Everytime I receive one of these ridiculous hand-holding pieces from the mutual fund industry, I am going to post it and tell you the other side of the story.  It is their objective to tell you that everything is just fine and not to worry about the fact the you are losing over 50% in their funds.  In other words, just go back to sleep and please don’t sell our funds.

As a result, investors don’t become pro-active about risk and continue to lose signficant portions of their life savings.  Yesterday’s example came courtesty of Oppenheimer.  Today’s piece entitled Braving the Bear comes courtesy of American Funds.

Avoiding Buying High and Selling Low – opening statement

Basically, investors who let emotion dictate their investment decisions run the risk of missing out on the recovery…yada yada yada…Then they go into the basis of their argument which is “Gain Confidence from the Past!”    They go back and find the bottom of bear markets and point out how much investors made had they stayed invested.  Of course, this is assuming we are at that a bear market low.  In fact, they are making a lot of assumptions. 

It is very easy to go back find the low of a bear market and show how much an investor is going to make in a recovery.  They were saying the same thing at the bottom of the bear market in 2002.  They could have written that had you stayed invested in 2002 at the bottom of the last bear market, your investments would have gone up 90% in 5 years.  However, then you would have proceeded to lose all of that and then in some in a mere 13 months.

Then my favorite is “don’t estimate the power of dividends…”  They write about how dividends accounted for a lot of return and insinuate that they soften blow.  They use the Great Depression and the bear market of the 70’s as  examples.  Back then, dividends were a big part of overall return.  That is not the case today. 

Bloomberg reported the other day that “The fastest reduction in U.S. dividends since 1955 is depriving investors of the only thing that gave stocks an advantage over government bonds in the last century.”  Although that has a lot to do with the past financial crises, dividends made up a much smaller portion of overall return than the past.

They talk about the past performance of their funds and the strong dividend.  Just two days after they sent out this hand-holding piece, American Funds sent out this announcement:

” The quarterly dividend is being reduced for American Balanced Fund^® as noted below.”

This is no ordinary bear market.  Remember that the mutual fund world does not have an answer for risk. 

I get so much propaganda from the mutual fund industry.  It is all information that I can take back to my clients and make them feel better as they lose 50% of their wealth.  Fortunately, I actively manage my clients’ money and don’t buy and hold investments so I don’t need the propaganda.  However, I want you to see why this propaganda is flawed in the message it delivers.

Example – Just invest for the long-term and see the big picture

Message – Why should an investor stay invested “for the long haul” if the market is tanking? 

Evidence:   Take a look at this bar chart which shows the S&P 500 Index’s best and worst rolling 12-month average returns for different holding periods, from 1975 to 2008.  In its best 12-month period, it was up 61% and in its worst, there was a 38% drop. That could scare any investor. Now look at the market’s best and worst average annual return over a 20-year period: an 18% and 8% gain, respectively.  Not too shabby.  It shows that, historically, time won out over volatility.  Past performance, however, cannot guarantee future results.

Implication:  As long as you stay invested over twenty years, you are just fine.

Reality:  Between 9/1929 and 9/1949, the Dow Jones Industrial Average lost -46%.  How is that for a 20 year period?  Yes, it can happen.  So far the looking at the last 10 years, the Dow has lost -14%.  Buy and hold doesn’t look so good.  

So what is the flaw in the argument?  Yes, they put their caveat that past performance cannot guarantee future results.  However, they fail to point out that there have been periods of history where 20 years ended up being horrible for investors.  They leave out the fact that we could face that again, which is the real risk of buy and hold.  A characteristic of this type of hand holding marketing is cherry picking numbers.  

They leave you with this set of numbers to help releave your pain:

S&P 500 returns

2004   10.9%

2005     4.9%

2006    15.8%

2007   5.5%

2008   -37%

(Incidentally, they don’t show you that the total growth during those 5 years was -10.5%)

What if the same numbers looked this way?

