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Facecrime
By Doug Hornig, Editor, Casey’s Extraordinary Technology
In late September, there was a modest gathering of law enforcement officers, military personnel, and mental health professionals in the small western New York town of Hamburg. It was totally ignored by the mainstream media, with just a reporter from the Buffalo News on hand to record the proceedings. Lucky for us.
The 120 men and women were attending the International First Responder-Military Symposium, held at Hilbert College, a small “Franciscan tradition” place of learning. Not that St. Francis would have been interested in a military symposium, but if he’d been able to attend, he’d have heard all about a new technology that will help identify and track “terrorists.”
A lot of very disparate people have been tagged with that term of late. But this new tech may well be the final icing on the cake. It’s a computer program that trawls phone conversations, emails, and social networking sites looking for any signs of resentment of the government.
That’s right. If you’re angry at Washington, they want to know who you are and what you’re saying.
The program has just been rolled out, and there’s no certainty that the cops or the Pentagon will jump at the chance to own it. But in the current climate, what’s the likelihood that they’ll turn up their noses at the opportunity to add this valuable weapon to their anti-terrorist arsenal?
Mathieu Guidere of the University of Geneva is co-developer of the software, along with Dr. Newton Howard, director of MIT’s Mind Machine Project. Guidere said it works by pinpointing “resentment in conversations through measurements in decibels and other voice biometrics,” and that it “detects obsessiveness with the individual going back to the same topic over and over, measuring crescendos.” With written material, it hunts for a similar fixation on the subject.
Chillingly, Guidere added that once this dangerous individual has been identified, the information can be passed along to authorities so surveillance can begin.
For the moment, Guidere is content to tout his program as a means of locating potential lone bombers, but his method of characterization leaves a bit to be desired. These people are not mentally deranged, Guidere says, they harbor hatred and deep resentment toward government. And their emotional spikes can be identified by the computer.
Quite a selling point. You monitor what folks are saying on Facebook. You profile a suicide bomber bound for Times Square. You stop him before he does the deed. Who would be against that?
Trouble is, of course, that “deep resentment toward government” describes everyone from WTO protesters to Tea Partiers and, increasingly, in-between Americans who have never picketed anything. In fact, it just may be possible that the phrase describes more than a few readers of this publication.
Here’s another quote: “It was terribly dangerous to let your thoughts wander when you were in any public place or within range of a telescreen. The smallest thing could give you away. A nervous tic, an unconscious look of anxiety, a habit of muttering to yourself – anything that carried with it the suggestion of abnormality, of having something to hide. In any case, to wear an improper expression on your face … was itself a punishable offense. There was even a word for it in Newspeak: facecrime…”
Those words were written over 60 years ago, by George Orwell, in the novel 1984. Only off by 26 years. Not bad, considering he had only his imagination with which to conjure up the total surveillance state.
Too bad Orwell didn’t live to see the Internet. He would’ve loved it for its potential to undermine centralized control. Now though, as you can see, plans are afoot to take the very embodiment of freedom of speech and turn it against the people. How will it survive as an open forum if people know the feds are patrolling it for unacceptable words?
All of the prohibitions government feels compelled to enforce have already turned America into the world’s #1 Incarceration Nation. We’re running short on prison space. So where will they put this horde of malcontents they’ll be rounding up in the near future? Good question.
Building the Internet was a massive undertaking. But keeping it free may prove to be even more difficult.
LOL, I wish, but alas no insider info, just some rumor I picked up on a while ago. If a RM comes to pass with this low OS we could see pennies easily. I am noticing a lot of hype but no substance anywhere. Time will tell.
.........al
I caught rumors of a possible RM a few months ago. Could not confirm it. With low OS would be a good candidate. Watching closely.
.........al
How This Economy Recovery Stacks Up
http://www.investorsinsight.com/blogs/forecasts_trends/archive/2010/10/26/how-this-economy-recovery-stacks-up.aspx
I've been a reader of Jefferson for a long time. Funny how the wisdom of the past is so applicable today.
........al
> Subject: Thomas Jefferson
>
>> ____________________________________
>
> How did Jefferson know?
>
> John F. Kennedy held a dinner in the white House for a group of the
> brightest minds in the nation at that time. He made this statement:
> "This is perhaps the assembly of the most intelligence ever to
> gather at one time in the White House with the exception of
> when Thomas Jefferson dined alone."
> 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_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff109181.html)
>
>
> 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_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff122881.html)
>
>
> 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_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff136389.html)
>
>
> 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_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff136410..html)
>
>
> My reading of history convinces me
> that most bad government results from too much
> government.
> _Thomas Jefferson_
> (http://www..brainyquote.com/quotes/quotes/t/thomasjeff157220.html)
>
>
> No free man shall ever be debarred
> the use of arms.
> _Thomas Jefferson_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff125076..html)
>
>
> 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_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff100991..html)
>
>
> The tree of liberty must be
> refreshed from time to time with the blood of
> patriots and tyrants.
> _Thomas Jefferson_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff109180.html)
>
>
> To compel a man to subsidize with
> his taxes the propagation of ideas which he
> disbelieves and abhors is sinful and tyrannical.
> _Thomas Jefferson_
> (http://www.brainyquote.com/quotes/quotes/t/thomasjeff157246..html)
>
>
> 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.'
Please note I am not a fan of Sarah Palin but I thought I'd pass this along for reading pleasure. Please note it was published in Canada and we would never see this in US media.
The Real Truth About Sarah Palin -- Ouch !
Very interesting facts on two very
different ladies.
Sarah Palin
Whether your a Democrat, Independent,
or Republican....the second half of this email should make all of us
very sick,
send this on .....especially the
second half......
READ TO THE VERY END! VERY
ENLIGHTENING!!! AND VERY DISTURBING!!!
By Dewie Whetsell, Alaskan Fisherman.
As posted in comments on Greta's
article referencing the MOVEON ad about Sarah Palin.
The last 45 of my 66 years I've spent
in a commercial fishing town in Alaska . I understand Alaska politics
but never understood national politics well until this last year.
Here's the breaking point: Neither side of the Palin controversy gets
it. It's not about persona, style, rhetoric, it's about doing things.
Even Palin supporters never mention the things that I'm about to
mention here.
1. Democrats forget when Palin was the
Darling of the Democrats, because as soon as Palin took the Governor's
office away from a fellow Republican and tough SOB, Frank Murkowski,
she tore into the Republican's "Corrupt Bastards Club" (CBC) and sent
them packing. Many of them are now residing in State housing and
wearing orange jump suits The Democrats reacted by skipping around the
yard, throwing confetti and singing, "la la la la" (well, you know how
they are). Name another governor in this country that has ever done
anything similar.
2. Now with the CBC gone, there were
fewer Alaskan politicians to protect the huge, giant oil companies
here. So she constructed and enacted a new system of splitting the oil
profits called "ACES." Exxon (the biggest corporation in the world)
protested and Sarah told them, "don't let the door hit you in the
stern on your way out." They stayed, and Alaska residents went from
being merely wealthy to being filthy rich. Of course, the other huge
international oil companies meekly fell in line. Again, give me the
name of any other governor in the country that has done anything
similar.
3. The other thing she did when she
walked into the governor's office is she got the list of State
requests for federal funding for projects, known as "pork." She went
through the list, took 85% of them and placed them in the
"when-hell-freezes-over" stack. She let locals know that if we need
something built, we'll pay for it ourselves. Maybe she figured she
could use the money she got from selling the previous governor's jet
because it was extravagant. Maybe she could use the money she saved by
dismissing the governor's cook (remarking that she could cook for her
own family), giving back the State vehicle issued to her, maintaining
that she already had a car, and dismissing her State provided security
force (never mentioning - I imagine - that she's packing heat
herself). I'm still waiting to hear the names of those other
governors.
4. Now, even with her much-ridiculed
"gosh and golly" mannerism, she also managed to put together a totally
new approach to getting a natural gas pipeline built which will be the
biggest private construction project in the history of North America.
No one else could do it although they tried. If that doesn't impress
you, then you're trying too hard to be unimpressed while watching her
do things like this while baking up a batch of brownies with her other
hand.
5. For 30 years, Exxon held a lease to
do exploratory drilling at a place called Point Thompson. They made
excuses the entire time why they couldn't start drilling. In truth
they were holding it like an investment. No governor for 30 years
could make them get started. Then, she told them she was revoking
their lease and kicking them out. They protested and threatened court
action. She shrugged and reminded them that she knew the way to the
court house. Alaska won again.
6. President Obama wants the nation to
be on 25% renewable resources for electricity by 2025. Sarah went to
the legislature and submitted her plan for Alaska to be at 50%
renewable by 2025. We are already at 25%. I can give you more
specifics about things done, as opposed to style and persona.
Everybody wants to be cool, sound cool, look cool. But that's just a
cover-up. I'm still waiting to hear from liberals the names of other
governors who can match what mine has done in two and a half years. I
won't be holding my breath.
By the way, she was content to return
to Alaska after the national election and go to work, but the haters
wouldn't let her. Now these adolescent screechers are obviously not
scuba divers. And no one ever told them what happens when you
continually jab and pester a barracuda. Without warning, it will spin
around and tear your face off. Shoulda known better.
You have just read the truth about
Sarah Palin that sends the media, along with the Democrat party, into
a wild uncontrolled frenzy to discredit her. I guess they are only
interested in skirt chasers, dishonesty, immoral people, liars,
womanizers, murderers, and bitter ex-presidents' wives.
So "You go, Girl." I only wish the men
in Washington had your guts, determination, honesty, and morals.
I rest my case. Only FOOLS listen to
the biased media.
NOW If you've read this far
...............................................now ,open your
eyes..........
First Lady Michelle Obama's Servant
List and Pay Scale
TheFirst Lady Requires More Than
Twenty Attendants (Thats 22 Attendants to be exact)
1. $172,200 - Sher, Susan (Chief Of Staff)
2. $140,000 - Frye, Jocelyn C. (Deputy
Assistant to the President and Director of Policy And Projects For The
First Lady)
3. $113,000 - Rogers, Desiree G.
