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Monday, March 30, 2009

Smart Grid! Another Great Idea

You just can make this stuff up. This adminstration would give Spanky and Alfalfa a real run for their money, in fact in many ways the He man woman haters club was better run than this adminstration. Please know that over 25 slots (so called important positions) are yet to be filled in the US treasury. While Mr. Geitner throws aimless ideas around he can't seem to get the recruiting side of this position down. But lets digress and look at some other mistakes getting ready to be made by this magnificent group of minds.
"Electrical 'Smart Grid' Not Yet Smart Enough to Block Hackers"

"President Obama's plans to accelerate the development of an electrical "smart grid" could leave the nation's power supply dangerously vulnerable to attacks by computer hackers, security analysts are warning.
The "smart grid" is projected to be a nationwide system of automated meters and advanced sensors that integrates new alternative-energy sources with traditional power plants.
Once online, utilities will be able to adjust their rates to the immediate supply and demand for power, and customers will be able to choose to operate their appliances during the hours when consumption — and prices — are at their lowest."

Can you imagine opening up our power grids for anyone to control? Now we can no longer refer to terrorists as terrorists,(The phrase "global war on terror" is finished, at least as far as U.S. Secretary of State Hillary Rodham Clinton is concerned. The top U.S. diplomat told reporters Tuesday that the Obama administration has quit using that line to describe the effort to fight terrorism around the world. "The administration has stopped using the phrase and I think that speaks for itself," Clinton said.) just as we no longer refer to liabilities or debts as liabilities they are now "Toxic assets". So, seeing that terrorists are not really terrorists, we can now simply allow them access to our power grids. Imagine a system where a 10 yr cyber geek could shut down a major metropilitan area's power grid? This administration doesn't think that might be a problem with the non so called terrorist groups. It will however potentially save some money. I am not usually amazed at the incredible ineptness that passes for leadership and most of it becomes laughable, yet this one has some really serious ramifications as it directly affects our safety. It is one thing to tax me into the ground and basically determine my financial future, it is quite another to endanger my life with an immature and incredibly short-sighted security mindset. We are not only living in dangerous times we are directly placed in danger by POOR leadership. This can not be over looked or giggled away. The economy is a demanding issue, personal safety and welfare is an American right. Everyone has to take some responsibility in holding the leadership of this country fully accountable for our security and protection from terrorists and the harm they seek to do us. One can not simply ignore this or act like it doens't exist.

You have to ask yourself one compelling question: Are you safer now then you were a year ago? Thius is not a political question, it is a simple leadership demand. Our safety and well being should be the #1 issue as a nation.


Saturday, March 28, 2009

Top 10 Investing Scams

Of course there can be no control over the government scamming us as taxpayers, we do however have the power to avoid the private scams that are perptrated against us as investors. Making smart decisions about money is most often avoiding what not to with money as contratsed with what to do with money. Always remember that the #1 sales technique is to gain emotional attachment to the offer. Once you allow emotions into the decisions that require money you have opened the door for the greed button to be pressed. Manipulative sales techniques will always seek to press your greed button (and please don't think you are above becoming greedy). Ponzi schemes have only been successful due to the personal greed which exists in all of human nature. So, lets look at the top 10 Investing scams out there today (please beware as the number and levels of scams will exponentially grow in todays present market grief).

“Ponzi scammers top the list of scam artists taking return-hungry investors to the cleaners, according to the latest look at the investment industry by the North American Securities Administrators Association. A close second is investment fraudsters targeting seniors.
‘These schemes offer products and pitches that may sound tempting to many seniors who've seen their retirement accounts and income dwindle in recent years,’ says Ralph A. Lambiase, NASAA president and director of the Connecticut Division of Securities. ‘It pays to remember that if an investment opportunity sounds too good to be true, it usually is.’”

Top 10 Investing Scams
A promise of 40% returns?
The quest for a safe investment vehicle is the common theme in all the scams. Here are the top 10, ranked roughly in order of prevalence or seriousness:

1. *Ponzi schemes. This is an old scam named for Charles Ponzi, a swindler from the early 1900s who conned $10 million from investors by promising 40% returns. His scam has been copied by countless crooks. The formula is simple: Promise high returns to investors and use their money to pay previous investors. According to the NASAA, Ponzi scammers often blame government intervention for the failure of their system. In Mississippi, two Ponzi scammers pled guilty to a scheme that bilked 41 investors from four states out of $10.2 million. They told investors they were taking part in a money-trading program. The program never existed.

