“The richest, most powerful nation on earth faces a fiscal tsunami which threatens to overwhelm Government and citizens alike.” – Former Comptroller General of the US, David Walker

I had a great opportunity to interview David Walker this week. Mr. Walker is uniquely qualified to talk about this country’s financial mess as he served as the Comptroller General for the United States between 1998 and 2008. He was the nation’s chief accountability officer and head of the US Government Accountability office or GAO. I have had many authors on the program that have written books about the financial crisis as well as what the future holds.

However none of those authors can give the perspective as Mr. Walker. He was on the inside for 10 years in Washington. He had no party affiliation. He never had to play politics. He was appointed to a 15 year term and never was in jeopardy of losing that appointment. He also was sounding the alarm at the same time and doing something that no one in Washington would dare. He was telling the truth. The above quote was from a speech in 2006 well before the financial crisis even began. He started sounding the alarms in 2005.

Prior to being the Comptroller General, he was a trustee for the Social Security fund. He has really been on the inside. The interview was about his book Comeback America. The good news from his perspective is this is all very fixable. He says that social security is fixable. Deficits are fixable. The uniqueness of this book is that you are getting actual solutions from someone who has been in the numbers and watched the train wreck in Washington develop over a period of 10 years. When he started there were no deficits.

That is the good news. The bad news is that you have to fix Washington and politics. The biggest problem might not be fixable. How do you take the politics out of Washington?

This book is a well rounded book giving you insight into the problems as well as a thorough look at the solutions. I would encourage you to get a copy of this book. If you would like to hear the interview, listen to the podcast here. For more information about the book, you can click here.

Tags: Bob Brooks, Comeback America, Comptroller General, David Walker, Social Security, Washington

I am watching the politicians grill Treasury Secretary Tim Geithner and former Treasury Secretary Hank Paulson with complete disgust. This is only about grandstanding and elevating them above fault. They just cannot understand why they took aggressive measures to bail-out AIG. They just don’t see how this would create further unemployment. One politician asks, “Tell me how what you did saved us from high unemployment?”

Really? Do you really not understand? These are the sane people who are in charge of overseeing the welfare of this country and they have to ask these questions?

In one former grilling about a year ago, one politician had to ask Geithner how the crisis occurred. Are you kidding me?

Once again, Geithner, Paulson, Bernanke etc. are not the problem. They had to clean up the mess that was created due to the lack of attention from the politicians. The politicians did not do their job and turned the other way. It was convenient for them and certainly was a good move for campaign contributions. These politicians are on a witch hunt and determined to find a scapegoat for their responsibility in the financial crisis.

Do they really think that the American people are that stupid? Does President Obama think that the American people are going to think he is doing something by stating he will be freezing spending? When in reality we are talking about saving a few billion dollars. If he wants to do something, he should go back and cut out all of the special interest projects that we the taxpayers are funding.

Remember some of these projects funded by the taxpayer?

• 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

The sad thing is that this is just a small representation of the irresponsible spending.

Tags: AIG, bail-out, Bernanke, Hank Paulson, irresponsible spending, Obama, Tim Geithner

Could it be that the foreclosure crisis is about to get worse? Let’s take a look at the above chart. The first set of green lines shows the number per quarter of the adjustable rate mortgages that were coming due between 2006 and 2008. These were sub-prime type adjustable rate mortgages. Now look to the right of that big green arch and see the next wave of adjustable rate mortgages that are coming due. This is all of the other types of adjustable rate mortgages coming due.

The problem with the first wave is that the vast majority of the mortgages that went into foreclosure because of the adjusting rates had to do with the homeowner not being able to make the payment. The problem is that when these adjustable rate mortgages “reset” (and the chart is showing you by the 100,000’s of mortgages and when they reset), homeowners have trouble making the larger house payment. Thus they become a foreclosure.