2000   -9.11%

2001  -11.88%

2002  -22.10%

2003   28.69%

2004   10.9%

2005     4.9%

2006    15.8%

2007   5.5%

2008   -37%

Total return -28.41%

Moral of the story:  You can show all of the good years that you want in these examples.  The bad years do much more damage to your return than twice as many good years.

I will say that President Obama is digging a very deep hole.  For his sake, I hope that the American people forget about his promises during his first 100 days.  The reality is that until we get the politicians out of Washington, we will have more of the same.  All you have to do is look at the stimulus package to come to that conclusion.

He says he is going to cut the approximately 1.2 trillion dollar deficit in half by the end of his “first” 4 years.   Well, let’s start with roughly $600 billion or so in his “save the economy” bill that could be cut out.  We are at 1.2 trillion dollars because of the 700 plus billion dollar stimulus package.  He could do it right now with a stroke of a pen. 

We have countless problems that have been created because politicians have run this country into the ground for decades (yes, both Republicans and Democrats).  The reality is two-fold.  First, we have many more problems that will have to be addressed, which will add hundreds of billions of dollars of additional deficit.   Second, the dollars don’t add up.  He can cut costs in Iraq all day long and it will not put a dent in the deficit. 

America, wake up!  Either this President is ill-informed or he is playing some extreme hardball politics.  I don’t have anything against Obama.  I have a problem with politicians and their lobbyist/campaign-contributor favoring politics.

The Government is simply out of control and getting completely in over their heads.   Let’s just start with the stimulus bill better known as the “make my lobbyist happy” bill.

Here we are, a country in dire straights, with stimulus needed to jump start the economy and we get this massive spending bill passed in Washington (which not one of the politicians actually read before voting on it).  Here are some of the wonderful items that President Obama feels he needs to spend our money on:

• A high speed rail line between Disneyland and Las Vegas – $500 million – This is going to be extremely helpful for the economy.  Of all of the people, who can afford to go to Disneyland and go gambling in Vegas?  You can thank Senator Reid (who represents Nevada) for that piece of wasteful spending.
• Storm-related repairs to NASA facilities – $50 million
• A jump-start for the domestic lithium-ion industry – $2 billion
• Cleaning out leaking underground storage tank according to the Solid Waste Disposal act – $200 million
• Benefit for small shipyards in metropolises like Ketchikan, Alaska and Bayou La Batre, Alabama  – $100 million
• Wireless and broadband deployment grants – $2.825 billion
• Digital to analog converter box program – $650 million (this is good – I think that everyone should be able to watch American Idol in digital)
• Digital TV coupons – $650 million
• Art projects and activities which preserve jobs in the non-profit arts sector threatened by decline in philanthropy during the economic downturn
• Postponed maintenance on the Smithsonian – $150 million

These were just some highlights.  For a great look at our taxpayer at work, this research firm put together this list.  As a taxpayer, you should check it out and be informed.

Then there are the 4 million (oops), I mean 3.5 million jobs (somehow we lost 500,000 jobs in a week) that this bill is going to create.  They are devoting $1 billion to hiring law enforcement.  That is a good thing.  However, as far as I can see it, the majority of the jobs created will be in construction. 

Tags: stimulus bill; congress

Desperate times requires desperate action.  Well, the credit card industry is pretty desperate as more and more Americans default on their credit cards.  Before I go any further, it is so amazing to me that the credit card industry is shocked about the losses.

You mean if you give people a bunch of credit , extend their lines of credit, and allow people with tons of open credit cards to open more cards, that there might be a problem in the future?  Wow, I can see where they might be very shocked. 

So, how sorry do you feel for this industry as they continue to find new ways to rip people off?  Well,apparantly  American Express is really hurting.  Actually, that does surprise me.  American Express actually had underwriting standards.  They are so desperate that they are offerring $ 300 to a select group of consumers to pay down their accounts and cancel their cards. 

They have 44.2 million open cards and a default rate of those cards now over 8%.  How bad do you think that is going to get? 

The rising rate of card defaults in the credit card industry represents round two of the financial crisis.

ASK BOB Q AND A  

I have a credit card that had $3400 credit limit.

