Is it the unemployment situation? Is it the volatility in the markets? The weakening greenback? Perhaps the generally perceived level of incompetence amongst our political and corporate leaders? Is it a media that does not hold our public officials and corporate leaders accountable?

While I could write extensively - and I have - on each of these questions, I am firmly convinced the ever increasing levels of populist rage go much deeper than any of these questions. How deep? To the very core of this great nation. What is at the core of any individual, institution, or nation?

Honesty and integrity.

Americans are a strong people. America is a proud land. That said, I believe we have allowed a semblance of moral decay to increasingly infiltrate our very core and we are now paying the price for it. How is this growing moral decay exemplified?

I am not suggesting that those who might hold differing opinions than mine on specific questions addressing ethical and moral topics as being the root of our current problems. I would like to think I am not so narrow-minded or judgmental. I do believe, however, that the rage sweeping our country on both sides of the political aisle stems from the reality that Americans are increasingly convinced that our political representatives, government officials, financial leaders, and their selected constituents have not been honest with America.

This lack of integrity and its growing level of awareness enrages Americans. They are voicing their rage. Congress is starting to hear this rage and is redirecting the anger and frustration toward leaders in Washington, state capitols, and Wall Street. We are now seeing this reality each and every day. America knows a lack of integrity when it sees it or feels it, despite the fact that large swaths of our media (exceptions include Susan Antilla and Jonathan Weil of Bloomberg, to name a few) provide the establishment cover.

Where have we seen a lack of integrity and honesty?

1. Select government reports to the contrary, the massive failings within the financial regulatory structure with specific emphasis on FINRA and the SEC.

2. Goldman Sachs CEO Llloyd Blankfein’s confession just this week that Goldman had engaged in activities that were clearly wrong and led to the economic crisis.

3. I have no doubt that many within our nation believe the Obama administration fundamentally believes in the principle of redistributing wealth via a number of programs. This emphasis on redistribution in one direction while simultaneously bailing out financial institutions leaves a very large percentage of those in the middle and on both sides of the aisle feeling totally disenfranchised. Not only do these people feel disenfranchised, but they feel that the government is not being honest with them regarding its motivations.

Will this situation turn around quickly? No. We did not get here just in the last year. While America is enraged currently, ultimately America itself needs to be held accountable for allowing this lack of integrity and honesty to promulgate over the years.

The cauldron is boiling. Washington and Wall Street feel it. I would expect we will witness more and more statements and acts from our leaders on Wall Street and in Washington to appease the electorate and assuage the pain.

Washington and Wall Street can keep their acts and statements.

Stop lying to America. Only then might we be able to make real progress.

LD

I love that pearl of wisdom shared by Danielle Park, my guest this past Sunday evening on No Quarter Radio’s Sense on Cents with Larry Doyle. I find it very applicable to the recently released economic report on housing starts. What did that report indicate? Housing starts in October registered a supposed surprising decline of 10.6% to a seasonally adjusted 529, 000 annual rate.

Is this truly a surprise? Market analysts and government pundits who continually ‘oversell’ economic data as legitimate, when in fact that data is gamed via government props, need to show surprise when a report disappoints. If they do not act surprised, then they merely expose themselves and lose credibility.

The simple fact is the housing market in our country remains in decline. One merely needs to look at the continually increasing levels of delinquencies to understand that. I addressed this important data last May in writing, “The Most Critical Economic Statistic”:

Which economic statistic is the most important? Unemployment? Housing starts? Trade deficit? Inflation? Retail sales?

Well, they are all important . . . but as I review the many statistics, the economic data that I believe most significant are loan delinquencies. Now, mind you a delinquency does not mean that the loan has defaulted and been foreclosed upon. A delinquency is merely a late payment. Typically loans are classified as 30 day, 60 day, or 90 day delinquent. There is a very high correlation between delinquent loans and those that default.

Loans become delinquent for a whole host of fairly typical reasons. That said, in this economy the nature and array of reasons are growing. As a result, the ability of lenders to forecast and manage delinquencies is increasingly more challenging. Lenders will typically increase reserves as loans become more delinquent in anticipation of a natural rate of default.