This next wave is much bigger and lasts longer than the sub-prime phase. Plus, unemployment is much worse and more people now owe way more than their house is worth. Today, it is much more socially acceptable to walk away from your house than a few years ago. Will a good percentage of these houses go into foreclosure as the mortgages reset? Well let’s look at the other variable that is becoming a problem.

For many of those who had mortgages reset last year, they enjoyed a lower payment. When their rates adjusted, it went down and positively affected the payment. There is a cost of funds index that is the benchmark that determines whether rates go up or down when mortgages reset.

Between November 2008 and October 2009, that rate plummeted from 3.155 down to 1.259. That changed in November 2009 as the rate shot up from 1.259 to 2.094. If this trend continues, it could spell additional bad news for homeowners.

Tags: adjustable rate mortgages, Foreclosure Crisis, Homeowners, sub-prime, Unemployment

All of the analysts are out this morning describing last week as nothing more than the normal correction that we have been expected. “Don’t panic – this is no big deal.” “It is great to be normal again.” To be fair, everyone who is bearish is calling for this bear market rally to be over and done. So, who is right? Corrections are normal. The fact that we haven’t seen a correction is not normal. So, welcome back to normal stock market activity. At the same time, the charts are potentially showing a change of character in the market that would also support the bearish case.

Every time the market changes direction, you have to look at the catalyst. Unfortunately for the bullish case, the catalyst is Washington intervention and finger pointing. Washington wants to assert control (continued move towards socialism) and wants to point the finger. There were two news items beyond not so hot earning reports that had a negative effect on the markets.

First issue – On Thursday, President Barack Obama proposed new rules designed to restrict the size and activities of the U.S.’s biggest banks, the latest in a series of administration moves to curb Wall Street.

If you think back to last year, they forced all of the investment companies like Goldman Sachs and JP Morgan to be banks so that the Government could give them aid and help protect them from failing. Well there is a price that comes along with that protection and it is called control. Basically President Obama wants to tell banks how big they can be and tell them whether or not they can participate in what is called proprietary trading.

Healthcare was only one of the ingredients of socialism. Nationalization of the banking system is the other. So, we just continue to follow their game plan. Last year they took some major steps in gaining control over the banking system. They performed an unnecessary stress test on the banking system last year in order to tell us (which was not necessary) the banks that were healthy and unhealthy. They also announced a list of problems that might force the government to step and take over.

Well one of those problems is unemployment. The government said that banks might have difficulty in an environment where we had a 10% unemployment rate. Guess what our unemployment rate is today? Yes, technically we are starting to meet the criteria as stated by Washington that would require them to assert control. It makes you wonder if President Obama’s announcement last week was a reenergized effort towards nationalization of the banking system.

As you might imagine, Wall Street wasn’t too happy with the President’s plan to assert control. You can look at the stock market and the moment he stated that he no banks should be allowed to run proprietary trading systems and that he wanted to limit the size of banks, the market fell apart.

This also gives the politicians during an election year the ability to point the finger at those big old bad banks that gave mortgages to people that couldn’t afford them. Those bad banks are the problem and the Obama administration and Congress are going to correct the problem.

Second issue – Members of Congress came out and declared that they would not vote for reappointment of Fed Chairman Ben Bernanke for another term. This is the ultimate in finger pointing. It is real convenient to blame him for the financial crisis and take the spotlight off of their part (the largest part of the blame) in the financial crisis. Not reappointing him would be a grand mistake. These politicians are too interested in their own survival to realize the problems they will create in the markets by not reappointing him.

This is the risk that we run into with the markets. You create problems when Government wants to fix things, assign blame, and start over regulating industry. They don’t regulate when they need to and when they regulate they do it too much.
Politicians should practice preventative medicine to prevent the crisis from happening and never should be allowed to fix anything after it is broken. You just have to look back to the Great Depression to see they same type of effect when they passed the Smoot-Hawley Act which many historians state made the Great Depression much worse.

Once again, we come to the same conclusion. These politicians seem to continue to be the problem.