The balance on that card never went above $1000 and I made payments every month, even when I had “No payment due”. I ALWAYS paid more than what was due.  I pulled my payment history and it does show that I have paid as low as $30 (Feb 09′) and as high as $400 every month.  On average I pay at least $150 every month.  I do this with every credit card that I have.

My 2/5/09 Statment shows my limit to be $3400 with $18.00 minimum due (due by 3/2/09) on a $685.77 Balance.  

On 2/7/09 I paid them $30 and was going to give them another $50 (the 2nd one for February) today.

I see that my credit limit has been reduced dramatically (less than $700).  I have received no “notice” from this credit card company that this was happening.  

On Friday 2/20/09 (since I didn’t know) I used this card for $130 and now I am $95 “Over Limit”.  I went ahead and paid the “express” payment of $165 today ($150 toward balance plus $15 so they would post it today).

My question is…Why would they reduce my credit limit so much when I pay them EVERY month. My credit situation has not changed. I have asked them but they have not answered my request as of yet.  I thought I would ask the “expert”.  You can answer by email.

A:

The credit card company can do anything that they want to with your account because you authorize them to do so when you signed your credit card agreement.  You told them that it was ok to change the terms and agreements anytime that they wanted for any reason.  The politicians and regulators have completely failed to do their job and regulate this industry.   The regulators passed rules to stop this practice.  HOWEVER, THEY DON’T GO INTO EFFECT UNTIL JULY 2010.

So gear up for more and more unethical behavior from the credit card industry.  By lowering your credit limit they just earned a late paymeny and a $ 15 fee to expidete a payment. 

It is absolutely ridiculous that the politicians allow this type of behavior to continue.

Tags: credit card companies; universal default clause

After hearing about all of the scams with these home loan modifications, I thought I would post these 5 things to know that were sent to me by a home loan modification.  I would post the author and internet site.  However, I know nothing about this company.  If you are looking get your home loan modified, just know that there are tons of scammers out there and you need to be very careful.

 1. “How long have you been in the loan modification business?” Loan modifications have been going on for years, but companies are popping up left and right trying to figure it out on the fly, so pick an expert! You need to have confidence in the person you are talking to, as they will be handling your family’s financial future.

2. “Are you an Attorney-based company? If they aren’t attorney-based, they may just be some fly-by-night operation who might not even be around in thirty days after they get your money. Successful negotiations require Attorneys, and you need strong legal representation.

3. “Is your company registered with the Directory of Registered Loan Modification Companies?” The DRLMC is a national private registry of loan modification companies. Its members must adhere to strict operational standards. DRLMC membership speaks volumes about a company’s integrity and competence.

4. “Do you have Forensic Audit experience?” Since an estimated 4 out of every 5 loans contain serious state and federal violations, any loan modification company you choose needs to be expert at forensic audit analysis in order to catch any potential violations. Before you can effectively have your loan modified, your modification company and it’s Attorney must know exactly what violations were performed by the lender.

5. “Do you have a WRITTEN money-back guarantee and do you guarantee in writing that you have no ‘back-end’ fees?” Some modification companies require payment up-front, and are “performing little to no services for those fees” (1). Worse yet, there are even some companies who charge a large, surprise junk fee at the end of the process once the loan modification is ready to be signed since the average customer is usually in a financial crunch and working on a short time line!

We are in the midst of updating the Prudent Money web-site.  So, the site is going to not look right for a few days as the final sections of the site are being completed.  So, if a link or a sectiondoesn’t work, it is being worked on.

Also, if you are an I-Tunes subscriber, we have been having difficulty with the download to I-Tunes.  We think that we have figured out the problem and hopefully will have everything fixed by tomorrow.

To get the best look at your credit, it has always been important to look at the FICO score of all three credit reporting agencies (TransUnion, Experian, and Equifax).  The FICO score was developed in 1956 by Bill Fair and Earl Isaac.  They built a company around this credit scoring formula called the Fair Issac and Company, which is where you get FICO from.  It is the accepted form of credit scoring by businesses.  The only one place you can get the original FICO credit score from the big 3 credit reporting agencies is through FICO’s website.  