Loan delinquencies will often occur even before unemployment hits or sales falter. As individuals or companies feel increasingly squeezed, the monthly loan payment becomes more difficult to make and delinquency results.

Delinquencies show no sign of abating. For a wealth of information on housing, I am happy to share a link to Mark Hanson Advisers, a site I recently found which provides true, cutting edge insights on housing.

While cheerleaders will look to parse each and every monthly statistic in an attempt to legitimize their work, do yourself the favor of looking at the major trend lines. Uncle Sam can attempt to ‘game this process,’ but I strongly recommend you do not ‘play’ his game. Why? The truth is not revealed in his game. When is the truth revealed? Over time.

Thank you Danielle. Thank you Mark.

Color from around the country as to developments within your local markets is very much appreciated.

LD

Goldman Sachs CEO Lloyd Blankfein

Wait a second. Blankfein admits that Goldman participated in activities that led to the crisis? Get Lloyd back in here and ask him for specifics.

In an attempt to probe as to Goldman’s culpability, I inquired:

What do you think Blankfein was referring to when he stated that Goldman “participated in things that were clearly wrong”? I’ll get the ball rolling with a few possibilities:

1. Manipulated the equity markets via computer programs connected with high frequency trading.

2. Ran over Tim Geithner in the settlement of open positions with AIG.

3. Facilitated insider trading on behalf of hedge funds.

4. Intentionally misled lesser prioritized clients via trading huddles.

5. Abused privileged information provided by former Goldman execs now in government positions.

6. All of the above.

7. Other . . . please share your opinions.

Yesterday we learn the answer is most likely choice # 2. It appears that Lloyd Blankfein would like forgiveness for the aggressive posture it took with Uncle Sam in the process of settling its exposure with AIG. Recall that Blankfein has repeatedly asserted that whether AIG went down or not was not meaningful to Goldman Sachs because Goldman had secured collateral from AIG to cover its exposure.

Does Lloyd regret making those strong and bold assertions? Is he apologizing for these statements? Why would he apologize? Did he intentionally misrepresent Goldman’s position? Did he lie? The Wall Street Journal provides compelling evidence that he did just that. The WSJ writes, Report Rebuts Goldman Claim on AIG:

For more than a year, Goldman Sachs Group Inc. has maintained that it wouldn’t have suffered material losses had the government allowed one of its major trading partners, American International Group Inc., to collapse.

A government report throws cold water on that claim.

Goldman was among the largest beneficiaries of a decision by the Federal Reserve Bank of New York to bail out insurer AIG in September 2008 at the height of the financial crisis. The Fed agreed to pay Goldman and 15 other banks, in full, for $62 billion of insurance contracts they had with AIG to protect against price drops of mortgage securities they held.

The report, issued this week by the special inspector general for the Troubled Asset Relief Program, comes amid controversy over whether the government unfairly helped out big banks in its bailout of AIG. The government auditor’s report broadly found that the New York Fed left itself little room in negotiating with the banks for a better deal for taxpayers.

Goldman’s trading position with AIG centered on $22.1 billion of such insurance the firm had purchased from AIG. In a separate series of trades, Goldman itself had sold protection against losses on the same securities to other trading firms.

The problem for Goldman: If AIG collapsed and markets continued to swoon, Goldman would have had to make payments to the other trading firms and been unable to collect on protection it had bought from AIG.

While spokesmen for Goldman may try to spin Blankfein’s previous statements of Goldman being hedged against an AIG default, it does not take a brain surgeon to tie Blankfein’s apology on Tuesday to the recently released WSJ story. Professional courtesy in the financial industry compels journalists to share articles, especially negative coverage, with selected parties prior to its release. Do not think for a second that Blankfein was not aware of the WSJ article. While some within the industry may look at Blankfein’s statements about Goldman being protected from an AIG default as some semblance of harmless obfuscation, from where I come, we call it lying.

Goldman took the American taxpayer to the hoop in the process. When does Blankfein want to make proper restitution? Keep your apology. Give the taxpayer their money back. Get Geithner in here as well, as he facilitated this transfer and allowed the lie to perpetuate.