Tags: Bob Brooks, Goldman Sachs, JP Morgan, Nationalization, Obama, socialism, Stock Market

We have talked many times on the radio show about the real problem that ignited the financial crisis. The financial system was allowed to practice acts of greed and take advantage of an unregulated system. As a result, there are trillions of dollars of losses for which the consumer/investor paid the price.

The politicians in Washington are charged with the duty to monitor these systems to make sure that this type of thing is not occurring. They are charged to write laws that protect consumers from greed and dishonest business practices. Unfortunately, politicians do what works for them politically, which means, they don’t bite the hand that feeds them. If campaign contributions are involved, they turn the other way.

For years they turned the other way and let Wall Street, Credit card companies, and the real estate industry create an enormous mess. If you were paying attention (and they are charged to pay attention) you could see this train wreck coming a mile away.

So, the best way to reform the system is to reform Washington. You do that by taking away the conflict of interest. More needs to be done to diminish the effect of campaign contributions and lobbyists in Washington. One shouldn’t have power, influence, and special favors just because they can write a check. Well, yesterday the Supreme Court made that much easier.

A divided Supreme Court struck down limits on corporate political spending, overturning two precedents in a ruling likely to affect campaigning in the 2010 elections. The 5-4 decision rolls back at least two decades of restrictions on what unions and corporations can spend in elections and frees special interest groups to unleash a flood of advertising to sway the outcome of races close to elections.

Now it appears that corporations can spend freely to get whatever they need from their politicians. It is amazing to me that our highest court just threw gas on the fire.

The most interesting aspect of this Supreme Court decision is the timing. It sure is convenient timing since we have crucial elections in November where it appears the democrats are in trouble. Imagine that……politicians getting a little boost just days after they received the reality check that the November elections might not go their way. Who would have ever imagined that the Supreme Court might also be in the special favor game?

Tags: campaign contributions, financial crisis, lobbyists, Supreme Court

Dr. Denison is a very gifted teacher who has a heart after God. I wanted to share the following commentary with you.

Is God punishing Haiti for worshipping the devil? Pat Robertson claims that Haiti made a pact with Satan for which the island’s 9.7 million inhabitants are now facing the wrath of God. Let’s examine Robertson’s statement in biblical perspective, investigate the historical background behind this alleged pact, and consider the intersection of natural disaster and divine love.

We begin with Robertson’s actual statement : “Something happened a long time ago in Haiti, and people might not want to talk about it. They were under the heel of the French. You know, Napoleon III and whatever. And they got together and swore a pact to the devil. They said, ‘We will serve you if you will get us free from the French.’ True story. And so, the devil said, ‘OK, it’s a deal.’

“And they kicked the French out. You know, the Haitians revolted and got themselves free. But ever since, they have been cursed by one thing after the other. Desperately poor. That island of Hispaniola is one island. It’s cut down the middle. On the one side is Haiti; on the other side is the Dominican Republic. Dominican Republic is prosperous, healthy, full of resorts, et cetera. Haiti is in desperate poverty. Same island. They need to have and we need to pray for them a great turning to God. And out of this tragedy, I’m optimistic something good may come. But right now, we’re helping the suffering people, and the suffering is unimaginable.”

I need to make four biblical responses.

First, God loves the suffering people of Haiti. He cares passionately for the poor and oppressed. His word tells us, “He who is kind to the poor lends to the Lord, and he will reward him for what he has done” (Proverbs 19:17). The Lord said of King Josiah, “He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?” (Jeremiah 22:16).

The alleged 1791 Haitian pact with the devil would put our Father on the side of slavery and Satan on the side of those seeking freedom. The reverse is actually the case. Satan is a “murderer from the beginning” (John 8:44), a thief who “comes only to steal and kill and destroy” (John 10:10) and seeks to make us “slaves to sin” (Romans 6:17). Satan enslaves—God liberates.