Well that was the case until last week.  Experian has announced that they will no longer provide FICO with credit report information for the Experian-based FICO score.  You can still get your FICO score through TransUnion and Equifax.  Businesses will still be able to get the Experian FICO information to evaluate consumers.  However, consumers will now be in the dark concerning their Experian FICO score.

So why would Experian pull out?  There has been a big fight between FICO and the big 3 credit reporting agencies for years.  The credit reporting agencies are tired of paying FICO for their credit scoring system.  They would rather market their own credit scoring systems.  In fact, FICO filed a lawsuit against the credit reporting agencies for developing another credit scoring model.  Fair Isaac wants to remain the standard for credit scoring.  

So, you can still get your Experian score through their site and other sites.  It just will not be the FICO-based Experian score.  It will be based on a different scoring model.  

When the market makes a significant low like it did November 08, you want to make sure that the stock market stays above that low.  For the S&P 500 that low was 741.  For the Dow Jones Industrial Average, that low was 7450.  It is very typical for a stock market to establish a low like it did in November and then decline back to that level.

When that happens, investors want to make sure that the markets don’t go to NEW lows.  For example, it would be important for the S&P 500 to stay above 741 versus going below it and for the Dow to stay above 7450.   As I write the Dow is merely 137 points above that level and the S&P is 52 points above that level. 

What happens at this juncture will say volumes about how 2009 might end up.  IF the S&P 500 does fall below that key level, there is a good chance that the S&P 500 would decline to the 575 to 600 area.  That is roughly a 27% decline from the above level.  For the Dow Jones Industrial Average, there would be two critical levels to look at below the November low.  The first level is 7197 which is the bottom of the 2002 bear market.  That is 5% from the above levels.  However, if that doesn’t hold, then it might be a trip down to 6451.  The Dow doesn’t have as clear cut of a potential low as the S&P 500.

So, what is bothering the market today?  The market is speaking very loudly that there is little belief in the stimulus package that was shoved down America’s throat by the Democtratic party.  Speaking of which, it probably would have been a good idea for the politicians in Washington to at least have a good understanding as to what was in the stimulus package.  According to news reports, none of the politicians actually read the 1100 page bill.  They delegated it to their staff.

It might have been a good idea for them to read the 1100 page bill.   To give them the benefit of the doubt, maybe they didn’t have time.  Afterall, President Obama put us all on crisis watch and warned that this bill needed to be passed immediately.  If this bill was so crucial, why wait 4 days to sign the bill?  Better yet, why spend money gasing up Air Force One and fly to Colorado just to have a photo opp and sign the bill?

Since we are over obligated by 65 trillion dollars as a country and remain the biggest debtor country in the free world, wouldn’t it make sense to save a litte change where you could?  It is no cheap affair to arrange for the President to go to Colorado just to sign a bill. 

After all, the politicians certainly had a problem with the CEO’s of the big 3 auotmakers flying their private jets to their meeting (witch hunt, finger pointing session, grandstanding spectacle) with Congress. 

The market is also concerned that GM is heading for bankruptcy.  The big 3 are to present to Congress by the end of the day a plan on how they are going to pay back the money that they borrowed.  It appears that instead of informing Congress how they will be paying the money back that they will be asking for billions more.  I wonder how many billions more it will take before the politicians realize that bankruptcy is the only answer?

Tags: bear market lows, GM bankruptcy

Today, I am interviewing Michael Panzner in his new book When Giants Fall.  I would highly encourage you to listen to the interview at www.prudentmoney.com if you didn’t get a chance to read the book.  In Michael’s previous book Financial Armageddon, which he wrote in 2007, he wrote about the upcoming financial crisis and foretold everything that we are seeing at this moment.