If Blankfein lied about this situation, the question begs as to what other lies or half-truths he has spoken.

What do you think?

LD

Retail sales rebounded strongly this month posing a 1.4% gain. Good news, right? In an attempt to provide a degree of sanity to what has become an extremely volatile report, let’s break this report down a little bit further.

Recall that our automotive sales have bounced around tremendously over the course of the last three months due to the Cash for Clunkers program. Auto sales soared in August given Uncle Sam’s handout. Once Uncle Sam shut that spigot off, auto sales dropped like a stone in September. In October, auto sales had a respectable bounce. All this said, there is no respected economist who doubts that the Cash for Clunkers program pulled demand forward. In the process, it has skewed the overall retail sales readings. What is the American consumer doing away from the auto sector? Let’s navigate.

Retail sales ex-autos posted a 1.0% increase in August, a .5% increase in September, and a .2% increase in October. That trend line does not look all that positive to me. Against that backdrop, holiday sales for retailers remain a major concern.

The retail concern combined with issues within housing and labor present major hurdles for our economy, but apparently not our markets. What gives? Our equity markets seemingly discount all bearish news and rally higher on any hint of positive news. Is this rational behavior? I am no psychologist or psychiatrist, but it strikes me that our markets are entering into a dynamic not commonly seen but not to be discounted. What is it? Welcome to a blowoff. What is a blowoff?

This large and dramatic price movement is generally seen at the peak of a market or stock. The idea behind the bearishness of a blowoff is that it signals the activity of the most irrational and overly exuberant market participants, who, wanting to take part in the rally, momentarily push up the already-overvalued stock.

What is likely to happen in a blowoff? Expect an increase in the number of solicitations from brokers and financial planners to get into the market. Expect stories of quick and easy money to flourish. Expect day trading ads to become prevalent once again. A blowoff can occur over a protracted period.

What is one to do? Keep your head. In fact, is there ever a time when one should lose his head? Of course not.

The virtues of discipline, patience, thrift, focus, and family never go out of style although they do not necessarily align well with those who would solicit active trading and investing based on positive price action in the markets.

Thoughts, comments always appreciated.

LD

Liu Mingkang, Chairman of China Banking Regulatory Commission

With friends like this, who needs enemies?

That trite saying is far too simplistic in defining the diverse and convoluted nature of U.S.-Chinese relations. That said, as President Obama prepares to arrive in the People’s Republic of China for the first time during his Presidency, he is faced with an extremely aggressive overture from Liu Mingkang, China’s chief banking regulator.

What does Mr. Mingkang have to say? Well, let’s just say he has a drastically different opinion on U.S. monetary and fiscal policy than his counterparts in Washington. While our wizards in Washington, Messrs. Bernanke, Geithner, and Summers would lead us to believe that the rebound in markets is a precursor to a rebound in our economy, Mr. Mingkang has a decidedly different take.

The Financial Times sheds light on this topic in writing, China Says Fed Policy Threatens Recovery:

The US Federal Reserve is fueling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang , China’s chief banking regulator, said the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”.

The comments came as China and the US sparred at the Asia Pacific Economic Co-operation summit over exchange rate policies amid rising international criticism that China’s currency is undervalued.

Mr Liu’s unusually blunt remarks underscore how China - the largest US creditor because of its massive holdings of Treasury bonds - has become a trenchant critic of monetary and fiscal policy in the US.

Since the start of the financial crisis, China has issued a number of warnings that the US should not inflate its mounting debt burden. Before these latest comments, however, Beijing had generally been most critical of US fiscal policy, urging Washington to spend less.

But speaking at a conference in Beijing, Mr Liu said the Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery.

Why so aggressive on Mr. Mingkang’s part? Two reasons. The weakening greenback negatively impact’s China’s massive dollar-denominated holdings, primarily in U.S. Treasury securities. Additionally, the weak greenback negatively impacts China’s balance of trade.

Despite assertions by Secretary Geithner to the contrary, I firmly believe a weakening greenback is a central tenet of the Obama administration’s economic policy. In fact, our government officials would never say it but they are likely somewhat envious of the benefits of the weak and undervalued currency policy practiced in China.