Second, the Haitians are suffering because we are fallen people living on a fallen planet. In the Garden of Eden, this tragedy would not have occurred. In God’s perfect plan there would have been no Hurricane Katrina, no tsunami in southeast Asia, no cancer or heart disease or earthquakes. But when we fell into sin, the entire planet was affected. As a result, “the whole creation has been groaning as in the pains of childbirth right up to the present time” (Romans 8:22). The earthquake is not the Haitians’ fault. God cares for their pain as his own.

Third, God’s people must respond. We are the body of Christ (1 Corinthians 12:12), his hands and feet. He will help the suffering Haitians through us. Give to help the relief effort; go if you can; pray fervently. Don’t speculate on the causes of this crisis—respond personally and practically.

Last, I must state that Robertson’s statement is unbridled audacity. Robert Jeffress, pastor of First Baptist Church in Dallas, said that it is “absolute arrogance” to claim that we can interpret such events as divine judgment (http://abcnews.go.com/GMA/white-house-advisor-valerie-jarrett-speechless-pat-robertson/story?id=9555714). Franklin Graham said that Robertson “must have misspoken” and added, “God loves the people of Haiti.”

As we will see, Robertson should have checked his sources before making his allegation. Scripture calls us to “test everything. Hold on to the good. Avoid every kind of evil” (1 Thessalonians 5:21-22). And he should speak only the truth, in love (Ephesians 4:15).

Christians should pray now for the Haitians, asking God to redeem this horrific tragedy for his glory and their good. A suffering world will believe that God is love (1 John 4:8) when they see his love demonstrated in ours. As my friend Ken Medema says in one of his songs, “Don’t tell me I have a friend in Jesus without showing me first I’ve got a friend in you.”

You can read his Parts 2 and 3 at the web-site – http://www.godissues.org/

Tags: Bob Brooks, Dr. James Denison, freedom, Haiti, Pat Robertson, slavery

It is no secret that Washington has been manipulating the system for years. There is a difference between manipulation of the past and present. In years past, they would manipulate behind closed doors. Today, they do it right in front of your face. America is starting to figure out how bad the manipulation actually has been. For example, conspiracy theorists (myself included) have often thought that Washington has been manipulating the stock market. Over the weekend Barron’s Magazine wrote about a report that a research company named Trim Tabs released. Trim Tabs analyzes the flow of money in and out of the stock market.

Looking at the past 10 months and given the tremendous stock market rally, they have come to one conclusion. Their report was “suggesting the Fed might be goosing stocks because publically observable fund flows seem not to be able to account for the 70% gain since the March bottom.”

In other words, the flow of money into the market does not support such a rise in price. It makes sense that the Fed would buy stocks and help push the market up. People feel better when the stock market is going up (even if it is artificial).

Then there is what happened in the Democrat-controlled state of Massachusetts. A Republican win sends a huge message to Washington. The march towards socialism has hit a big road block. No longer can Democrats control what is happening now that Republicans have the power to filibuster. Now the Democrats are scrambling for cover with re-elections coming up in November.

Finally, things are coming to light. Finally, America is getting a backbone. Just maybe we can get our country back from the politicians, socialists, progressives, etc (whatever your label of choice).

“Socialism only works in two places: Heaven where they don’t need it and hell where they already have it.” -Ronald Reagan

Tags: Bob Brooks, Democrats, FED, manipulation, Ronald Reagan, socialism, Washington

I received a disturbing public relations e-mail from Dr. Jerome Corsi who has been on the show several times. The subject of the e-mail was a news story that was circulating around for a while last year. However, it was more of a mention than anything. Well, the notion of Washington forcing Americans with 401(k) plans and IRAs to give up a portion of their accounts for a guaranteed annuity down the road is surfacing again. Dr. Corsi gives some evidence that the Obama administration might be seriously considering the hijacking of retirement plans in order to get money into the government coffers.

Note: Information from the press release is in bold

Bloomberg reported Friday that Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Mark Iwry are planning to stage a public comment period before implementing regulations that would require private investors to structure IRA and 401(k) accounts into what could amount to a U.S. Treasury debt-backed government annuity.