His latest book is a sobering look at the end of the American era.  OK, many of you might automatically write this book off as a sensationalized gloom and doom book.  In my opinion, I don’t completely agree with all of his predictions in the book.  At the same time, I do agree with the probabilities of many of the outcomes he describes.  It is not tough to come to the conclusion that this country is on the decline.  The question is to what extent.  This book should be required reading for anyone who wants to be prepared for any of a number probabilities of the future.  For more information on the book, click here.

This country is in a dangerous place.  Consider what Jerome Corsi wrote over the weekend:

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the “2008 Financial Report of the United States Government” as released by the U.S. Department of Treasury.

We have a Government practicing Socialism.  The history books will show you that Socialism has never been a good solution.  We have had an $800 billion dollar stimulus bill passed this weekend that consists of programs designed to keep people on unemployment benefits for months at a time and create mainly construction based jobs. 

One of the highlights of the bill is a high speed rail project to be built between Las Vegas and Los Angeles.  That is something extremely important right now in the midst of a financial crisis.  This bill does one thing – it promotes the pet projects of the politicians that are doing everything possible to benefit the people who keep them in office.  The best part of the passing of the stimulus bill is that apparently none of the politicians have even read the 1,100-page bill.  They delegated that to their staff.

Well, to all of the politicians in Washington, the members of your staff were not the ones elected to office.  You should have read that bill from cover to cover.  It is a disgrace.

Whether or not this has an ending as dire as Panzner’s predictions in his book is hard to say.  I feel pretty comfortable in saying that what is happening in this country could not possibly have a long-term positive effect on the economy and the stock market.

It is important to remain very defensive with your investing as well as make sure you are controlling your risk.  Risk remains high. 

“I read your comments on the stimulus plan that the President is asking for and I just want to know if you think he is wrong in what he is doing. What do you suggest he do?  When he was elected the president, the Bush Administration had already made the mess the world is in now. He (President Obama) didn’t make this thing. It was already in action when he got elected so I am just trying to understand what you think he should do. No disrespect to you. I love listening to your broadcast when I can. Please answer this for me. Thanks.”

Great question and no disrespect taken!

First of all, let me state that my feeling regarding the actions of the Obama Administration or any of the politicians has nothing to do with Republicans or Democrats or the individual holding the office.  My problem has to do with politicians playing self-interested politics.  

I just don’t think that you spend hundreds of billions of dollars on all of these projects that have very little to do with solving the problem.  We need solutions that help people restructure bad mortgages and not solutions that have a ton of strings tied to them.  

We have to aggressively attack the foreclosure problem and focus our resources on getting the banking system healthy again.  All of these other projects should wait rather than creating trillions of dollars of debt for future generations.

The jobs that these programs are going to create will be primarily construction related.  I hardly see that as a plan to fix unemployment.  My biggest problem with the politicians is the lack of detail to the American public.  We apparently get no say in how they are going to spend our money.  They will not disclose the details.  President Obama had said originally the details would be on the web for a period of time before anything is signed into law.  That isn’t the case now.

There is a reason they will not release the details.  The plan will be scrutinized and danger its passing.  We will see all of the special interest.  

We just opened up the checkbook to every lobbyist and special interest group in Washington to where they can get their projects started and funded.  It will be one big spending free for all.  This will end up being horribly mismanaged.

The most troublesome part of the process is Obama going back on his word of making this a bi-partisan project.  Nancy Pelosi said that the Democrats won and they get to write the bill. This is a democratic bill with very little Republican involvement.  

Obama did inherit a mess. The Bush Administration really made some fatal errors.  The Republican Congress was a horrible steward of this country the years they were in control.   

I appreciate your question.  

So, let’s say that the politicians really can fix the problem.  They introduce a stimulus package with the main objective to create jobs.  As a side note, the other main objective should be to save the housing and credit markets.  You know the problem that has created the crisis?  If you take a good hard look at the stimulus plan, the only objectives getting accomplished are President Obama’s campaign objectives.  There has never been a time in history when a President has been able to walk into office with an open checkbook filled with billions of dollars waiting to fund stated campaign objectives.