(Special Assistant to the President and White House Social Secretary)
4. $102,000 - Johnston, Camille Y.
(Special Assistant to the President and Director of Communications for
the First Lady)
5. $100,000 - Winter, Melissa E.
(Special Assistant to the President and Deputy Chief Of Staff to the
First Lady)
6. $90,000 - Medina , David S.
(Deputy Chief Of Staff to the First Lady)
7. $84,000 - Lelyveld, Catherine M.
(Director and Press Secretary to the First Lady)
8. $75,000 - Starkey, Frances M.
(Director of Scheduling and Advance for the First Lady)
9. $70,000 - Sanders, Trooper (Deputy
Director of Policy and Projects for the First Lady)
10. $65,000 - Burnough, Erinn J.
(Deputy Director and Deputy Social Secretary)
11. $64,000 - Reinstein, Joseph B.
(Deputy Director and Deputy Social Secretary)
12. $62,000 - Goodman, Jennifer R.
(Deputy Director of Scheduling and Events Coordinator For The First
Lady)
13. $60,000 - Fitts, Alan O. (Deputy
Director of Advance and Trip Director for the First Lady)
14. $57,500 - Lewis, Dana M. (Special
Assistant and Personal Aide to the First Lady)
15. $52,500 - Mustaphi, Semonti M.
(Associate Director and Deputy Press Secretary to The First Lady)
16. $50,000 - Jarvis, Kristen E.
(Special=2 0Assistant for Scheduling and Traveling Aide to The First
Lady)
17. $45,000 - Lechtenberg, Tyler A.
(Associate Director of Correspondence For The First Lady)
18. $43,000 - Tubman, Samantha (Deputy
Associate Director, Social Office)
19. $40,000 - Boswell, Joseph J.
(Executive Assistant to the Chief Of Staff to the First Lady)
20. $36,000 - Armbruster, Sally M.
(Staff Assistant to the Social Secretary)
21. $35,000 - Bookey, Natalie (Staff Assistant)
22. $35,000 - Jackson, Deilia A.
(Deputy Associate Director of Correspondence for the First Lady)
(This is community organizing at it's finest.)
There has NEVER been anyone in the
White House at any time who has created such an army of staffers whose
sole duties are the facilitation of the First Lady's social life.One
wonders why she needs so much help,at taxpayer expense, when even
Hillary, only had three; Jackie Kennedy one; Laura Bush one; and prior
to Mamie Eisenhower social help came from the President's own pocket.
Note: This does not include makeup
artist Ingrid Grimes-Miles, 49, and "First Hairstylist" Johnny Wright,
31, both of whom traveled aboard Air Force One to Europe .
FRIENDS.....THESE SALARIES ADD UP TO
SIX MILLION, THREE HUNDRED SIXTY FOUR THOUSAND DOLLARS ($6,364,000)
FOR THE 4 YEARS OF OFFICE????? AND WE ARE IN A RECESSION?????
WELL....MOST OF US ARE. I GUESS IT'S OK TO SPEND WILDLY WHEN IT'S NOT
YOUR OWN MONEY?????
Copyright 2009 CanadaFreePress.Com
<http://freepress.com/>
Yes, Yes, I know, The Canadian Free
Press has to publish this because the USA media is too scared they
might be considered racist.
Sorry USA !
History Unfolding -
David Kaiser is a respected historian whose published works have covered a broad range of topics, from European Warfare to American League Baseball. Born in 1947, the son of a diplomat, Kaiser spent his childhood in three capital cities: Washington D.C. , Albany , New York , and Dakar , Senegal . He attended Harvard University , graduating there in 1969 with a B.A. in history. He then spent several years more at Harvard, gaining a PhD in history, which he obtained in 1976. He served in the Army Reserve from 1970 to 1976.
He is a professor in the Strategy and Policy Department of theUnited States Naval War College. He has previously taught at Carnegie Mellon, Williams College and Harvard University . Kaiser's latest book, The Road to Dallas, about the Kennedy assassination, was just published by Harvard University Press.
Dr. David Kaiser
History Unfolding
I am a student of history. Professionally, I have written 15 books on history that have been published in six languages, and I have studied history all my life. I have come to think there is something monumentally large afoot, and I do not believe it is simply a banking crisis, or a mortgage crisis, or a credit crisis. Yes these exist, but they are merely single facets on a very large gemstone that is only now coming into a sharper focus.
Something of historic proportions is happening. I can sense it because I know how it feels, smells, what it looks like, and how people react to it. Yes, a perfect storm may be brewing, but there is something happening within our country that has been evolving for about ten to fifteen years.. The pace has dramatically quickened in the past two.
We demand and then codify into law the requirement that our banks make massive loans to people we know they can never pay back? Why?
We learned just days ago that the Federal Reserve, which has little or no real oversight by anyone, has "loaned" two trillion dollars (that is $2,000,000,000,000) over the past few months, but will not tell us to whom or why or disclose the terms. That is our money. Yours and mine. And that is three times the $700 billion we all argued about so strenuously just this past September. Who has this money? Why do they have it? Why are the terms unavailable to us? Who asked for it? Who authorized it? I thought this was a government of "we the people," who loaned our powers to our elected leaders. Apparently not.
We have spent two or more decades intentionally de-industrializing our economy.. Why?
We have intentionally dumbed down our schools, ignored our history, and no longer teach our founding documents, why we are exceptional, and why we are worth preserving. Students by and large cannot write, think critically, read, or articulate. Parents are not revolting, teachers are not picketing, school boards continue to back mediocrity.. Why?
We have now established the precedent of protesting every close election (violently in California over a proposition that is so controversial that it simply wants marriage to remain defined as between one man and one woman. Did you ever think such a thing possible just a decade ago?) We have corrupted our sacred political process by allowing unelected judges to write laws that radically change our way of life, and then mainstream Marxist groups like ACORN and others to turn our voting system into a banana republic. To what purpose?
Now our mortgage industry is collapsing, housing prices are in free fall, major industries are failing, our banking system is on the verge of collapse, social security is nearly bankrupt, as is Medicare and our entire government. Our education system is worse than a joke (I teach college and I know precisely what I am talking about) - the list is staggering in its length, breadth, and depth. It is potentially 1929 x ten...and we are at war with an enemy we cannot even name for fear of offending people of the same religion, who, in turn, cannot wait to slit the throats of your children if they have the opportunity to do so.
And finally, we have elected a man that no one really knows anything about, who has never run so much as a Dairy Queen, let alone a town as big as Wasilla , Alaska .. All of his associations and alliances are with real radicals in their chosen fields of employment, and everything we learn about him, drip by drip, is unsettling if not downright scary (Surely you have heard him speak about his idea to create and fund a mandatory civilian defense force stronger than our military for use inside our borders? No? Oh, of course. The media would never play that for you over and over and then demand he answer it. Sarah Palin's pregnant daughter and $150,000 wardrobe are more important.)
Mr. Obama's winning platform can be boiled down to one word: CHANGE. Why?
I have never been so afraid for my country and for my children as I am now.
This man campaigned on bringing people together, something he has never, ever done in his professional life. In my assessment, Obama will divide us along philosophical lines, push us apart, and then try to realign the pieces into a new and different power structure. Change is indeed coming. And when it comes, you will never see the same nation again.
And that is only the beginning..
As a serious student of history, I thought I would never come to experience what the ordinary, moral German must have felt in the mid-1930s. In those times, the "savior" was a former smooth-talking rabble-rouser from the streets, about whom the average German knew next to nothing. What they should have known was that he was associated with groups that shouted, shoved, and pushed around people with whom they disagreed; he edged his way onto the political stage through great oratory. Conservative "losers" read it right now.
And there were the promises. Economic times were tough, people were losing jobs, and he was a great speaker. And he smiled and frowned and waved a lot. And people, even newspapers, were afraid to speak out for fear that his "brown shirts" would bully and beat them into submission. Which they did - regularly. And then, he was duly elected to office, while a full-throttled economic crisis bloomed at hand - the Great Depression. Slowly, but surely he seized the controls of government power, person by person, department by department, bureaucracy by bureaucracy. The children of German citizens were at first, encouraged to join a Youth Movement in his name where they were taught exactly what to think. Later, they were required to do so. No Jews of course,
How did he get people on his side? He did it by promising jobs to the jobless, money to the money-less, and rewards for the military-industrial complex.. He did it by indoctrinating the children, advocating gun control, health care for all, better wages, better jobs, and promising to re-instill pride once again in the country, acrossEurope, and across the world. He did it with a compliant media - did you know that? And he did this all in the name of justice and . . .CHANGE And the people surely got what they voted for.
If you think I am exaggerating, look it up. It's all there in the history books.
So read your history books. Many people of conscience objected in 1933 and were shouted down, called names, laughed at, and ridiculed. When Winston Churchill pointed out the obvious in the late 1930s while seated in the House of Lords in England (he was not yet Prime Minister), he was booed into his seat and called a crazy troublemaker. He was right, though. And the world came to regret that he was not listened to.
Do not forget that Germany was the most educated, the most cultured country in Europe . It was full of music, art, museums, hospitals, laboratories, and universities. And yet, in less than six years (a shorter time span than just two terms of the U. S.presidency) it was rounding up its own citizens, killing others, abrogating its laws, turning children against parents, and neighbors against neighbors. All with the best of intentions, of course. The road to Hell is paved with them.
As a practical thinker, one not overly prone to emotional decisions, I have a choice: I can either believe what the objective pieces of evidence tell me (even if they make me cringe with disgust); I can believe what history is shouting to me from across the chasm of seven decades; or I can hope I am wrong by closing my eyes, having another latte, and ignoring what is transpiring around me..
I choose to believe the evidence. No doubt some people will scoff at me, others laugh, or think I am foolish, naive, or both. To some degree, perhaps I am. But I have never been afraid to look people in the eye and tell them exactly what I believe-and why I believe it.