While those on Wall Street and Washington are reluctant to address ‘huge carry trades’ and ‘asset bubbles,’ our largest creditor pulls no punches on these topics and provides a healthy dose of ’sense on cents’ in the process.

Welcome to China, Mr. President. How nice to see you. About your currency, we are not so happy.

LD

Ignorance of the law is never an acceptable defense on Main Street; regrettably, the same does not seem to hold true on Wall Street. How so?

A recent auction-rate securities arbitration case involving an investor who purchased ARS from a Raymond James financial representative acknowledges the ignorance of the sales rep, but effectively absolves the firm in the process. The implications of this decision should not be underestimated. The Wall Street Journal sheds further light on this case in a recent review, GETTING PERSONAL: Investor Loses Out In Auction-Rate Case:

A complaint brought by an auction-rate securities investor offers insight into the plight of those stranded in the instruments as well as the arbitration process some investors dread.

Like many investors, Gene McCutchin, a real-estate entrepreneur, was holding auction-rate securities when the $330 billion market froze up in early 2008. He filed a complaint against his broker, Raymond James Financial Services Inc., in September 2008 asserting negligence, fraud and breach of fiduciary duty, among other things. He said the brokerage failed to warn him about the risks before his purchase, and he asked for compensation and punitive damages.

A Financial Industry Regulatory Authority arbitration panel, in an Oct. 26 resolution, didn’t award damages or order that the share sale be rescinded. It supported some of McCutchin’s assertions, finding that a Raymond James broker, Rick Woolfolk, “was poorly trained with respect to the ARS product,” and it did order the brokerage to pay forum costs.

But the panel also said that McCutchin identified himself as “a sophisticated investor.” While McCutchin wasn’t informed about the extent of risk before the transaction, it was clear that his personal adviser, Dan Chilton, understood that he was buying ARS bonds, and that the higher returns they offered came with higher risk, the panel’s resolution said.

Let’s zero in on the phrase, “wasn’t informed about the extent of the risk before the transaction.” The fact that the FINRA arbitration panel is absolving Raymond James in this transaction, despite the fact that the customer was not informed of all the risks, should send chills down the spine of every investor in our public markets. With that statement, the arbitration panel is sending a message, loud and clear: “Buyer Beware!!” You are on your own.

To mitigate the enormous risk of purchasing an investment that a sales representative may not understand, I would strongly encourage individual investors to do the following:

1. Make sure your conversations with your sales reps are on taped lines.

2. Ask the sales rep if he fully understands ALL of the risks in the dog meat, I mean the investment, he is trying to sell you.

3. Ask the sales rep to put his understanding of the risks in writing and have him sign it. Have his sales manager sign it as well.

4. To the sales reps in the audience, compel your product and sales managers to provide a fully written explanation of ALL the risks which you can share with your customers. While individually sales reps may think that may be a tough request, if the entire salesforce makes the request, management will have to listen.

If the financial industry is going to send incompetent and uninformed sales reps out to lay garbage investments on the American public, and FINRA is not going to hold the firms and individuals accountable, then American investors only have one choice: play offense.

I strongly encourage each and every investor to put the burden back on Wall Street and utilize the above approach. If the firms, reps, and managers are not willing to accomodate you, then take your business elsewhere.

Caveat Emptor . . . Buyer Beware?? No, I don’t think so.

Caveat Venditor . . . Seller Beware!!

Comments, color, constructive criticisms always appreciated.

LD

Well, I’ll be a monkey’s uncle. Sure never saw THAT one coming. I’ll give you a moment to recover from the shock.

Okay. So, yeah - check out what brought this about for the Mormon Church:

It looked like a stunning reversal: the same church that helped defeat gay marriage in California standing with gay-rights activists on an anti-discrimination law in its own backyard.

On Tuesday night, after a series of clandestine meetings between local gay-rights backers and Mormons in Salt Lake City, the Church of Jesus Christ of Latter-day Saints announced it would support proposed city laws that would prohibit discrimination against gays in housing and employment.

The ordinances passed and history was made: It marked the first time the Salt Lake City-based church had supported gay-rights legislation.