Do you really think that it is necessary to spend billions of dollars right now for all of these initiatives that are not even focused on the overall problem?  Well, President Obama, I hope that you get everything accomplished and get re-elected.  My 5 and 7 year old sons don’t mind paying the debt that you created for the rest of their lives.

Then there is the promise of no pork and no agenda.  Well, guess where 30 million dollars of this plan is going?  The Washington Times reports that the plan “includes $30 million for wetlands restoration that the Obama administration intends to spend in the San Francisco Bay Area to protect, among other things, the endangered salt marsh harvest mouse.”

That is Speaker of the House Nancy Pelosi’s state.  Of course, she had nothing to do with it, according to her people.  With all due respect Ms. Pelosi, you should be outraged by the fact that you are wasting 30 million dollars on a mouse.  I hope that this project “that you don’t have anything to do with” helps get you re-elected as well.  It is well-known that you have championed this initiative for a very long time.  However, I am sure you had nothing to do with it.

Then there was the spectacle yesterday on Capital Hill with the CEO’s of the nation’s largest banks who were “on trial” yesterday.  CEO’s of the nation’s largest banks were being grilled by the politicians on how the Government money has been spent.  One politician asks, “Do you have anything to apologize to the American people for?”  I just wish that one of the CEO’s would have said, “Well, Senator, you go first.”

That was a typical capital bill witch hunt where these politicians just ask pointless grand standing questions that do nothing more than belittle the people who are on trial.  As an American, I was embarrassed to watch how little these politicians who are supposed to be overseeing the financial sector knew about the banking industry.  My hats off to the bank CEO’s for very professionally answering the questions meant to belittle them.

 For these politicians, this is all about pointing fingers and displaying their power.  

 The ultimate power position in this country appears to be the upper echelon of politics.  That power is all in the hands of the politician as long as he or she gets elected.  That is the name of the game.  If you are elected to Congress, you get addressed as Mr. or Mrs. or by the name “Senator” or “Congressman” or “Congresswoman”.  You get all of the “capital” of Capital Hill.

How do you stay elected?  Well it comes down to keeping two different parties happy.  First, you have to make sure that the voters like you.  You accomplish that by making sure that it always appears you have the voters’ best interest at heart.  More importantly, you have to keep the campaign contributors happy.  Without their money, it doesn’t make a difference what voters think.  You need capital to stay on Capital Hill.

We have elected politicians who are so good at staying elected that they live well into their 90’s holding prominent positions in Congress.  They could be on life support serving their 20^th term of office.  They still have a vote in every American’s future.  

There is a dark side that comes with all of that power.  It is the responsibility to oversee the workings of the United States.  The politicians are supposed to be the watch guards of the American people.  They are charged with writing and passing legislation designed to protect the American people.  

This is where the conflict of interest occurs. You cannot protect the American people and keep happy the hand that feeds you at the same time.  It is impossible.  So, who do they protect?  Campaign contribution and voting records would show that the politicians protect the hand that feeds them and not the hand that pulls the lever.

So, they continue this process of making sure that the right people are happy.  Then the dark side gets in the way.  They shrug their true responsibilities to the American people.  They allow a mortgage industry to get completely out of control.  They allow the Greed Machine of Wall Street to get utterly out of control. The next thing you know we have crisis on our hands.

This is where the politicians blame everyone but themselves.  This is where they grill people on Capital Hill in outrage as to how these industry leaders could let these things happen. With all of the self-righteous finger pointing, no one ever asks the politicians the questions “Who is the ultimate body in charge?”  “Where does the buck truly stop?”

It doesn’t matter because the politicians show up like the Cavalry ready to spend our tax payer dollars to “fix’ the problem and protect mice in California.  Their arguments for indebting our children to trillions of dollars have holes in it.  Most of these plans have an agenda and filled with special interest.

They create the crisis by allowing it to happen and then ride in on the white horse to fix the problem that they allowed to be created, all to benefit those who help them get re-elected.    

Obviously, it would be unfair to say that every politician in Washington operates this way.  I am sure that there are some who lead with a heart for service and what is true.  