I pray I am wrong. I do not think I am. Perhaps the only hope is our vote in the next elections.
David Kaiser
Jamestown , Rhode Island
United States
Mortgage Crisis Set to Kick Into a Higher Gear
By Elizabeth MacDonald
Published October 19, 2010
| FOXBusiness
“It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies.”-- Bank of America court filing, June 2010
A court filing made by Bank of America (BAC: 11.79 ,-0.52 ,-4.22%) back in June is adding another twist to the foreclosure document crisis, a problem that could mushroom into more writedowns for the banking industry, and headaches for Fannie Mae, Freddie Mac, and the New York Federal Reserve, which now owns $1.25 trillion in mortgage-backed securities guaranteed by Freddie Mac, Fannie Mae and Ginnie Mae.
Attorneys general in 50 states are now investigating allegations of falsified foreclosure documents, where banks allegedly have not proved they own the underlying mortgage and in turn have the right to seize a home when a borrower defaults.
But now the question is not just who owns the property -- the mortgages -- but whether Wall Street and the mortgage industry pumped out too many mortgage-backed securities built on these loans?
Specifically, the question is how many mortgages were overpromised and overpledged -- sometimes two, three maybe five times, maybe umpteen times -- to back securities? How many fraudulent mortgage-backed securities now sit on Fannie and Freddie’s books? At the New York Fed? Who will be on the hook for those securities?
And instead of another round of quantitative easing from the Federal Reserve, will the US Treasury have to step up to support the banks in clearing out this possible mountain of fake securities?
A New York Fed official tells me that because Fannie and Freddie back its $1.25 trillion mortgage-backed securities portfolio, it won’t face any losses for rotten securities. Fannie and Freddie officials tell me that while they do have that unlimited pipeline into the US Treasury, they are going to turn around and make the banks swallow the losses for the bad securities they built on loans.
Wall Street analysts concur. That is called a put-back. But if the banks cannot, then taxpayers will because the US Treasury is backing up the balance sheets at Fannie and Freddie.
The estimates for the size of the problem are coming in. JPMorgan Chase (JPM: 37.71 ,-0.50 ,-1.31%) analysts Ed Reardon and John Sim calculate bank industry wide put-back risk from Fannie and Freddie at $23 billion to $35 billion from mortgage-backed securities, $40 billion to $80 billion in non-agency mortgages, and $20 billion to $30 billion for second liens and home equity lines of credit.
Reardon and Sim figure the true cost may be less than the total above, perhaps on the order of $55 billion for the entire industry. Worst case scenario could be $120 billion. And the put-backs may be spread over many years, at about $10 billion to $25 billion annually for the entire industry.
But Wall Street fears that numbers could be much larger.
Branch Hill, a San Francisco hedge fund, says Bank of America faces larger numbers for putbacks, suggesting upwards of $59 billion in losses on put-backs. BofA officials say those numbers are exaggerated and are an overstatement.
The Taylor, Bean & Whitaker case illustrates the problem. The BofA court filing indicates that mortgages were falsely pledged to numerous investors, perhaps double- and triple-pledging.
The Bank of America court filing has to do with the Chapter 11 bankruptcy filing by Taylor, Bean & Whitaker Mortgage Corp. [TBW] run by Lee Farkas, a Florida businessman who built Taylor Bean from a tiny mortgage company into the nation’s largest mortgage lender not owned by a bank. The case ropes in Bank of America and Freddie Mac, as well.
Federal prosecutors claim Taylor Bean’s Farkas engaged in a seven-year, multibillion-dollar fraud by double- and triple-pledging Taylor Bean’s mortgage loans to investors and improperly transferring loans and securities between the company’s bank accounts. Farkas now awaits trial.
Prosecutors also say Taylor Bean’s Farkas and others engaged in a scheme to misappropriate more than $1.9 billion in funds to hide operating losses at Taylor Bean, which in turn helped hasten the collapse of Colonial Bank, the company’s main lender.
The fight boils down to this: Deutsche Bank (DB: 57.58 ,-0.82 ,-1.40%) and BNP Paribas in late 2007 created an off-balance sheet vehicle called Ocala Funding that bought $2.1 billion in commercial mortgage loans.
Ocala pumped out asset-backed commercial paper, which then funded the purchase of mortgage loans from Taylor, Bean & Whitaker. Those notes were then sold to Freddie Mac. LaSalle Bank acted as the collateral agent and trustee; Bank of America eventually bought LaSalle Bank, so it then acted as the trustee and managed the collateral for Ocala, helping to oversee the roughly $1 billion in securities Ocala put on its conveyor belt each month.
When Taylor, Bean collapsed in late summer 2009, its lender, Colonial Bank, went under as well, and so did Ocala, after the Federal Housing Administration forced it to pull the plug.
All this triggered lawsuits between Deutsche Bank, BNP Paribas and BofA. Which brings the fight to Freddie Mac. Bank of America has made a court filing essentially demanding to review Freddie Mac’s asset records, to make sure Freddie did not get assets it is not due and owing. BofA also wants to know who is the rightful owner of these mortgages and securities, and that the proper ownership paper trail is in place.
Specifically, its filing says: “On numerous occasions, the Debtor (in this case, TBW) has informed the Court and other parties in interest that one of the biggest challenges in this case will be sorting out the competing claims to cash and other assets that flowed through the Debtor’s accounts prior to the bankruptcy filing.
“Indeed, it appears as though many loans and other mortgage-related assets have been double- and even triple-pledged to various constituencies. According to the Debtor, the largest single source of disputed funds — more than $548 million according to Debtor’s Second Interim Reconciliation Report — relates to Freddie Mac.
“Indeed, BofA believes that there were improper diversions of Ocala loans and assets from TBW to Freddie Mac, and Ocala may have valid ownership claims with respect to a substantial portion of assets that relate to Freddie Mac.
“Accordingly, there can be little doubt that BofA, in its representative capacities with respect to Ocala, has a valid and pressing need for information regarding Freddie Mac’s extensive need for information regarding Freddie Mac’s extensive relationship with the Debtor which is directly relevant and necessary to evaluate the Debtor’s property, liabilities and financial condition.”
So here you have it. That drunken paper daisy chain of mortgages I told you about three years ago is now draped around the neck of the New York Fed. It’s crumbling into a mountain of paper, the refuse of a crazy bubble, that taxpayers will be morosely staring at for years to come.
Loans willy nilly spliced and diced and double and triple, maybe even quintuple counted, into an array of off-balance sheet vehicles, trusts, you name it, means this foreclosure mess won’t be sorted out for a decade or more. It means trying to foreclose on defaulters will be difficult because numerous parties can come forward claiming ownership.
Street analysts expect the Federal Reserve will start to sell its mortgage-backed securities in order to buy Treasury notes and bonds, in a bid to keep long term rates down. This is additional round of quantitative easing the markets expect the Fed to enact shortly, anywhere from $500 billion to $1 trillion total, with purchases ranging from $50 billion to $100 billion a month, as needed.
http://www.foxbusiness.com/markets/2010/10/19/mortgage-crisis-set-kick-higher-gear/
FYI everyone - Basser is on vacation and out of internet range. I'm sure he'll be glad to see today's press release when he returns. Better numbers quarter to quarter are always good news. Let's hope it becomes the trend.
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'This is the biggest fraud in the history of the capital markets'
Janet Tavakoli is the founder and president of Tavakoli Structured Finance Inc. She sounded some of the earliest warnings on the structured finance market, leading the University of Chicago to profile her as a "Structured Success," and Business Week to call her "The Cassandra of Credit Derivatives." We spoke this afternoon about the turmoil in the housing market, and an edited transcript of our conversation follows.
Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?
Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security interest, and it’s not optional.
EK: And how much danger are the banks themselves in?
JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.
EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.
JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It’ll be a case-by-by-case basis.
EK: Given that our financial system is still fragile, isn’t that a disaster for the economy? Will credit freeze again?
JT: I disagree. In order to make the financial system healthy, we need to recognize the extent of our losses and begin facing the fraud. Then the market will be trustworthy again and people will start to participate.
EK: It sounds almost like you’re saying we still need to go through the end of our financial crisis.
JT: Yes, but I wouldn’t say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S&Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they’d get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.
http://business-news.thestreet.com/link/?http://feeds.voices.washingtonpost.com/click.phdo?i=ecbee33f3feb3dd520e07264e11086db;;;http://business-news.thestreet.com/business/2010/10/08/a/708835705-this-is-the-biggest-fraud/;;;http://business-news.thestreet.c
I don't believe the MMs are playing games with this. It's usually not necessary with an OS this big. There are usually enuff swing traders and disgruntled longs to keep an adequate supply of shares in play. Add some of the large share holders throwing in a few here and there and more come in to play. Given what I have read in the Qs the market cap of the company is pretty close to right. A large block trading could cause blips in pps either way depending on buying or selling, but the key to a bigger market cap will be improving numbers on the Qs.
As an aside I do hope to see some pics of the convention also.
.......al
Hello all, old timer here. I was holding my shares and not selling because I didn't need the losses to offset gains. Had enuff losses from the market melt last2 years carrying forward. Now I'm glad I didn't need the losses. Now looking at long term capital gains. Let er rip.
..........al
Looking at what is happenning here I tend to agree. That 99% figure is what is scaring most investors away right now. Anyone that has had a R/S done to them in the past probably has a real bad taste in their mouth. It does explain the lack of interest in buying at present.
.........al
I'm in the camp that believes the gov't thru the FED is artificially supporting the stock market. With just about everything else going the wrong way if peoples' 401Ks and IRAs are at least looking decent there might not be as much grumbling about how bad it really is. With several trillion $$ on the balance sheet, 30 or 40 billion to pump the market is a drop in the bucket. JMHO
.........al
hate to see it but it looks like the dreaded reverse split words have taken the wind out of these sails. still holding and don't know how it will pan out but a very large majority of reverse splits, well over 90% as a good guesstimate, are not shareholder friendly. time will tell. hoping for the best but have doubts.