The Mormon church — which continues to suffer a backlash over its support last year of Proposition 8, the measure banning gay marriage in California — emphasized that its latest position in no way contradicts its teachings on homosexuality.

But the action is one of the strongest signs yet that even conservative religious groups that oppose same-sex marriage might be willing to support legal protections for gays that fall short of that.

Well, that is good news. Personally, I felt like the Mormon Church was being used as a bit of a scapegoat in CA. Sure, they supported Prop 8, but apparently, so did the majority of Californians. It’s a hard truth to swallow, but the evidence is indisputable. The majority voted for Proposition 8. Are you telling me that that many Californians could be swayed to violate their internal beliefs by the Mormons? Really? Exactly.

More about the Church:

At the same time, the church’s position has angered some of its conservative allies on social issues, prompted questions about whether public relations is its real motivation, and put the church on the spot over how far it will go on similar legislation on the state and federal level.

“This is a very good public relations response that has the additional benefit of actually representing the way the current church leadership thinks,” said Armand Mauss, a retired professor at Washington State University and scholar of Mormonism.

Some of the church’s conservative allies in the gay marriage battles, however, call it a setback. The two new ordinances make it illegal to fire or evict someone for being gay, bisexual or transgender.

Such legislation robs employers and landlords of their rights and gives legal ammunition to judges sympathetic to gay marriage, said Peter Sprigg, senior fellow for policy studies at the conservative Family Research Council.

“It’s disappointing and I’m fearful that it reflects in part a reaction to the attacks they came under after Proposition 8 — an effort to bend over backwards to exhibit tolerance toward homosexuals in some way,” Sprigg said.

Michael Otterson, director of public affairs for the Mormon church, said Wednesday that church leaders were able to support the ordinance because it doesn’t carve out special rights for gays.

Supporting “basic civil values,” Otterson said, does not compromise the church’s religious belief that homosexuality is a sin and that same-sex marriage poses a threat to traditional marriage.

“There are going to be gay advocates who don’t think we’ve gone nearly far enough, and people very conservative who think we’ve gone too far,” Otterson said. “The vast majority of people are between those polar extremes and we think that’s going to resonate with people on the basis of fair-mindedness.”

The position is not a reversal, Otterson said. In August 2008 the church issued a statement saying it supports gay rights related to hospitalization, medical care, employment, housing or probate as long as they “do not infringe on the integrity of the traditional family or the constitutional rights of churches.”

I have to admit - given the attacks on the Mormon Church, I am a tad surprised to see this is their position. Honestly, that’s more progressive than many people would believe. More than I would have believed had I not read it for myself. The way in which the Mormons have been demonized by LGBT rights activists and supporters, one would have thought the Mormons were the Devil Incarnate. Evidently not:

Church officials say the city ordinances were not discussed in the recent meetings between church staff and gay rights leaders, and that it was the mayor who put the proposals on the table.

Harry Knox, director of the religion and faith program at the gay-rights group Human Rights Campaign, said the Mormon church’s stand on the Salt Lake City ordinances could help alter the debate over gay rights.

“The church deserves credit, but that credit really comes because people have been pushing for it,” Knox said. “It’s not something thing they arrived at on their own and out of the goodness of their hearts.”

The church’s action is the latest sign of a softening among some conservative Christians toward offering some legal protections to gays.

Activists are trying to garner support from evangelicals for a federal employment anti-discrimination law that would cover gays. However, religious reaction was largely negative to a federal hate crimes act protecting homosexuals that President Barack Obama recently signed into law. Several conservative Christian groups argued that preaching against homosexuality could be deemed a hate crime under the legislation.

The Mormon church has not taken a stance on either piece of federal legislation.

Otterson, the church spokesman, said that in the case of the Salt Lake City ordinances, Mormon leaders weighed in because they were responding to a request for feedback on specific legislation.

Asked whether the church would take a stand on similar state or federal legislation, Otterson said: “The church leadership is not inclined to offer free advice where it’s not being requested.”