2. *Senior investment fraud. Record-low investment rates, rising health care costs and an increased life expectancy have set seniors up as targets for con artists peddling investment fraud -- like Ponzi scams, unregistered securities, promissory notes, charitable gift annuities and viatical settlements. In 2003, Pennsylvania securities regulators shut down a Ponzi scheme that bilked $2 million from seniors' pensions and IRAs.

3. *Promissory notes. These are short-term debt instruments often sold by independent insurance agents and issued by little-known or nonexistent companies. They typically promise high returns, upward of 15% monthly, with little or no risk.

Bad brokers and not-really-brokers

4. Unscrupulous stockbrokers. As share prices tumble, some brokers cut corners or resort to outright fraud, say state securities regulators. And investors who have grown more cautious and scrutinized their brokerage statements have discovered their financial adviser has been bilking them via unexplained fees, unauthorized trades or other irregularities.

5. Affinity fraud. Taking advantage of the tendency of people to trust others with whom they share similarities, scammers use their victim's religious or ethnic identity to gain their trust and then steal their life savings. The techniques range from "gifting" programs at churches to foreign exchange scams.

Please return this week for the rest of this list.

*You may recognize many of these scams as daily events promulgated by our banking system. Of course those scams are legal and should not be confused with these investing scams.

Friday, March 27, 2009

The New Ponzi!

How the plan would work
The Treasury's ambitious program would revolve around five steps:
A bank decides what pool of assets they would like to sell.
After determining that it would be willing to leverage the pool, the FDIC will conduct an auction. For instance, mortgages with $100 face value would be bought for $84.
Of the $84, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.
The Treasury would then provide 50% of the equity financing. In this example, Treasury would invest $6 and the private investor would contribute the other $6.
The private investor would manage the servicing of the asset pool using managers approved by the FDIC.
Let’s make a small comparison. Most remember Enron and its rise and fall, don’t we. Well the rise of Enron stock was based upon the good news of many energy contracts and projects that Enron was arbitrarily valuing. (of course there were no contracts or projects in reality, but it sure looked good on paper). A week or so ago the Dow was tumbling and Citibank went below $1, yet two days later Citibank publicly came out and projected a profit in Q1 2009, imagine one of the largest Banks which had the biggest pool of so called toxic assets (government speak for Liabilities or debt) was somehow going to be profitable in the first quarter. On this speculative announcement the market went on a small bull run (even fantasy tends to make the market rise). This is stage one just as Enron would report new contracts to get the employees buying more stock so the price could rise.

This week the Secretary of the Treasury releases the above plan to release the banks from the toxic assets they are holding. For those of you who have ever taken accounting in school you understand how absurd this entire exercise is. These so called toxic assets have zero value as they are totally illiquid. To call them assets at all is a major leap or basically an accounting manipulation. They are LIABILITIES or DEBT. But let’s play along with the government because of course they are looking out for us. Now, remember at this stage Enron had no assets either only phantom assets on paper, but that stock price sure looked good. So back at the treasury, the plan is to print 1 trillion dollars as a future debt to back these toxic assets which in reality have no value. But wait it gets better because now the government is going out to the investor (private market) the same group that this government wants to raise taxes on and punish for success, to invest and buy some of these assets. In order to attract that investor the Bank can pick which baskets of assets it wants to pawn off and simply place an arbitrary value to these so called assets. Now for you accounting students out there don’t you wish you could take your balance sheet and attach an arbitrary value to your most expensive liabilities and then sell them to investors and magically turn losses into gains so your balance sheet becomes rich with profit! Enron couldn’t even do this. But wait it gets better, after the private investors put up real capital the government will back the investment of said assets (liabilities) with paper debt which will be paid back by the same private investors in the form of future taxation. Of course this tax bill will be spread to all citizens in the future for what would probably have to be decades at the minimum and possibly a century. (PS don’t think that Congress didn’t run the trial balloon of a 90% tax as this is probably just about the correct rate to pay off this ridiculous debt structure)

(PS we all know what happened to Enron, this is just a much bigger version)

After this is all done the Banks walk away clean, with renewed balance sheets and increased stock value. Of course the investors have just sucked up all of the Banks losses both in real and future dollars. Now if this isn’t Bank robbery I don’t know what is. It really does get better however, as this entire Ponzi scheme is being perpetrated to get the Banks back to the business of lending. So, after the American consumer takes on all the debt of the Banking industry (all those losses) the Banks will be kind enough to lend us more money! Talk about incredible gall, this one takes the proverbial cake.