..........al
3:35 pm seeing bid .0026 ask .003 eom
Hello all, I see some controversy over otcbb status. Ameritrade doesn't have level 2 quotes on pink stocks. They do on otcbb stocks. I am currently and have been getting level 2 on ETNL. fwiw.
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news release. new BOD elected eom
The End of Democracy?
Dear Reader,
A fellow subscriber sent along a piece titled “Are we sliding into a tyranny of good intentions?” by Neil Reynolds that ran in Canada’s Globe & Mail. Because it’s good and because it ties into something that’s been on my mind recently, I want to share it in its entirety.
Are we sliding into a tyranny of good intentions?
‘Nationalizing the moral life of the people is the first step toward totalitarianism’
Nearly 50 years ago, Kenneth Minogue, a professor of political science at the London School of Economics, published The Liberal Mind, his classic study of the dominant philosophy of the 20th century: radical niceness. Rooted in extreme liberal optimism and salvationist aspiration, this triumphant ideology (Prof. Minogue said) tenaciously advanced the notion that history requires the perfection of human society, that governments – in pursuit of this perfection – are obliged “to provide every man, woman, child and dog with the conditions of the good life." Prof. Minogue ended with a warning: “A populace which hands its moral order over to governments, no matter how impeccable its reasons, will become dependent and slavish."
Now professor emeritus at LSE, the 80-year-old has published a remarkable sequel – The Servile Mind: How Democracy Erodes the Moral Life. He picks up where he left off, documenting the ways in which democracy (which once expanded freedom) requires strict obedience to the state – and to the bureaucratic moral order that sustains it.
An elegant essayist of the old school, Prof. Minogue advances his argument by small steps that can end abruptly in crisp revelation.
“I am of two minds about democracy," he writes, “and so is everyone else. We all agree that it is the sovereign remedy for corruption, war and poverty in the Third World. We would certainly tolerate no other system in our own country. Yet most people are disenchanted with the way it works. One reason is that our rulers now manage so much of our lives that they cannot help but do it badly. They have overreached. Blunder follows blunder."
Far worse, traditional democratic theory has been flipped upside down: “Our rulers now make us accountable to them."
Count the ways.
“Most Western governments hate me smoking, or eating the wrong kind of food, or hunting foxes or drinking too much. Most of these governments think we borrow too much money for our personal pleasures and many of us are very bad parents. Ministers of state have been known to instruct us in elementary matters, such as the importance of reading bedtime stories to our children.
“Many of us have unsound views about people of other races, cultures or religions, and the distribution of our friends does not always correspond to the cultural diversity of our society. We must face up to the grim fact that the rulers we elect are losing patience with us.
“Debt, intemperance and incompetence in rearing our children are no doubt regrettable – but they are vices, and – left alone – they will soon lead to the pain that corrects. Life is a better teacher of virtue than politicians and most sensible governments in the past have left moral faults to the churches.
“The point is that governments have no business telling us how to live. They are tiresome enough in the exercise of authority. They are intolerable when they mount the pulpit. Nor should we be in any doubt that nationalizing the moral life of the people is the first step toward totalitarianism."
Original article here.
Sound thoughts.
But you don’t need anyone to tell you that an increasing number of Americans are fed up with the government’s daily intrusions into everyday life. Just yesterday I was informed by the local gas company that, due to a change in government regulations, they could no longer service my back-up generator (a must-have in the rural northern climes) or even provide the gas required to run it. So I have two choices – spend a thousand dollars or so to move it further from the garage or shut it down. Fortunately I have the money, but what if I didn’t?
Of course, griping about government is nothing new and, frankly, begins to bore. There is, however, something a bit more exciting that’s come to mind of late – though only as a thought experiment. And that is whether one of the possible outcomes of the current crisis might be the overthrow of the U.S. government.
If you have nothing better to do, stick with me while I ponder the imponderable.
The End of Democracy?
As evidenced in the essay above, and in a growing number of comments made by people on both the left and right of the political spectrum, there’s widespread and growing discontent with the institution of democracy in these United States.
On the left, there is an emergent view that the perfect-world agenda is being stymied by the obstructionist curmudgeons on the right. On the right, there is heartfelt anger at the blunt-force passage of populist anti-business, anti-liberty legislation by the controlling leftists.
In fact, just about the only thing both sides of the political spectrum can agree on is that democracy is not working.
It’s hard to argue the point, but I have long come to accept this polarization as natural, given the age of the U.S. democracy. Decades of political pandering, payoffs, and proliferation have reformed the societal landscape, building a wall between the productive elements and the net recipients of government largess. In the latter category, I’m not just referring to the unfortunates who have to rely on government checks to cover the food bills, but including all the corporations and non-governmental organizations whose long and cozy relations with their cronies in Congress allow them special favors.
There is an old adage that one should lead, follow, or get out of the way. At this point, our democratically elected government is doing none of the above. And so here we are, passengers on a runaway train with effectively no one at the controls.
As the situation seems irresolvable at this point, I can’t help wonder what might come next? Especially after the train leaves the rails, followed by a second and far more devastating round of economic destruction?
At that point, with tens of millions of people suffering the indignity and privations of long-term unemployment, and their ranks swelling by the day, could we actually see an overthrow of the American democracy?
Leaning once again on the astute observations of Machiavelli in his masterpiece The Prince, I’d like to try to imagine just how such an overthrow might occur.
In The Prince, Machiavelli describes how it is relatively easy to capture a country whose society is divided into principalities (or dukedoms, tribes, etc.), each of whom has their own loyal following. That’s because leading a successful revolt can be accomplished by lining up the support of a group of ambitious princes who then act in concert against the person at the top.
Once you capture such a country, however, it’s very hard to hold it. That’s because, in the same way that you can corrupt a few well-placed princes, so can any would-be usurper. A good example of this axiom is provided in the movie Braveheart when a handful of the Scottish lords, each with their own following, are bought off. At a decisive moment in a battle against the English, they lead their followers away, leaving William Wallace to his unhappy fate.
For the sake of this discussion, I’m passing over the republics that were the topic of Machiavelli’s Discourses on Livy, because I think we’re well past the point of a functioning participatory government at this point. In my view, we’ve been effectively taken over by the professional politicians and the entrenched bureaucrats that serve them.
And so, having dealt with countries replete with princes and their pockets of local loyalties, we turn to those countries that are led by a central authority and administered by bureaucrats.
While one could debate as to whether the U.S. is such a country, my assessment is that it is. Though the Executive, Legislative, and Judicial branches are supposed to provide checks and balances, the unfettered growth of government power to the detriment of the individual makes it clear that, no matter who occupies which positions in government, the net result is the same: the government tells us, the citizenry, to jump, and the legions of bureaucrats institute and enforce the rules determining how high.
In any event, back to Machiavelli and my thought experiment, it was Machiavelli’s observation that a country led by a central authority is very hard to overthrow. That’s because the public has no strong loyalty to anyone in power and thus can’t be encouraged to rally around that personage, prince, or tribal chiefdom in order to rise up and seize the controls. This point is easy to understand by asking yourself if anyone would rally to a battle call issued by Barney Frank or Nancy Pelosi, or any congressman or state governor, for that matter.
Hardly.
So a country with a centralized power, in this thesis, the United States, tends to be very hard to overthrow. But once you have done so, Machiavelli informs us, it’s very easy to hold power. Modern examples of the truth of this observation are plentiful, including China, North Korea, Libya, Zimbabwe, Burma, etc. That’s because, again, the population has no loyalty to any potential opposition that can be used to rally them to action.
With that background, I turn now to how an overthrow might occur. Paradoxically, it begins with the strongly held cultural beliefs in the United States surrounding freedom, justice, and liberty for all. Even though these principles have been ground into the dirt by the politicos, we Americans still like to believe that these American virtues live on in our very cores.
So be it.
Now imagine a day in the not-too-distant future when something terrible happens that shakes America to its core. It could be a collapse of the U.S. dollar that literally wipes out the wealth of the majority of population.
Or it could be an atomic bomb going off in a major city.
Neither of those two possibilities are out of the question, and they are just a couple of any number of equally frightening potential scenarios. If such a scenario came to pass, what do you think the public reaction would be, especially of those of a more conservative political mindset?
Do you think their already seething anger at what they see as a wholesale stomping on the underlying principles of America might boil over and send thousands into the street? I do.
However, rather than democracy as we know it being swept away by a popular uprising, complete with the whole pitchforks and torches thing, I see a far more likely scenario being a military coup – though that coup would likely only take place once the streets were filled with angry citizens.
A military coup? Impossible, I can sense many of you thinking… but stick with me for just a moment longer and I’ll try to explain how it might work.
So, the tipping point event has occurred and the Democrats are seen as being at fault, either for mismanaging the country into economic ruin or for failing to properly look after national defense. Angry citizens take to the streets, and ugly confrontations are broadcast around the clock on the cable news. The National Guard is called out and people are killed, and nothing the politicians on either side say in press conferences given in undisclosed locations can mollify the angry masses.
At which point a general, called to the White House for a crisis consultation, arrests the president and the military moves in.
“Never gonna happen!” you say. “We Americans may have our differences, but a dictatorship? Never!”
Not so fast. In fact, I think a number of Americans, though initially shocked, could quickly find themselves supportive of the military’s coup.
Keep playing along with the thought experiment and see if it’s even a remote possibility.
For instance, imagine the words that General Petraeus might use as he addresses the nation for the first time.
“My fellow citizens, it is with deep regret that I must announce that in order to defend the nation and the Constitution, a joint military administration has temporarily removed the president from office and disbanded the legislative branch until the period of crisis has passed. This action has been taken only after much deliberation and only after it has been determined that the nation’s leadership has failed in its constitutional responsibilities and, in so doing, led us to this dark chapter in American history.”
With a backdrop of a waving American flag and a speech replete with patriotic quotes and references to the Constitution, freedom and liberty, I think the repugnance that most Americans feel for the politicians would override any deeper sense of outrage at the military’s actions, especially in that those actions would only come in the context of a whopper of a crisis and would be positioned as being only “temporary.”