Well, that’s an interesting response. But the rest of it is a bit eye-opening for a church that has been completely demonized by liberals. Perhaps, at some point, they might actually have to start looking at just who it was who voted for Prop 8. I guarantee you, they weren’t all Mormons…

And speaking of religious types, it seems Donnie McClurkin, Obama’s big campaign buddy, has been out and about spewing hate against the GLBT community. Oh, yes. No doubt, Jesus told him to call us “vampires,” and “perversions.” Yep:

The last time we heard from Donnie McClurkin, he was campaigning with Barack Obama. At the Obama campaign event, you may recall, McClurkin harangued gays for over thirty minutes and proclaimed:

“God delivered me from homosexuality.”

Well, McClurkin is back. This weekend, he re-emerged spewing homophobic hate in Memphis. Rod 2.0 reports:

Donnie McClurkin ramps up the ridiculous to speak in tongues and call gays “vampires”. The infamously “ex-gay” — or should we say merely “re-closeted” — Grammy Award winning gospel singer and evangelist rants against gays, gay youth and recently out gospel singer Tonex at the Church of God in Christ’s Holy Convocation Youth Service. This happened last Saturday at the COGIC convention in Memphis.

Oh, it doesn’t stop there: I

n the first of three disgusting YouTube videos, McClurkin begins his rant against Tonex, the gospel star and minister who recently confirmed his long-rumored sexuality. McClurkin says Tonex is a “perversion” and must pray away the gay: “God did not call young people to such peversion. Society has failed him, his church has failed him … I would be homosexual to this day if Jesus hadn’t delivered.”

McClurkin also rails against against openly gay youth as “broken and feminine”: “I see feminine men, feminine boys, everywhere I go … No, don’t applaud ‘cuz it ain’t funny. It’s because we failed. I see them everywhere.”

Rod has posted the three videos of McClurkin’s rant. Check them out. It’s ugly.

Again, it begs the question: why did people in the GLBT community ever think Obama stood with them considering the people with whom he surrounded himself?

I might add, if you really want to see where the community is these days, check out some of comments at posts that have anything to do with the DNC at Gay Americablog - I know Aravosis was an Obama water carrier. He sems to have realized the error of his ways. TOo late, I know, but nothing like being scorned, right? The anger in the comments is palpable by people in the GLBT community at Obama and the DNC. Hence the latest, “Don’t Ask, Don’t Give” campaign being generated against the DNC. Oh, yeah. They are shutting down their wallets. About damn time, too, if you ask me.

That is to say, Upside Down World continues - the Mormon Church is supporting a number of GLBT rights, Obama’s good buddy is ranting against GLBT people, and the is dragging its feet. Maybe it’s because of its new leadership - Gov. Tim Kaine, homophobe. Okey dokey.

I think I need to sit down now.

Our global economic landscape continues to present new twists, turns, peaks, valleys, and challenges. There are those who believe we are in the midst of a V-shaped recovery, while others see the next Great Depression right around the corner. What is one to do? Where can one turn to make sense of it all so as to most effectively ‘navigate the economic landscape?’ You have come to the right place as No Quarter Radio’s Sense on Cents with Larry Doyle welcomes Danielle Park tonight at 8pm EST.

While many market pundits and Wall Street analysts would attempt to define the ‘rules of the game’ and inform us as to how to play, what has that approach truly ever accomplished? I strongly believe each and every individual needs to understand his own personal situation in the process of navigating one’s own personal economic landscape. To that end, I am thrilled to have Danielle Park join me this Sunday evening. Why?

Danielle brings a perspective to personal finance, the markets, and the economy that is vastly different from what we are fed by the Wall Street establishment. How so? Who is Danielle Park? Let’s go ‘north of the border’ as Danielle lives and works in Ontario, Canada. Danielle is uniquely qualified to address the challenges of our current economic turmoil.

Portfolio Manager, attorney, finance author and television personality Danielle Park, a regular guest on CNBC, BNN, CBC and many other networks, is the author of the best selling myth-busting book Juggling Dynamite: An Insider’s Wisdom on Money Management, Markets and Wealth that Lasts, as well as a popular daily financial blog, Juggling Dynamite.com.