Spokesmen from both the U.S. Treasury and Department of Labor confirmed that the federal agencies are about to enter a pre-regulation public comment phase on the proposed rule change.

In a nutshell, they would require investors to forfeit a portion of their retirement account for a guaranteed income annuity at retirement. You could refer to it as Social Security II.

On the Department of Labor website, the transcript of a Dec. 9 webchat with Borzi confirms the Employee Benefits Security Administration is about to issue a Request for Information on how annuity lifetime options should be structured into a wide range of defined contribution retirement plans, including 401(k)s.

“Lifetime Income Options,” code words for annuities, are also listed in the Department of Labor’s regulatory agenda for the Employee Benefits Security Administration, issued Dec. 7 and filed in the Federal Register.

Due to all of the losses from the bear market, the Government thinks that investors are not smart enough to handle their own investments and that the Government should help them out. The real truth is that it is a way to raise money for the irresponsible spending and just an additional way to put more dependence on the Government (i.e. socialism).

The Investment Company Institute, a national trade organization representing the mutual fund industry, argues that the distinction of the Obama administration proposal would be to require annuities funded with Treasuries to be embedded within IRAs and 401(k) programs, using the fear of loss as a reason to demand retirement investors own Treasuries.

The Investment Company Institute member companies manage some $11.62 trillion in mutual fund assets for some 90 million mutual fund shareholders, including retirement-oriented investors participating in defined contribution plans such as employer-sponsored 401(k) accounts.

Would the Obama administration really attempt to do something as irresponsible as to force investors to do something against their will? Well, they are doing it with healthcare. Why not with your retirement? We will keep a close eye on this story.

Tags: 401(k) plans, Bob Brooks, Department of Labor, Dr. Jerome Corsi, Obama Administration

I have always had an issue with these Congressional panels that grill executives for “wrong” doing. These politicians insist on being addressed with Mr. or Mrs. and act as if they have been granted special powers and privileges. They act as if they themselves are above and beyond all wrongdoing.

Yesterday is just the latest of one of those circus acts as a Congressional panel grilled Wall Street executives on their “wrong” doing when it came to the financial crisis. This is convenient for the politicians. They get to point the fingers and indict any and everyone except for themselves.

The role of the politicians is simple. They are charged with passing laws and looking out for the general welfare of the United States. Why do we have laws? We have laws to make sure that bad things don’t happen to good people. Laws are passed to protect. So, why aren’t the fingers pointed at the very people who should have passed the laws that should have protected our country from a financial crisis?

My 8 year old could have come to the conclusion that if you loan out a ton of money to people regardless of credit scores, in homes they cannot afford, and with payments that are affordable now but will not be in the future, there will be a problem. Maybe they couldn’t figure out all of the intricate dealings of Wall Street and the risk that went along with the securitization of these loans. However, anyone with common sense could see that this type of activity in the mortgage business was going to end badly. It was a real estate bubble plain and simple. All of the signs were there. If you are charged with passing laws and looking out for the general welfare of people, wouldn’t you be on watch for this type of irresponsibility?

There is no question that Wall Street had a part in the financial crisis. However, the judge and jury we call Congress is just as much to blame as they point fingers. The political system is THE PROBLEM. This three ring circus that these politicians put on for the general public is nothing more than a way to take the light off of their irresponsibility and place the blame elsewhere. Let’s face it….Wall Street in all of their greed is the perfect target.

Tags: blame, Bob Brooks, Congress, politicians, Wall Street

The White House is claiming a victory on the jobs front stating that they “estimate” that the 700 billion dollar plus stimulus program has created 2 million jobs. The White House economist calls it “stunning.” No, really what is “stunning” to me is the way politicians play with numbers as they desperately want us to believe a reality that does not exist.