So, this is the problem America.  Are you outraged?  The question is at what point do we as a country put our foot down or is it too late to do so?

Tags: Congress, Stimulus Plan

I love this story about Brad and Sarah Bailey of Lewisville, Texas.  According to WFAA.com, Mr. Bailey had discovered that he was a victim of identity theft.  One charge in particular motivated Mr. Bailey to investigate and see if he could catch the thief.  Apparently, the identity thief was having a little pizza, courtesy of the Bailey’s. 

Mr. Bailey showed up at Romero’s pizza to investigate.  In order to get the address where the pizza was delivered, Mr. Bailey was instructed to show up with a police officer…and that he did.  It took one trip to a Motel 6 and there was the thief enjoying a little pie while making up some fake cards for identity theft purposes ( I am just imagining that he was enjoying a little pie). 

First,of all, way to go Mr. Bailey.  The vast majority of identity theft cases don’t even get solved.  You had the guts to go solve it yourself.  That was the best part of the story.

The funniest part is that this thief had a pizza delievered to the same place he was producing fake cards.  I would think that would be identity theft 101 – never leave a paper trail.  Then again, what was the pizza delivery man thinking when he delivered a pizza that was for the owner of a credit card of  a guy named Brad Bailey to a guy named Semmie Isaiah Williams?

Maybe a hint something was up?   I guess pick up wasn’t a good idea either.

Smoke and mirrors is defined as “something that is intended to draw attention away from something else that somebody would prefer remain unnoticed.” 

Bloomberg wrote the following this morning about Government actions towards the stimulus:

“The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve. “

A friend of mine sent that to me this morning.  His comment – “this is starting to tick me off.” 

President Obama is making the rounds this morning speaking aggressively to how we should pass this stimulus bill.  Someone fires a question from the crowd concerning foreclosures.  He replies that we are going to fix that too.  That is in another bill. 

So, how many bills are they going to try and pass?  How many trillions of dollars more does he want to put us in the hole as he lays out a new type of politics in Washington?  It seems like the same old thing to me. 

A top White House advisor said this morning that this would promote “new lines of credit in a climate of greater transparency.” 

Therein lies the problem with politics.  It is the lack of transparency.  With this second part of the TARP money, they want to mask bad assets off the books of banks.  This way we don’t know how bad of shape these banks are really in.  That isn’t transparency.  The first part of the TARP plan leaves us with no idea of how the money was distributed.  The Treasury will not disclose where OUR money went and why the $350 billion did nothing to help the credit markets. 

Then there is the stimulus package, which we have to watch Congress painfully argue over.  Why do we need a stimulus package and then a separate housing package and then the second part of the TARP program to fix the situation?  Let’s get one thing straight upfront.  It is highly unlikely that the politicians are going to fix the problem by spending.  It hasn’t worked in the past and I doubt it will going forward. 

Obama and the other politicians want to take all of his campaign initiatives, such as healthcare and energy, and roll them up under the disguise of the stimulus program.  Of course, he is going to throw $50 billion towards troubled mortgages (which should scratch the surface).  This is more about getting the agenda of this administration met than addressing the problem.  We are going to spend billions of dollars addressing things that can wait. 

If he wants to address energy and health, then do so in separate bills.  This is a unique way for politicians to satisfy their agendas and take care of those who got them elected.  It is fiscal irresponsibility at its highest. 

All of the initiatives that Obama wants handled that have nothing to do with the current crisis are not going to even produce jobs anytime soon.  This analysis was performed by a non-partisan (neither Republican nor Democrat) committee.

It is smoke and mirrors politics.  They are trying to pass something that will not even directly address the problem.  It will however fix a lot of things that can wait.  It will not matter how energy-efficient we become or how pretty those new roads and bridges are while we are facing huge amounts of debt on top of a broken financial system. 

Looking at the market this week, we will see how the market takes the new spending plans of the Government.  I think that the market will probably “sell” the news as they have gone up on the “rumor” of a new plan. 

Be sure and continue to watch your risk!