Danielle worked as a litigator until 1997 when she was recruited to work for an international securities firm. Becoming a Chartered Financial Analyst (CFA), she now helps to manage many million dollars for more than a hundred of Canada’s wealthiest families as a Portfolio Manager and analyst at the independent investment counsel firm she co-founded Venable Park Investment Counsel Inc. In recent years Danielle has been writing, speaking and educating industry professionals as well as investors on the risks and realities of investment behaviors.

A member of the the internationally recognized CFA Institute, Toronto Society of Financial Analysts, and the Law Society of Upper Canada. Danielle is also an avid health and fitness buff.

She is a passionate and insightful speaker on financial markets, money management, work/life balance and wisdom.

Little doubt, Ms. Park possesses all the tools to help us most effectively ‘navigate the economic landscape.’ I look forward to what will assuredly be a riveting discussion. Please join us.

LD

“Few would have seen on that day that… that their American ally would be led by a man of African descent.”

That comment was SO out of place, and SO unnecessary.

Yet, SO typical.

And that brings us to this article, Heroes Took Huge Risks To Save Others. Not only are we learning more about Hasan as time passes by, but we are learning more about the actions of that tragic day on Fort Hood, and others who acted selflessly. No doubt, the big hero is Sgt. Munley, and I will get to her in just a minute Here is another hero:

Pfc. Marquest Smith, on his way to Afghanistan in January, was completing routine paperwork about a bee-sting allergy when the sounds erupted.

A loud popping noise. Moans. The sudden, urgent shout of “Gun!”

Smith poked his head over the cubicle’s partition and saw an extraordinary sight: An Army officer with two guns, firing into the crowded room.

The 21-year-old Fort Worth native quickly grabbed the civilian worker who’d been helping with his paperwork and forced her under the desk. He lay low for several minutes, waiting for the shooter to run out of ammunition and wishing he, too, had a gun.

After the shooter stopped to reload, Smith made a run for it. Pushing two other soldiers in front of him, he made it out of the Soldier Readiness Processing center — only to plunge into the building twice more to help the wounded.

Smith had survived the worst mass shooting on an American military base, a rampage that left 13 dead and 30 wounded, including the alleged shooter, Army psychiatrist Maj. Nidal Malik Hasan.

It could have been much worse, but for the heroics of Smith and others — including the diminutive civilian police officer who single-handedly took down Hasan.

Of course, that would be Sgt. Munley. More on her below as the picture of what happened on Fort Hood gets filled in. A big piece of that is we are getting some information on where the shooting began:

Decisive Action

At the processing center on the southern edge of the 100,000-acre base, soldiers returning from overseas mingled with colleagues filling out forms and undergoing medical tests in preparation for deployment.

Around 1:30 p.m., witnesses say a man authorities later identified as Hasan jumped up on a desk and shouted the words “Allahu Akbar!” — Arabic for “God is great!” He was armed with two pistols, one a semiautomatic capable of firing up to 20 rounds without reloading.

Packed into cubicles with 5-foot-high dividers, the 300 unarmed soldiers were sitting ducks (emphasis mine). Those who weren’t hit by direct fire were struck by rounds ricocheting off the desks and tile floor.

Let’s just reflect on that for a minute. Hasan chose an area in which the soldiers were close together. It was like shooting fish in a barrel. That’s pretty much what he did after he jumped up onto the desk and started firing. Just picture the logistics of that - man on desk firing on unarmed soldiers (only the MPs and contracted civilian police officers carry guns), 5 foot dividers, 300 soldiers. The potential for mass casualties was set in motion:

When he decided the shooter wasn’t close to being out of ammo, Smith made a dash for the door. He’d made it outside when he heard cries from within.

“I don’t want to die.”

“This really hurts.”

“Help me get out of here.”

Smith rushed back inside and found two wounded. He grabbed them by their collars and dragged them outside.

Around this time, Fort Hood Police Sgt. Kimberly Munley got the call of “shots fired.” The SRP isn’t on Munley’s beat; she was in the area because her vehicle was in the shop.

Munley, 34, was on the scene within three minutes.

Just over 5 feet tall, Munley is an advanced firearms instructor and civilian member of Fort Hood’s special reaction team. She had trained on “active shooter” scenarios after the April 2007 mass shooting at Virginia Tech. She didn’t wait for backup.