Let’s take a look at this statement. If I am doling out 700 plus billion dollars of other people’s money, I am going to have a mechanism in place that documents the number of jobs created and have hard numbers to demonstrate without any doubts taxpayer money is not being wasted. The math is pretty easy. There is a certain amount of dollars going to fund a certain number of projects that create an easily documented number of jobs. Unfortunately, that creates problems for politicians for a number of reasons.

First, taxpayers would be reminded of the large amount of money that is being wasted on projects that have nothing to do with solving America’s problem and have everything to do with special favors from politicians that work to get them re-elected. Second, that would be disclosure of too much information and would allow the American people to track what the Government is doing. Finally, estimates are so much more fun to create and make much better political sound-bites, especially when we just lost another 85,000 jobs. The great thing about estimates and political sound-bites is that politicians can appear to actually be doing their job.

Besides, the government comes up with a fantasy number each month in the jobs report. They estimate through a formula how many jobs were created by small businesses that just were not picked up by the Department of Labor. This is called the birth/death ratio. They have “estimated” that roughly 900,000 jobs have been created in 2009 alone. Were those jobs included in the 2 million job estimate or does that now make it closer to 3 million jobs?

I want real information and not fantasy accounting. My concern is that America is going to wake up one morning and realize that things aren’t what they are “estimated” to be.

Tags: Bob Brooks, Department of Labor, Government, job estimates, job numbers, stimulus, White House

Is the problem of identity theft overblown? I have been getting a few e-mails recently concerning identity theft. It had me thinking that maybe it is not as big of a deal as advertized. You have seen the statistics. The statistics would back up the Federal Trade Commission’s claim that identity theft is the number one crime in America. However, that is also based on statistics from various time periods in the past. There is identity theft pre-credit crisis and identity theft post credit crisis. Credit is much harder to get these days and credit scores across the board are much lower. It is tougher to hijack someone’s identity theft with a credit score in the low 500’s. I would be much more interested in identity theft statistics post 2009-2010 to see if the impact is worsening.

Also don’t forget that the identity theft protection business is an enormous industry. There are companies that claim that they can magically protect you from everything. Yet, they really don’t give a lot of detail how they go about it. This requires customers of these products to really trust them. The bottom line is that if an identity theft is not hitting your credit report and people are not opening up accounts in your name, I don’t know that I would worry as much about it.

In reality, protecting yourself from identity theft is not that difficult. It is especially not the rocket science ID theft solutions companies portray it to be. It really just takes 6 steps.

(1) Don’t use a debit card – credit card offers you maximum protection

Taking money directly out of your bank account is much more serious than someone illegally using your credit card. In addition, you the maximum liability for unauthorized charges on a credit card is $50. On a debit card, it can be unlimited liability.

(2) Watch all of your accounts more closely

Once a month, take a look at all of your credit card accounts and bank accounts and make sure that everything looks ok. You just don’t have the luxury of not doing so in this environment.

(3) Monitor your credit reports

This is a no brainer. In most cases, evidence of identity theft starts by appearing on your credit report.

(4) Get a PO Box

This eliminates the risk of someone going through your mail.

(5) Be aware of your surroundings when giving out personal information and be discreet about giving out information

If you are in a doctor’s office and they ask for social security number, don’t write it down on a stray piece of paper and don’t announce it to the world. Be discreet when giving our personal information.

(6) The Golden Rule of ID Protection that will eliminate a vast majority of problems. Never give information to someone who approaches you first.

This really will eliminate most problems. If someone approaches you and requests information, never give it. That could be through a phone call, an e-mail, a door to door solicitation, etc. Only give information to people when you initiate the contact with contact information that you know is reliable and not a scam. This way you know that the people you are talking to are legitimate.

Tags: Bob Brooks, credit reports, Credit Score, debit card, Federal Trade Commission, ID protection, Identity Theft

This is getting to the point of being completely ridiculous as the banks on Wall Street continue to take advantage of the system. As you recall, the big banks had to get bailed out due to their incredible irresponsibility with mortgage backed securities and leverage prior to financial crisis hitting. If there were a list of “players” out there that share responsibility (along with the politicians) for the predicament we find ourselves in today, the big banks would be on the list.