But once the overthrow is complete, it would be very hard to overturn, and a new American era would begin. In time, I would expect the military to step aside, but only after American democracy had been reformatted and streamlined.
Do I think this scenario could actually come to pass? Not really. But I wouldn’t dismiss it out of hand.
And it is no certainty that a suspension of American democracy will come from the right; in the teeth of a crisis, anything can happen. Including that a Democrat president, faced with widespread rioting, could declare martial law and shut down opposition media and websites for a “cooling period.”
I’m not predicting some sort of dystopian future for the U.S., but there’s no ignoring the almost infinite number of historical examples of political systems and arrangements being suddenly tossed over the side. That the U.S. democracy has become so degraded and discredited, and appears to be on track to only degrade further, seems to me to make it vulnerable.
While I can’t be sure how things will evolve from here, I have a hard time believing that we’ll get through this crisis without big changes, if for no other reason than that it’s clear to pretty much everyone that the status quo isn’t working.
Other than idle musing, is there anything actionable in this discussion?
Not really, other than as a reminder to take general measures against uncertainty – laying a solid foundation in precious metals and giving thought to establishing a second home, or at least a bank account, in another country you like to spend time in. In order of priority, the collapse of the dollar is far more concerning to me than a military coup.
With the basic preparations, you can get on with enjoying your life. Because if you dwell too much on this sort of thing, you’ll become paranoid and miss the best this wonderful world has to offer.
Echoes from History
At the risk of being labeled an incurable doom-and-gloomer, I want to share the contents of an email I received yesterday from Rob Roper, a sound-thinking friend. Rob forwarded excerpts from an interesting historical document: the 1920 Nazi party platform, which, according to Rob, was authored for the most part by Adolf Hitler. I am pasting it in here without comment, simply because I found it interesting and thought you might too.
12. In view of the tremendous sacrifices in property and blood demanded of the Nation by every war, personal gain from the war must be termed a crime against the Nation. We therefore demand the total confiscation of all war profits.
13. We demand the nationalization of all enterprises (already) converted into corporations (trusts).
14. We demand profit-sharing in large enterprises.
15. We demand the large-scale development of old-age pension schemes.
16. We demand the creation and maintenance of a sound middle class; the immediate communalization of the large department stores, which are to be leased at low rates to small tradesmen. We demand the most careful consideration for the owners of small businesses in orders placed by national, state, or community authorities.
17. We demand land reform in accordance with our national needs and a law for expropriation without compensation of land for public purposes. Abolition of ground rent and prevention of all speculation in land.
18. We demand ruthless battle against those who harm the common good by their activities. Persons committing base crimes against the People, usurers, profiteers, etc., are to be punished by death without regard of religion or race.
19. We demand the replacement of Roman Law, which serves a materialistic World Order, by German Law.
20. In order to make higher education—and thereby entry into leading positions—available to every able and industrious German, the State must provide a thorough restructuring of our entire public educational system. The courses of study at all educational institutions are to be adjusted to meet the requirements of practical life. Understanding of the concept of the State must be achieved through the schools (teaching of civics) at the earliest age at which it can be grasped. We demand the education at the public expense of specially gifted children of poor parents, without regard to the latter’s position or occupation.
21. The State must raise the level of national health by means of mother-and-child care, the banning of juvenile labor, achievement of physical fitness through legislation for compulsory gymnastics and sports, and maximum support for all organizations providing physical training for young people.
22. We demand the abolition of hireling troops and the creation of a national army.
23. We demand laws to fight against deliberate political lies and their dissemination by the press. In order to make it possible to create a German press, we demand:
a) all editors and editorial employees of newspapers appearing in the German language must be German by race;
b) non-German newspapers require express permission from the State for their publication. They may not be printed in the German language;
c) any financial participation in a German newspaper or influence on such a paper is to be forbidden by law to non-Germans and the penalty for any breech of this law will be the closing of the newspaper in question, as well as the immediate expulsion from the Reich of the non-Germans involved. Newspapers which violate the public interest are to be banned. We demand laws against trends in art and literature which have a destructive effect on our national life, and the suppression of performances that offend against the above requirements.
24. We demand freedom for all religious denominations, provided that they do not endanger the existence of the State or offend the concepts of decency and morality of the Germanic race. The Party as such stands for positive Christianity, without associating itself with any particular denomination. It fights against the Jewish-materialistic spirit within and around us, and is convinced that a permanent revival of our Nation can be achieved only from within, on the basis of: Public Interest before Private Interest.
25. To carry out all the above we demand: the creation of a strong central authority in the Reich. Unquestioned authority by the political central Parliament over the entire Reich and over its organizations in general. The establishment of trade and professional organizations to enforce the Reich basic laws in the individual states.
The Party leadership promises to take an uncompromising stand, at the cost of their own lives if need be, on the enforcement of the above points.
Munich, February 24, 1920.
Saw that one yesterday. I think this forclosure mess is going to get a lot bigger and take down some big players in the end. No sympathy for them. I hope the jails are overrun with these fraudsters.
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ObamaCare Kicks In - Taxes Sure to Rise
http://investorsinsight.com/blogs/forecasts_trends/archive/2010/10/05/obamacare-kicks-in-taxes-sure-to-rise.aspx
Phase I of the Patient Protection & Affordable Care Act of 2010, better known as “ObamaCare,” officially kicked in on September 23, six months after it was signed into law. This week, we look at the main provisions that went into effect late last month, and what they may mean for health insurers, healthcare providers and you.
Interestingly, just three days before Phase I of ObamaCare went into effect, the latest Rasmussen poll found that 61% of likely voters want ObamaCare repealed. That’s the highest number in several months. So much for Americans coming to like ObamaCare once they learn more about it, as the president suggested.
We have learned quite a lot about ObamaCare since Nancy Pelosi told us late last year that “We have to pass this bill to see what’s in it.” As it turns out, ObamaCare is even worse than its critics suggested before it was signed into law. I’ll give you the details on that as we go along.
We’ve also learnedthat the Obama administration is going to strong-arm the insurance industry for raising healthcare premiums, regardless of how much healthcare services increase in costs. Health & Human Services Secretary Kathleen Sebelius took the health insurance industry to task in a letter in early September that basically threatened to put them out of business if they raise their rates too much or blame the increases on ObamaCare.
Finally, it remains to be seen whether Congress will pass a new law to extend the Bush tax cuts before they expire at the end of this year. Of course, there remains the question of whether the tax cuts will expire only for those individuals making over $200,000 and couples making over $250,000.
Currently, the maximum tax rate is 35%, and most people believe it will rise to 39.6% if the tax cuts for the “rich” expire. However, I am going to show you how, by 2013, the top rate will go much higher than in the Clinton-era, despite Obama’s claims otherwise.
Rasmussen: 61% Favor Repeal of Healthcare Law
When President Obama and the Congress rammed the new healthcare law down the throats of Americans last March, well over 50% of Americans opposed it, according to various polls. People were particularly angry at the way the bill was so narrowly passed, what with all the backroom deals and legislative chicanery that went on to get just enough votes to pass it.
At the time of ObamaCare’s passage, pollster Scott Rasmussen found that 53% of likely voters opposed the new healthcare law and wanted it repealed. President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi all promised that the American people would come to like ObamaCare the more they came to understand it. Oops!
On September 20, just three days before ObamaCare Phase I kicked in, Rasmussen reported that 61% of likely voters now favor repeal of the new national healthcare law. That number was up eight points from the prior survey and was the highest level of opposition measured since late May when 63% wanted it repealed. Only 33% of likely voters opposed the repeal of ObamaCare in Rasmussen’s September 20 poll.
While the president, Reid and Pelosi promised that we would come to embrace ObamaCare as we learned more about it, just the opposite is happening. The more we collectively learn about government healthcare, the more we dislike it.
As noted above, the initial provisions of ObamaCare kicked in on September 23, six months after the president signed the bill into law. I will summarize these initial provisions as we go along. While some of these provisions are nice things to have, they will result in higher health insurance premiums and the loss of certain types of health insurance altogether.
As I repeatedly warned before ObamaCare became law, there was a lot not to like in that massive 2,400-page bill. As more of the details become known, and the initial provisions of the bill are kicking in, opposition to ObamaCare should continue to rise. I will bring you the specifics just below.
ObamaCare Officially Kicked-off on September 23
With very little coverage by the mainstream media, ObamaCare officially began on September 23. Since a majority of Americans want ObamaCare repealed, and since we are less than a month from the election, most in the media avoided making a big deal of it. Most of the Democrats running for re-election that voted for ObamaCare are keeping silent as well.
Here is a summary of the initial provisions of ObamaCare that kicked in late last month from Kaiser Health News:
* Insurers must allow parents to keep their adult children up to age 26 on their health plan and those young adults can’t be charged more than any other dependent. Some insurers began this policy early during the summer. BUT: This doesn’t begin until your new plan year begins – for many, that will be Jan. 1, 2011. And, if your child has an offer of coverage from an employer, he/she might not be able to be on your plan.
* Insurers can’t charge co-pays or deductibles for preventive services such as breast cancer screening and cholesterol tests. BUT: “Grandfathered” plans – those that don’t make major changes from the previous plan year – don’t have to follow this requirement. [See my June 29 E-Letter to learn why this grandfather provision may be nothing more than an illusion for many employers.]
* Insurers must cover children up to age 19 with a pre-existing medical condition. New individual plans and all group plans – such as those you get at work – can’t refuse to cover a child. BUT: “Grandfathered” individual health plans can refuse to cover a child.
* Insurers cannot cancel coverage once you get sick, a practice known as “rescission.” BUT: If you committed outright fraud and intentionally hid something, your insurer can refuse to pay.
* Consumers get direct access to physicians: You – not your insurance company – decide which primary physician, gynecologist, obstetrician and pediatrician you see among your plan’s list of approved providers. BUT: The usual obstacles remain, like whether the doctor is taking new patients or has an appointment opening available.
