political environment are suppressing opposing points of view? Are you scared by, or at least in certain respects agree with Lou Pritchett’s point of view?

…it’s funny how things tend to repeat themselves throughout history. We often find the words of wisdom from years past serving us well at points in the future.

Currently our Country is in the midst of a very serious economic recession. Irrespective of what the media pundits, prObama supporters, and Government officials may say this is not over yet. Will it get better eventually; yes – soon, maybe…but maybe not.

There has been a lot of focus and attention on how our Country is going to pay for all the debt we’re creating. Simply put, the plan is basically to tax the shit out the rich and punish large corporations with extra taxes for revenues earned overseas – all while giving the “average joe” a “better shot” (a.k.a. a handout).

I believe that we’re on the path to create a huge gap in our society within this country. I believe the middle class is being destroyed; I believe we’re going to have a disparity in the classes analogous to the way we had disparity and inequality in the races during the first half of the last century. I believe that people will be punished through taxes for being successful. I worry hat we’re rapidly devaluing our currency and creating an impossible burden of inflation and debt that even our children’s children will be paying off long after we’re gone.

…I’m truly concerned about the state of our economy and country.

The following words are from Abraham Lincoln, and in the context of my first paragraph I ask, where has the wisdom gone?

You cannot help the poor by destroying the rich.

You cannot help people permanently by doing for them, what they could and should do for themselves.