Yet, it makes no difference the damage that has been left in the wake of their greedy decisions. It makes no difference that we all will have to suffer for decades to come because of their decisions to make a profit regardless of the costs. To rub salt in the wounds, they continue to pay themselves enormous salaries and bonuses.

The New York Times says it best:

“The bank bonus season, that annual rite of big money and bigger egos, begins in earnest this week, and it looks as if it will be one of the largest and most controversial blowouts the industry has ever seen.”

Of course, you can thank Congress for its hand in all of this greed. They arranged last year for banks to orchestrate some funny accounting so that all of those toxic losses don’t have an impact on the books or the bottom line. One day you have hundreds of billions of dollars on the balance sheet and then just like that with a stroke of a pen those losses are no big deal and don’t hit the bottom line. However, you have to know that they are still there and the banking system is still not remotely out of the woods. For today, it is OK for Goldman Sachs to pay its employees an average of about $595,000 each for 2009 or JPMorgan Chase employees to be paid roughly $43,000 on average.

Don’t forget the 6 million dollar salaries you and I are paying the CEO’s of Fannie Mae and Freddie Mac to lose taxpayer money. The politicians in Washington would be responsible for allowing that to happen as well.

In a new lawsuit filed against Goldman Sachs, it is alleged that in 2008 “Goldman earned $2.3 billion, paid out $4.8 billion in bonuses and received $10 billion in TARP funding. The lawsuit argues that the bank’s 2008 bonuses were subsidized with taxpayer money.”

If you consider the funny accounting that took place this past year and the behind the scenes flow of money between the banking system and the Treasury, who is to say that taxpayer money is not funding these bonuses as well?

It would appear these companies haven’t learned anything from the financial crisis. Beyond the financial crisis, it appears to be business as usual. Greed at any cost.

Tags: accounting, Bob Brooks, Fannie Mae, Freddie Mac, Goldman Sachs, JP Morgan

Investors and those depending on fixed income today are craving higher interest rates. They are just non-existent. A client recently sent me a marketing e-mail from AAA Life Insurance Company. The caption definitely grabs your attention.

Great Annuity rates up to 5.65 % – call for more information – limited time

Your first impression is that you can get a locked rate of 5.65%. That is furthest from the truth. There is a base interest rates paid of 3.15% per year. In addition to that rate, you get a first year bonus rate of 2% giving you 5.15% in the first year. How do you get the 5.65% in the first year? You have to invest over $500,000 with this company. Incidentally, I wouldn’t want to put anything over the insurable limit with a small insurance company like this one.

That is all of the information they give you. They don’t disclose the deal breaker. They want you to call so one of their telemarketers can successfully “sell” you the product and talk around the downside of this product. A good telemarketer is good at getting the sale regardless of the fact it is a bad deal for any consumer.

There are two downsides. First, you have to be in the product for 10 years. OUCH!! Funny how they didn’t mention that in the advertisement. I would never lock in a rate that low for that long. Second, you can lock your rate in for 5 years with bigger and stronger insurance companies and get better rates.

If the insurance industry were regulated like investment companies, those disclosures would have been in that ad. Remember that insurance companies are notorious for irresponsible marketing (marketing that makes you believe something that is not true). They are only lightly regulated by each state’s board of insurance. Buyer Beware!!

Tags: advertising, annuity, Bob Brooks, deceptive, interest rates

Yesterday I wrote about the high level of optimism in the stock market right now. I also made the point that it is tough to be that optimistic when you look at the high levels of risk that are present due to crisis. This year one of my smaller resolutions is to give both sides of the argument and not assume that you are hearing it in the media.