* No additional payments can be required for out-of-network emergency room care: Insurers cannot require higher co-payments or deductibles if you have a medical emergency and seek treatment at an emergency room that’s not in your health insurance plan. BUT: Once again, “grandfathered” plans are exempted.
* Annual limits on coverage will be going away. BUT: First, they’ll be raised to $750,000 for all employer plans and new individual plans, rising to $1.25 million after Sept. 23 of 2011 and then to $2 million the following September.
* No lifetime limits: All plans, even “grandfathered” plans, will be prohibited from setting dollar limits on lifetime coverage. NO “But” on this one!
While the following provisions of the health law have been around for a while they’re worth noting, as well:
* High-Risk Pools: Designed to help people who have been uninsured for six months get coverage. Each state has its own pool.
* Help to Companies Paying for Early Retirees: More than 2,000 employers and unions have applied for government grants to cover up to 80 percent of retirees’ medical costs between $15,000 and $90,000 until they can qualify for Medicare coverage.
* Small Business Tax Credits: Small businesses with 25 or fewer full-time employees who earn an average yearly salary of $50,000 or less will qualify for a tax credit of up to 35 percent of the cost of premiums. That credit will rise to 50 percent in 2014. To qualify, businesses must cover at least 50 percent of the cost of workers’ insurance.
ObamaCare is Even Worse Than Critics Thought
There are many reasons why it was so difficult to pass the massive healthcare reform bill back in March. The concept of government-run healthcare, accounting for almost one-fifth of the US economy, is completely foreign to most Americans. That is why a majority of people oppose it to this day. We have not warmed up to the idea as Obama and the liberals in Congress expected.
There were many promises made about how nationalized healthcare would make our lives better, improve the quality of care and reduce costs. But most Americans knew well that you can’t add over 32 million uninsured people to the healthcare rolls without increasing costs and rationing care. There are only so many doctors and so many hospitals, after all.
As the first of the ObamaCare provisions officially kicked in late last month, the realities of government-run healthcare are becoming obvious. Here are just a few:
1. ObamaCare will not decrease healthcare costs for the government or consumers. According to the Centers for Medicare and Medicade Services, it will increase costs by at least $300 billion over the 10 years 2011-2020 – despite the fact that it will collect premiums for five years before any benefits are paid out.
In May, the Congressional Budget Office estimated that ObamaCare will add $134 billion to the federal deficit in 2010-2019. But former CBO director Douglas Holtz-Eakin calculates that ObamaCare will add $500 billion to the deficit over the same period. The CBO also estimated in May that the overall cost for ObamaCare will be at least $940 billion over the same period. Some private estimates put the actual cost of ObamaCare at close to $2 trillion over the next 10 years.
2. ObamaCare will increase insurance premiums – in some places, it already has. Insurers, suddenly forced to cover clients’ children until age 26, have little choice but to raise premiums, and most are expected to go up by 1%-9% in 2011. Obama's only method of preventing massive rate increases so far has been to threaten insurers.
3. As I explained in my June 29 E-Letter, ObamaCarewon’t allow employees or most small businesses to keep the coverage they have and like – as Obama promised. By the Obama administration’s own estimates (after the bill passed), as many as 69% of employees, 80% of small businesses and 64% of large businesses will be forced to change their health insurance coverage, most likely to more expensive plans.
4. ObamaCare imposes a huge non-medical tax compliance burden on small business. It will require them to mail IRS 1099 tax forms to every vendor – including corporations – from whom they make purchases of more than $600 in a year, with duplicate forms going to the Internal Revenue Service ( click here for more details). This will result in millions of new 1099 forms that small businesses will have to send out starting in 2012.
Like so much else in the 2,400-page bill, our senators and representatives were apparently unaware of this when they passed the measure. The last thing small businesses need right now is another tax reporting burden disguised as a way to help pay for ObamaCare.
5. ObamaCare forces states to guarantee not only treatment of, but also payment for, indigent Medicaid patients. With many doctors now refusing to take Medicaid (because they lose money doing so), cash-strapped states could be sued and ordered to increase reimbursement rates beyond their means. Never mind that ObamaCare cuts almost $600 billion over 10 years from Medicare funding and will force millions of seniors out of the popular Medicare Advantage program by 2019.
6. ObamaCare allows the IRS to confiscate part or all of your tax refund if you do not purchase a qualified health insurance plan. The bill provides funding 16,000 new IRS agents to make sure Americans follow the new rules.
These are but a few of the troubling provisions of ObamaCare. If you wonder why so many American voters are angry at the president and Congress, you need to look no further than ObamaCare, which will be a pivotal issue in the upcoming elections.
Will Government Put Insurers Out of Business?
Everyone reading this will remember that President Obama promised that his healthcare plan would “bend the healthcare cost curve downward.” Most of us didn’t believe that promise, and the CBO has since confirmed that healthcare costs will rise under ObamaCare. Even the president admitted it in a press conference on September 10:
“As a consequence of us getting 30 million additional people health care, at the margins that’s going to increase our costs—we knew that.”
That wasn’t how he sold the plan, but, anyway, that’s a truism – costs will go up. Here’s another: The White House was always going to blame insurance companies for any cost increases, even when its own policies caused them.
Witness Health Secretary Kathleen Sebelius’s September 9 letter to America’s Health Insurance Plans, the industry trade group, which was a thuggish message even by her standards. The HHS Secretary wrote that some insurers have been attributing part of their 2011 premium increases to ObamaCare and warned that “there will be zero tolerance for this type of misinformation and unjustified rate increases.”
President Obama himself warned that if insurance companies raise their rates too much (according to whom?), they would be barred from participating in ObamaCare’s subsidized “insurance exchanges” when they come on line in 2014. That would almost certainly drive them out of business. Who knows, maybe that was the plan to begin with! President Obama has said that the new healthcare law was a good step toward an eventual single-payer system.
Income Tax on “Rich” Headed Higher Than in Clinton-era
Everyone reading this is no doubt aware that there is a fierce debate ongoing about whether to extend the Bush tax cuts which automatically expire at the end of this year. President Obama has said for months that he favors extending the Bush tax cuts for all but those individuals making over $200,000 and couples making over $250,000 a year.
But with the prospect of a Republican tidal wave in the November mid-term elections, even many Democrats up for re-election have had a change of heart and want all of the Bush tax cuts extended, even for those making over $200K/$250K a year. Yet despite the likelihood of a GOP landslide in November, Obama remains steadfast in raising taxes on the “rich.”
President Obama repeatedly reminds us that extending the Bush tax cuts for the rich will cost the government upwards of $700 billion over the next 10 years, so he says. The rich, he says, need to pay their “fair share” even though they already pay over 50% of all income taxes paid.
Obama also emphasizes that eliminating the Bush tax cuts for the rich would only mean that their “tax rates would just go back to where they were under President Clinton.” And he reminds us that the economy grew at a rapid clip during the Clinton years, adding tens of millions of new jobs. I have a real problem with this analogy on several levels!
As I have written in the recent past, those making $200/$250K a year, many of whom are entrepreneurs, account for over 50% of all new job creation. Raising their taxes from 35% currently to 39.6% if the Bush tax cuts expire is not a good way to stimulate the economy. In fact, it will have just the opposite effect.
But there’s more to this story that you need to know. Thanks to a little-known provision in the new healthcare law, the president’s plan will push the top tax rates for most types of income above Clinton-era levels starting next year and even more in 2013. In other words, the rich are already in for another tax increase whether the Bush tax cuts are extended or not.
If the Bush high-income rate reductions expire, it will be the Obama administration’s second move to increase the top marginal tax rates.
In 2010, the top income tax rate bracket for ordinary income is 35%. Besides wages and interest income, this income category includes profits from pass-through business firms, such as sole proprietorships, partnerships, and S-corporations. Under the president’s proposal, the top tax bracket will rise to 39.6% on January 1 on all these entities, for those making over $200K/$250K. But it gets worse.
Another stealth provision of Obama’s proposed federal budget for 2011would phase out high-income taxpayers’ itemized deductions starting next year, adding another 1.2% (average) to the effective tax rate for many high-income earners, bringing it to as much as 40.8%.
Most people don’t think about Medicare taxes, currently at 2.9%, (paid half by the employer and half by the employee), but it is a tax nonetheless. Under ObamaCare, this tax will increase to 3.8% in 2013 for those making over $200K/$250K. But for purposes of this discussion, we will not include the Medicare tax as it is very complicated.
Also in 2013, a new 3.8% tax, called the Unearned Income Medicare Contribution (UIMC), will be imposed on high-income taxpayers’ interest income and most of their pass-through business income that’s not currently subject to the Medicare tax. If you are subject to this tax and the phase-out of itemized deductions, your tax rate will be far beyond the top rate of 39.6% under Clinton. But it gets even worse.
A similar pattern holds for capital gains taxes. Under the president’s plan, in 2011 and 2012, the top rate on gains – currently at 15% – will go to 20%beginning on January 1, 2011. And it gets even worse. Starting in 2013, capital gains will also be hit by the 3.8% UIMC tax noted above, thus pushing the new cap gains rate as high as 23.8% for some who make over $200K/$250K.
Under the president’s proposal, virtually all of top earners’ ordinary income will be taxed at 44.6 percent, starting in 2013. We’re not just going back to the Clinton-era rates of 40.8 and 43.7 percent.
Dividends are on track to see a much steeper tax increase starting next year. President Obama’s proposed federal budget for fiscal 2011 calls for the dividend tax rate to go from 15% to 20% in 2011, but Congress quickly changed that to 39.6% for those making over $200K/$250K. Congress has yet to pass Obama’s 2011 budget, as amended, but it likely will at some point just ahead. If nothing else changes, the top dividend tax rate will rise from 15% today to 39.6% in 2011 and 2012, with the 3.8% UIMC tax pushing the rate that much higher starting in 2013 for those making over $200K/$250K.
In short, if the Bush high-income tax rates expire and the budget for fiscal 2011 passes as amended, it will be the Obama administration’s and congressional lawmakers’ second move to increase the top marginal tax rates. The first shoe has already dropped, in the form of the UIMC tax which is scheduled to take effect in 2013.
