Straight From the Heart

The Foxes Guarding the Henhouse-How Wall Street is Robbing Us Blind

As a financial advisor, I have been concerned about short selling and in particular naked short selling since the fall of 2008. Every day at 3:45pm, the market would start to nosedive. Every day, the same pattern. Who would profit from the market going down? Short sellers and naked short sellers, that's who! I saw the impact of this on my clients' accounts, the panic and despair that ensued, and how our economy tanked. Short selling in the market has had a checkered history going back to the Dutch Tulipmania, Great Depression, and George Soros shorting the British Pound that "broke" the Bank of England. There are some that say short selling is good for the market. In one case, a well-known short seller helped expose Enron. The public was protected by the "uptick rule" established in 1938 but was rolled back in July of 2007. There are proposals on the table to reinstate the rule and there was talk last spring about reinstating the rule, but I couldn't find anything saying it had been. The Wall Street Journal reports that Wall Street firms, including Vanguard Group and Goldman Sachs are arguing against new rules to restrict short-selling under consideration by the Securities and Exchange Commission. In letters filed last week with the SEC over the proposed restrictions, firms raised objections to a number of proposed limits on short-selling. So the SEC is still delaying making the decision to reinstate the uptick rule and is getting pressure not to from some of the players that stand to benefit from market manipulation.

http://en.wikipedia.org/wiki/Uptick_rule

Moving right along to the heart of the matter...

This excellent Rolling Stone Magazine (not a fan) article by Matt Taibbi explains in great detail the practice of naked short selling. He deftly walks the reader through the collapse of Bear Stearns and Lehman Brothers. The practice of naked short selling has had dire consequences --wreaking havoc on the stock market at the same time as credit default swaps and toxic mortgages were creating their own disasters--a trifecta of scams that makes Bernie Madoff look like a small-time piker. Incidentally, Patrick Byrne, CEO of Overstock.com had complained about naked short selling to the SEC for years, seeing how it negatively impacted his own company. He is still waiting for an answer! We shared several emails about this topic several months ago. This is a lengthy article with some profanity, but worth the read if you want to get a glimpse into how we investors are being swindled and manipulated.

How can a regular investor compete with these schemes? We don't have a chance. The foxes are guarding the henhouse.

http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle

Obama's Spending Spree

Well, this week didn't turn out so well for the Obamas and their cronies in Chicago. Despite their magnetic personalities, cutting-edge fashions, and Oprah in tow, that wasn't enough to put Chicago on the Olympic podium. I'm sure that building the Olympic venues would have been a boon to the constuction industry and related trades, filling the hotels with international guests would have helped the depressed hospitality sector, and sure, bringing home a slew of gold medals would have all made us proud. Maybe even the Obamas would feel proud to be Americans.

I was troubled by our President's tone when pitching the Olympics to the International Olympic Committee (IOC). Once again he put down America, alluding to the mistakes of the past (Bush), with threatening body language (shaking a fist). Why does he think that positioning the US in a negative light will win foreign friends? Doesn't he realize they are laughing at him and by extension, us? Does he really think that bowing down to world is going to make them like us?

The world will never like us and I don't care if they do. I have traveled outside of the US and no matter where you go, the people emulate us. They want to wear the latest Nike sneakers, drink Coke, eat McDonalds (now transfat free!), and converse on Facebook. All American inventions and products. They want to be like us, they want to live in the US, but they are jealous. They can't be us and they all can't live here. So like teenage girls, they talk behind our backs, backstab us, and don't mind taking our dollars either.

Getting back to the Obamas. So while they are dissing us to the people who will never like us, they also think that if they spend more money on us, we will like them better. Money is a drug and pouring it into means-tested welfare programs will addict another generation of welfare dependents. President Obama's budget plans call for the government to spend $10.3 trillion on these programs over the next 10 years according to an analysis by the The Heritage Foundation. That comes out to approximately $250,000 for each US citizen living in poverty. Welfare has increased from 1.2% of the GDP in 1964 to 5% of the current GDP. There are 13 government departments and agencies, 17 budget functions, and 71 separate programs--adding up all those programs puts welfare spending as the 3rd most expensive government program, ahead of defense spending, interest on government debt, and transportation programs. One dollar out of every seven (in a total of federal, state and local) goes to a welfare program.

According to the analysis authors Robert Rector, Katherine Bradley and Rachel Sheffield,the United States has spent a total of $15.92 trillion since the "War on Poverty" began in 1964  (in today's constant dollars). All the military wars fought since the Revolutionary War to the current Afganistan and Iraq Wars cost less than that-- $6.39 trillion (in constant 2008 dollars). That makes the "War on Poverty" the most expensive "war" the US has ever fought! In fact, President Obama will spend more on welfare in one year than President Bush spent on the entire Iraq War. Add a little ACORN to this cocktail and you have a lot of welfare recipients voting for Obama, their savior. Who wouldn't be happy with a million dollar handout for a family of four?

Consider the Obama's "Green Spending Spree" or the carbon footprint from their travels: two Airforce Ones to Copenhagen-hundreds of thousands of dollars, designer clothes-thousands of dollars, Oprah as your BFF-priceless. It still wasn't enough to buy the Olympics or international love. Will all this welfare money buy him votes? You can count on it.

For more information on the Heritage Foundation analysis, please see www.heritage.org