You don’t have to be a student of economics or accounting to understand a scam when it presents itself. The government is playing 3 card monti and just like a corner hustler the public is the mark. Bernie Madoff would be a better choice for Secretary of the Treasury as he really understands how these scams work. Of course this scam is the largest in the history of mankind (even bigger than Social Security) and will leave the biggest trail of lies, deceit and utter destruction.

The unintended consequence of this monumental mistake with money is the ultimate destruction of the US dollar. Once our currency becomes useless the debt that we sell becomes useless. No debt to sell to unsuspecting suckers (China etal…) and the country has no economy to speak of. This is what happened to Enron. Just like in the Wizard of OZ our leaders want is to disregard that little man behind the curtain. On the way to the devaluation of the dollar are some other pretty ugly events. As the market feasts on the false news and pumped up toxic assets investors begin to speculatively run up the prices of commodities (oil, food such things as everyday staples of living) and this speculative run makes all of our daily necessities of life cost more and more and more. Remember just 6 months ago when speculators ran oil up to 100 dollars a barrel and poor consumers like us had to pay $4 a gallon for the over inflated value of gas? Well, on the news of the Ponzi scheme from the Secretary of the Treasury Oil shot up to $54 a barrel or a 22% gain in one day. Next domino is energy, as the administration wants to find alternate forms of energy (never mind that oil is a speculative gold mine) they decide to tax the oil, natural gas and electricity providers (remember this tax is necessary to fund the debt from the Ponzi scheme enacted by the Secretary of the Treasury) which in turn is passed on to the consumer (you and me). When this happens your utility bills will increase by approx 200% if we’re lucky. So now we pay more for gas, food and utilities not to mention the entire tax bill for the banks plus the tax bill for the utility concerns. If you haven’t figured it out yet we pay all the debt and the increased bills created by the legislators who were attempting to improve our lives.

In the final picture we will be back to horse and buggy and candles. We would be better off if the government was run by the Quakers or Amish; at least there would be a justification for us living in the 1800’s.

Of course all this can be stopped, yet to will take strong grass roots efforts and the active commitment of every American citizen. Just as our founding fathers were able to relieve themselves of a corrupt and excessive government, we need to demand TERM LIMITS and also find leaders from a third and forth party. If the two political parties will not have a reasonable movement towards a moderate form of governing then we the people need to create the government in the middle. Remember that this was created to be a government of the people and by the people. Somewhere along the way we became a government of the privileged. If you don’t believe our government is simply the privileged just look at the last Presidential campaign or even a congressional campaign. More money was spent in the Presidential campaign then is in the entire economy of some mid sized nations. In fact the Inauguration party spent more money than third world nations have in their own GDP. Something is wrong when you have to raise 10’s of millions just to be a local government leader. This leads to corruption and the abuse of power. Money is buying power and power is abusing the American citizen.

Term Limits will put a stop to most of this. This will lead to a more even playing field and it will assure that leaders serve the interests of their constituents before leaving office swiftly. Shorter term in office also makes it incredibly difficult for corrupt lobbyists or interests groups to control a legislator. With the consistent flow of new leaders and new ideas the power corruptors can’t get their claws in the leaders. This cuts across party lines, just think of the former Strom Thurmond and Ted Kennedy as examples of how non term limits can effect our government. In fact I will stress that you get on the Term Limits campaign now as there has already been a minor movement towards lifting any term limits (Mayor Bloomberg in NY got the Courts to over turn the term limits attached to his office in order for him the run for a 3rd term). The next thing you will be hearing is the movement to lift term limits on the Presidential office. Within the next 24 months you will be hearing this kind of talk.

Let’s start a grass roots movement for TERM LIMITS, and if the legislators don’t sign on simply provide term limits yourself with your vote. Should the legislators fight term limits (as they have been doing) simply don’t re-elect any incumbents. This is the simplest form of term limits, vote for the non-incumbent. This will also assure a balance of power and keep us from the disaster of one party rule (this is not good regardless of party), we should never be stuck with one party rule as it endangers the welfare of our country.

So on the heels of this great Ponzi scheme let’s start our own grand scheme and hold our leaders and future leaders to full accountability, total responsibility and most importantly clear transparency.

Karl Schilling