It’s bad enough that this tax received little attention or scrutiny before it became law, with not a single congressional hearing to explore its economic impact. Worse yet, you never hear President Obama or the Democrats mention this 3.8% tax when they talk about marginal tax rates. No wonder!
I could go into a lengthy discussion about why these significant tax increases will be bad for the economy and job creation. But I suspect that most of my readers already have their minds made up regarding whether or not the government should raise taxes on those making over $200/$250K – the supposedly “rich.”
I will make one other observation, however. It galls me to hear President Obama say that by extending the Bush tax cuts for all but the wealthy, he is giving “immediate tax relief for the middle class.” If the Bush tax cuts are extended, that is no relief – rather, it will be no change at all since tax rates will remain the same as they are today, except for those making over $200K/$250K.
Obama can say whatever he wants, but at the end of the day, it’s up to Congress to pass a new law to extend the Bush tax cuts, or they expire automatically on January 1 – for everyone. It now appears that Congress won’t take this matter up until after the November 2 election. There are going to be a LOT of angry lame ducks in Washington after the election, and they have a lot of work to do before the holidays. So, don’t bank on the tax cuts being extended for anyone until you see it!
Very best regards,
Gary D. Halbert
LOL, looks like OA has fan club and probably doesn't even know it. I was involved in labor disputes for many years and sometimes to maintain mutual respect you have to just agree to disagree. It works out far more positively in future encounters.
........al
9:03am gold 1331 silver 22.32 eom
When the precious metals ETFs started to come out warnings were being sounded by many people that read the prospectus'. The key point being the lack of independant verifications and inventories. I have also seen that more and more people are coming to believe that the ETFs were started to siphon off monies from the real thing. It walks like a stock and quacks like a stock but the IRS says you can't claim capital gains on long term holds so is it really a stock?
btw, my disclaimer- I do not own any ETFs nor do I plan to ever own any. If I did ever buy one I would treat it like a penny stock looking for an early exit with a small profit.
.......al
Absolutely!!! I've been preaching that for years. If you can't hold it in your hand don't think you really "own" it. Paper is paper. Gold and silver you can see are the real thing. In the "it seems more likely with each passing month" possibility of gold confiscation where do you think the agents will be going first? To the biggest stashes. In case of bankruptcy, unless of course you believe there is no fraud and ponzi in the securities markets, how much of "your" gold would you expect to get after everyone else has been satisfied? I have nothing against ETFs. If you want to trade gold they are an excellent vehicle. Just don't make the mistake of thinking the gold they hold is actually "yours".
........al
8:11am gold 1315.80 silver 22.04 eom
I can only answer for myself. I don't follow your company so I won't be watching. As I do with everyone here in the pennystock swamp I wish you well. The odds are always stacked against you. Throw 3 darts at the dartboard and you will hit at least 2 scams. It's not for the faint of heart. Been doing this for over a decade and if my wins hadn't topped my losses I would have been gone long ago. It's definately a jungle.
........al
It's possible but not that I have seen. eom
Hi nez- I've known OA for quite some time on message boards. Just because he's a little straightforward doesn't mean he "working" for anyone. If you have followed him as long as I have I think you would agree where he smells smoke from a company there is usually fire somewhere. Ignore at your own peril.
GL2U
.........al
my final fill was at 10:56;19 according to the trade confirmation. I don't know how the rest was played.
........al
maybe, but-
That last 185,000 was my buy. placed anorder a half hour ago for 200000 at the ask of .003. they filled 14000 then raised the ask to .0038. I let the order ride and just filled the rest. fwiw it wasn't a sell.
...........al
Thought you would enjoy this one:
I am appalled that so many people are rabidly opposed to the mosque near ground zero in NY. To show our tolerance, we should let them build. Then right across the street, someone should put a topless bar, called “You Mecca Me Hot”. Next to that should be a gay bar, “The Turban Cowboy”. And next door to the mosque should be a pork rib restaurant, maybe “Iraq o’ Ribs”? Then the Muslims would be allowed to show their tolerance.
Problem solved.
Don- probably is but I'm not sure. It popped into my search engine and since the buzz is down on the star trek urns I thought I'd give it a post. When the new star treks came out my inbox was flooded with articles from my search engine on them. Far too many to post and coming from worldwide. I guess we are hoping that all this will turn into big time sales eventually.
........al
Top 9 Penny Stocks to Watch this Week
Read more: http://www.beaconequity.com/top-9-penny-stocks-to-watch-this-week-2010-09-29/#ixzz10xDJ1W2c
Eternal Image Inc. (OTC: ETNL) is up 12.00% to $0.0028 on over 156K shares. Eternal Image is engaged in the design, manufacturing and marketing of officially licensed memorial products such as caskets, urns, monuments and vaults. Earlier this month, the company unveiled its first-ever official STAR TREK cremation urns. (OTC:ETNL), (ETNL)
links to all this public information would be a great start. if it's available to everyone it has to be posted somewhere.
.........al
COB today gold 1309.70 silver 21.74 eom
Bringing Financial Reform Closer to Home
http://www.investorsinsight.com/blogs/forecasts_trends/archive/2010/09/28/bringing-financial-reform-closer-to-home.aspx
IN THIS ISSUE:
1. The Concept of Personal Financial Reform
2. What No Reform Act Can Do for You
3. Conclusions
Introduction
Since the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was signed into law by President Obama just a couple of months ago, most recent articles about this legislation have concentrated on little-known provisions that are now coming to light. However, most of these discussions are far-removed from the real world experiences of most investors.
There’s no doubt that the bear market spawned by the recent financial meltdown decimated many investors’ nest eggs. To the extent that Congress passed a law that will supposedly prevent future debacles like the one involving subprime mortgage loans, then investors may rest easier. However, individual investors are also faced with issues that may never be covered by federal law. For example, the Dodd-Frank Act cannot repeal the business cycle (ie – recessions), prevent future bear markets, correct all bad habits or protect investors from every unscrupulous person claiming to be a financial advisor.
This week, I’m going to bring the idea of financial reform closer to home. I’ll discuss various habits and tendencies of investors that often lead to negative consequences, and what you can do about them. As I go along, I’ll be referencing a number of Forecasts and Trends E-Letter articles from the past, so this will be a good issue to pass along to family and friends who may be looking for some basic financial advice without a product sale tied to it.
What No Financial Reform Act Can Address
What follows are some very general discussions about issues that can negatively impact investor portfolios, but which are not likely to be prevented by legislation of any kind. One common denominator you will notice is that these issues all require you to take some protective action in order to avoid unfavorable consequences. The clear implication is that investing is not a spectator sport.
The observations below come from my own 30+ years of experience helping investors meet their financial goals. Over the course of my career, I have found that there is no amount of government-based financial reform that can:
Make you financially literate.
In my June 22 E-Letter, I wrote about a study performed by Dr. Annamaria Lusardi showing widespread financial illiteracy among American adults. Some readers didn’t like the use of the term “illiteracy” as it brings to mind fictional images of backwoods denizens with little formal education. However, whether you call it illiteracy or lack of being informed, the results are the same.
Dr. Lusardi’s research has shown that ill-prepared investors make a variety of mistakes that can negatively affect their investment performance, including failing to plan for future financial goals, having no understanding of the effects of inflation and the failure to recognize the need to diversify one’s portfolio.
The Dodd-Frank Act did recognize the need for financial knowledge by establishing the “Office of Financial Literacy” to help educate consumers. Aside from the laughable irony of a deficit-spending, debt-laden government taking on the job of educating consumers in financial matters, there’s little hope that this new agency will meet its mandate.
After all, the Internet is replete with financial education and most major financial firms offer basic financial educational materials, some of which have been reviewed by federal and state regulators. The issue isn’t the lack of available information, it’s the lack of will on the part of consumers to seek out this information before making major financial decisions.
As noted above, my June 22 E-Letter offered readers a chance to take one of Dr. Lusardi’s tests to determine their level of financial literacy. I’m very pleased to report that almost all of my readers did extremely well on the test. The obvious implication is that a regular diet of financial information can increase financial literacy. If you missed being able to take the financial literacy test we provided back in June, click on the following link to access this simple, five-question quiz.
Make you save more money and/or reduce debt.
I have often repeated the finding that apprx. 70% of our economy is based on consumer spending. Thus, it’s almost un-American to suggest that households should consume less and save more. However, increased saving is the best way to approach your financial goals. The markets have shown that returns are unpredictable, and sometimes negative. Thus, the only part of the equation that is in our control is how much we save.
Closely coupled with this concept is the idea of eliminating debt. Americans have been on a steady diet of debt to finance consumer expenditures for decades. When you think of debt as negative savings, you see that many US households are having to “get back to zero” before they can realize any net increase in savings.
Long ago, I learned the guideline of paying yourself first, meaning that you set aside savings from your paycheck before paying any bills or discretionary spending. The rule of thumb used to be setting aside 10% of pay, preferably over and above amounts contributed to your 401(k). Sadly, the savings rate in the US has been far below that level for a long time. In fact, the savings rate even turned negative in 2006.
Spending wealth generated by the stock market bubble of the late 1990s or the real estate bubble of the early 2000s is the antithesis of savings. Not only does it mean living paycheck-to-paycheck, but the values of these assets are depleted. Then, when the bubble bursts, you’re left with lower asset values, no savings and maxed-out credit cards.
I have a rule that is akin to one attributed to Warren Buffett. While Mr. Buffett’s rule relates to avoiding investment losses, mine relates to saving: Rule #1 – Save more money. Rule #2 – Don’t forget Rule #1.
Make you read important disclosures.
As I noted above, the federal government will be taking on a greater role in providing financial education. However, the government has already been very active over the years in trying to help investors make good decisions. Many of these efforts have been in regard to making sure that sponsors of financial products and services provide comprehensive disclosures detailing every aspect of the investments. The only problem is that few investors ever read them.