Along with new year predictions, you also get the list of lessons learned in the previous year along with some principles that should be reconsidered. Scott Burns wrote an article for the Dallas Morning News entitled “Timeless truths serve as beacon for investors.” One of the timeless truths was “there is always a crisis.” He basically states that there is always a crisis. From that, one would infer that crisis shouldn’t be something that scares you away from investing because that is the everyday environment. This is one of those dangerous presuppositions such as buy and hold for the long-term. Yes, there is always risk and always the possibility or reality of a crisis. At the same time, there are different levels of crisis and the current debt crisis we face is unprecedented, making today a time that investors need to be more leery of risk than ever before. This is a crisis with a capital C.

Think of it in terms of a hurricane. If you live in Florida, there is always the possibility of hurricanes. When one is coming your way, to ride it out or go to safety? Well if you looked at every hurricane that came along as one that was going to be no more than a Category 1, you probably would think twice about going through the expense and time of leaving. However, they aren’t always going to be Category 1 hurricanes. Given time, the probability rises when a Category 4 or 5 potentially hits. As a result, you wouldn’t want to be around for that one. I truly believe that we are in that Category 4 or 5 financial storm environment. Right now, we are at the calm part of the storm. As an investor, you need to be mentally prepared for that possibility. If it starts to come to pass, what is your exit strategy? Remember the financial advisor community for the most part will just tell you to ride the storm. If this is as big a crisis as it looks, riding it out (if we see Financial Crisis Part II) is something that you will not want to do.

Getting the t-shirt that says “I survived the Great Debt Crisis – I just have less money” is not something that you want to strive for.

Tags: Bob Brooks, financial crisis, predictions, Scott Burns, Stock Market

From this week’s Stock Market Outlook:

With a new year the predictions are everywhere. Will the economy continue to stabilize? Will the stock market continue to go up? What are the pros saying? It is what they are saying as a majority that has me the most concerned. This is the time of the year where everyone is predicting how the new year will turn out. Personally, I am a recovering prognosticator and refuse to predict anymore after the bad predictions from last year. Granted, I was right about the first quarter and the continuation of the bear market. However, I couldn’t have been more wrong about what happened at the lowest point in March. So, let’s take a look at the prediction business and have some fun.

First, this is what concerns me. There is an old saying that goes like this – “When everyone thinks the same way, usually everyone is wrong.” Today everyone thinks there is no risk in the market. Everyone is bullish. In fact, today the level of optimism is higher than in October 2007 (top of the bull market), than in January 2000 (top of a bull market), and in August 1987 (two months before the second largest stock market crash on record.) When everyone is optimistic or pessimistic, things usually change. Danger – everyone is packed into a crowded party. What are you going to do when someone yells FIRE!?

Unusually High Levels of Optimism
I heard one analyst this morning who was just gushing with optimism about how high the stock market is going to go. Then in the same breath he said: If we continue to see the same type of economic numbers going forward, I am very positive about the stock market.

Let me state the same thing in football terms. If the Dallas Cowboys continue to play the way they are playing now, I am very optimistic that they are going to the Super Bowl. What are the probabilities that the Cowboys are going to continue to play the same way? Minus the fact that Wade Phillips is unproven as a head coach that can take a team to the championship, I think that they are good. Things are clicking for the Cowboys. What are the chances that the economy is going to continue to improve? The economy is improving on the heels of a big shot of Government intervention that has created this false level of growth in the economy. I will not bore you with the long list of risks to investments today.

I will just ask one question. What are the chances that we just cruise on through without any ill effect of the debt crisis and continuing irresponsibility of the Government bail-out and cover up programs? Well, only time will tell. The quality of a prediction always comes down to the assumptions that are being made. I think that it is extremely risky to assume and base the fate of your investments on the probabilities that things are just going to run along smoothly in this economy when we face an unprecedented amount of challenges.

Next week – As I wrote earlier, I am out of the prediction business. However, I will present you next week with what I think are the probabilities for 2010 and what you need to put on your radar. Incidentally, tomorrow on the Prudent Money blog I will follow up with the counter argument to the point I am making today. Make sure and catch it.

Tags: Bob Brooks, bull market, debt crisis, predictions, Stock Market