I’m sure we’ve all been faced with a half-inch thick prospectus document on thin paper full of legalese in small print. While these disclosures are typically very complete, they’re not easy to digest, though they can be a sure-fire cure for insomnia.
A real-life example can be found in an actual call taken by one of my staff. An investor wanted to know if we were aware of an insurance product that guaranteed 8% interest for 10 years. The story was that if you put in $250,000, you would have $540,000 in 10 years and you could then draw $27,000 per year in income for life.
While we were unaware of the particular product involved, my staff member went to the Internet to search for information on the product. He found a blog where this exact contract was being discussed. Without going into a lot of detail, the participants in the blog were able to highlight features of the annuity that made it much less attractive, but were not recognized by our client.
So, how did these blog participants know about these potential negative aspects of the annuity? They got them from the insurance company disclosures describing how the contract worked. In other words, the information was readily available to the investor, but he had not taken the time and effort to read and understand the disclosures. All he saw was the 8% guarantee.
Always, ALWAYS, ALWAYS read the disclosures that come with most investments. In fact, be careful if an investment has no disclosures or prospectus. Virtually all regulated investment sponsors are required to disclose certain material, so be wary of any investment sponsor who claims to be “unregulated” or that there are no disclosures required.
Keep you from making emotional investment decisions.
Emotions are part of being human, so how can we divorce ourselves from them when making investment decisions? I’ll have to admit that it’s often quite difficult, if not impossible to do for many people. However, I have written numerous times about how the Dalbar organization and others have documented that investors’ emotions can be their worst enemies. See my November 3, 2009 E-Letter for more information about the findings of the Dalbar studies over the years.
For example, Dalbar has consistently found that investors will chase returns and then sell out at a loss when the hot investment turns cold and loses money. The emotions of fear and greed are very strong and control many investment decisions. Of course, it doesn’t help that investment sponsors also know the power of fear and greed and often attempt to use these emotional triggers in their promotional materials.
A more recent phenomenon related to the emotional reaction to fear is that some investors have chosen to never set foot in the stock market again. One of our staff members told me of a neighbor of his who said he wants to try to make his money back from the recent bear market, and then he says he’s “done” with the stock market forever. Considering the mountain of investor cash either on the sidelines or in bonds and bond mutual funds, I’d have to say that this guy has a lot of company.
This neighbor’s statement has two areas of concern. First, there’s the idea of getting out of the equity markets forever, thus forfeiting any chance for meaningful growth in the future. Most Investment Advisors agree that even retirees should maintain some exposure to stocks in their portfolios, so a fear reaction to stay in cash or short-term bonds could mean running out of money in retirement.
A second concern in this neighbor’s comment is that he wants to make it back to break-even before getting out of equities forever. Unfortunately, this sometimes means that greed takes over and investors take on more risk than they should to “make it all back.” In fact, after both the 2000–2002 and more recent 2007–2009 bear markets, we had many investors asking us how they could quickly restore their portfolio losses. This is a self-destructive emotional decision as it could lead to even greater losses in the future. It can also lead to being susceptible to investment scams as I will discuss in greater detail later on.
Some investment sponsors are now using the term “guarantee” to help allay investors’ fears. In the annuity example above, the guarantee was a big reason why the investor was drawn to the product. Just remember that guarantees always come with strings attached, especially ones that are providing greater than market-rate returns. The companies sponsoring these products do not plan to lose money, so they have incorporated ways to protect themselves. You must discover what these restrictions and limitations are, and then decide if the guarantee is worth the price.
A final emotional trigger is not actually an emotion at all, but rather the result of warring emotions. We call it “investment inertia,” and it happens when investors stay in non-performing or unsuitable investments because they lack the knowledge of what action to take. Sometimes, investment inertia stems from what we have labeled “analysis paralysis,” where so many conflicting ideas cause the investor to freeze, thinking that it’s better to make no decision than make a wrong decision.
The problem is that making no decision is actually making a decision to stay where you are, whether it is in cash or invested in the markets.
Seeking out the help of an investment professional such as an Investment Advisor is usually an excellent way to overcome the emotional stress related to making investment decisions. Whether you call my firm or a local Advisor, an objective viewpoint with your best interests in mind can be a welcome resource for investors who want to overcome their emotions.
Prevent scam artists from preying upon hapless investors.
On this item, you may be saying, “Wait a minute! Scams should be addressed by reform legislation.” You are correct, except that fraud and theft have been against the law for a very long time. Writing new legislation to address financial frauds and scams won’t make them any more illegal, or any more likely to be curtailed. Only an financially literate public can put an end to them.
Yahoo Finance recently published an article entitled “Scams: A Sucker Retires Every Minute.” The article recounts how retirees are now being increasingly targeted by scam artists, some of whom are elderly themselves. According to the nonprofit Investor Protection Trust, one out of five Americans over age 65 has been the victim of a financial scam of one kind or another.
As more and more Baby Boomers retire with too little money to last their lifetimes, scam artists will be even more active in separating them from what money they do have. Unfortunately, many scams are based on legitimate investment and planning techniques such as annuities, reverse mortgages and principal-protected notes.
For example, a retired couple may be convinced by a scam artist to take out a reverse mortgage on their home, which is a perfectly legitimate transaction. However, instead of using the money to increase monthly income or pay off debts, the fraudster has the couple invest in a bogus investment and steals the money. In the end, the couple is in much worse shape than when they started and the scammer moves on to the next victim.
I have written about scams and scam artists many times over the years. The most recent was in my January 19 E-Letter that focused on Ponzi schemes and other fraudulent investments. Some readers may tire of reading periodic articles about investment scams, but as long as there are increasing numbers of victims of these schemes, I’m going to do my best to keep educating my audience about their dangers.
A good example of what to watch out for just occurred in our local market. Recent radio ads by an Austin-based firm advertised guaranteed 8% returns on investments. Investors’ money supposedly would be pooled and loaned out at 12%, so the investors got 8% and the promoter got 4%. However, an article this week in our Austin newspaper noted that the Texas State Securities Board has now accused the firm of fraud and reportedly shut down the operation. Of course, we don’t yet know if this firm will ultimately be found guilty of wrongdoing, but it does illustrate the potential danger of chasing guaranteed returns that are much higher than market rates.
Always remember – if it looks too good to be true, it probably is too good to be true. Also, be wary of investments offering guarantees of principal and/or returns, especially if the returns are higher than prevailing rates on certificates of deposit. Dig into the information to find out just who is offering the guarantee and how stable that entity is. Also beware of firms that claim to be unregulated or who brag about “flying under the radar” of the regulators. They might just fly away with your money.
Conclusions
While the passage of the Dodd-Frank Act was big news in relation to the largest firms in the financial industry, it’s still important to know that at the individual level, you are still your own best source of protection for your investment portfolio. As I noted earlier, each of the various items discussed in this week’s E-Letter requires some action on your part in order to “reform” your investment experience.
Failing to take advantage of the many sources of investment information and counsel available on the Internet and through financial professionals can be a recipe for disaster. However, be aware that many sources of information on the Internet and elsewhere come to the conclusion that passive asset allocation strategies are the answer. You shouldn’t be passive in regard to your investments any more than you are about your politics or religion.
In no other area of our lives are we taught that inaction and ignoring risk is the best course of action. Virtually every investment offering is accompanied by the caveat, “Past performance is not necessarily indicative of future results.” Yet Wall Street’s conventional wisdom’s most frequent advice is for investors to just hold on during down periods and the market will surely recover in time to meet your financial goals. Anyone who has lived through the last 10 years knows that this advice is not necessarily true.
A growing amount of evidence is beginning to show that the most effective portfolios are those that include a diversity of investment strategies as well as stock and bond asset classes. Strategies such as managed futures and alternative investments have long shown their tendency to reduce portfolio volatility and provide added potential for gains. Why do you think so many pension funds, endowments and other large institutional investors include these strategies?
I mentioned earlier that almost all of the readers of my E-Letter scored well on the financial literacy test featured in my June 22 E-Letter. For that reason, I want to make it easier for others to enjoy the benefits of my weekly analysis of how economic, investment and political issues can and do affect your investments.
I have waived my copyright on this issue of the Forecasts and Trends E-Letter so that you can forward it on to anyone you like. Perhaps you have family members who could benefit from knowing more about the economy and investments. You might even have friends and co-workers who could also benefit. Just forward them this E-Letter and suggest that, if they like what they read, they should come to this Conclusion section and click on the free subscription link below:
Free Subscription Link for the Forecasts & Trends E-Letter
Once they click on this link, we will send them an e-mail to confirm their subscription request as well as make sure that we are listed as an approved domain on any spam filters they may use.
As we venture further into uncharted waters of federal spending and debt, I think it’s vital that as many Americans as possible be aware of the economic and investment implications of government policy. As a loyal reader, I know that you share these concerns, so let’s get the word out to as many of your friends, neighbors and family as possible.
Very best regards,
Gary D. Halbert
SPECIAL ARTICLES:
Don't be Your Own Worst Investing Enemy
http://moneywatch.bnet.com/investing/blog/wise-investing/our-own-worst-enemy-putting-our-investments-in-one-basket/1522/
Why the Rich are Angry and Why it Matters
http://www.nydailynews.com/opinions/2010/09/26/2010-09-26_mad_money_why_the_rich_are_angry_and_why_you_should_worry_about_it.html
Tarp II - Banks and Businesses Don't Want It
http://www.realclearmarkets.com/articles/2010/09/28/tarp_ii_banks_and_business_dont_want_it_98690.html
Just a heads up all. Bullwinkle wants to keep politics off this board. Yes, there is a somewhat symbiotic relationship between economics and politics, I know that and so do most of us. Try to keep the focus on the economics part of it. There are plenty of boards that cover politics on Ihub.
Thanks to all
.........al
Apparently the CEO is very active promoting himself on his blog while he dilutes the stock. Been watching this and see nothing to make me want to get back in. Listen to the mod!!
.........al
Must be very tight. Nice movement on small volume. Worth holding a while longer.
..........al