As she approached the squat, rectangular building, a soldier emerged from a door with a gunman in pursuit. The officer fired, and the uniformed shooter wheeled and charged.

Munley was hit at least three times in the exchange — twice through the left leg and once in her right wrist. Hasan was hit four times.

From the first shots to the last, authorities say the whole incident lasted less than 10 minutes.

Sgt. Munley’s fast response time, not waiting for backup (I wonder if she’ll get lectured about that?), and her willingness to put herself in harm’s way saved who-knows-how-many lives. Clearly, her training kicked in, and she did what she was trained to do. This article, Hero ‘Civilian Cops’ Emerge After Fort Hood Shooting: Sgt. Kimberly Munley Lost So Much Blood Doctors Feared She Wouldn’t Survive, goes into even more detail as to what Sgt. Munley did that day (H/T to American Girl in Italy for this article), as well as another police officer, Sgt, Mark Todd:

After Sgt. Kimberly Munley helped stop the Fort Hood massacre by shooting Major Nidal Malik Hasan several times, she collapsed from her wounds and doctors who treated her were afraid she wouldn’t survive.

“She was fading in and out of consciousness. She wasn’t saying much,” medic Francisco de la Serna, who began treating Munley when the shooting stopped, told ABC News.

Munley, a 34-year-old former soldier who became a civilian cop on the Fort Hood base, was shot twice in both legs during Thursday’s confrontation. Two powerful “cop killer” rounds allegedly fired by Hasan tore through her left thigh, exited and blasted through her right thigh as well. She was also struck in the wrist.

Sgt. Mark Todd, 42, a retired soldier who also works as a civilian police officer at Ford Hood, also engaged in a firefight with Hasan that lasted less than a minute, according to The Associated Press. Todd was not wounded.

Army officials say that an investigation is under way about whose bullets brought down Hasan as there was much confusion following the shooting. Munley’s supervisor initially credited her with the shot that stopped Hasan.

Todd told The Associated Press Saturday that he was unsure if Munley had wounded the suspect, because “once he started firing at me, I lost track of her.”

After firing his Beretta at Hasan, Todd said the suspect flinched, slid down against a telephone pole and fell on his back. Todd recalls hearing people say, “two more, two more.” He first thought they were referring to more shooters, but he realized that the bystanders were urging him to fire two more rounds, Todd said.

Todd said he approached the suspect and saw that he still had a gun in his hand, which he kicked away. Todd told the AP, “He was breathing, his eyes were blinking. You could tell that he was fading out. He didn’t say anything. He was just kind of blinking.”

Munley, the mother of two girls, was sped to Metroplex Hospital several miles away where doctors say she lost so much blood that they feared she would not make it.

I suppose we will have to wait to find out exactly whose bullet brought down Hasan - Munley’s or Todd’s, but there is no dispute that had she not started firing on Hasan, he would have inflicted more damage on the soldiers.

Her wounds were clearly severe, especially after being hit by “cop killer” bullets:

Munley proved to be as tough in the operating room as she was while confronting Hasan in their close-range shootout.

Dr. Kelly Matlock, who treated Munley at the Metroplex Hospital, said her first words in recovery were concern about Hasan’s victims.

“She opened her eyes and said, ‘Did anybody die?’ That’s what she said, ‘Did anybody die?’” Matlock said.

That pretty much tells you all you need to know about the make up and constitution of this woman. Her first thought, her first question, wasn’t about herself, but others. I am in awe.

Sgt. Munley got her question answered:

Munley now knows that the man she shot is alive, and that he is accused of killing 13 unarmed people and wounding 38.

Texas Gov. Rick Perry visited Munley in the hospital today and later described her as “understated.”

“She is a classic public servant who is not interested in anything other than getting on with her life,” Perry said.

Chuck Medley, the director of emergency services at Fort Hood, said many more would have died if Munley had not leaped into action.

“If she had not responded the way she had, we would have had an extremely high number of dead and injured,” Medley told ABC News Friday. “The number of lives that this person saved … We will probably never know. But there is a lot of ammunition left, a lot of magazines,” he said referring to what Hasan was allegedly carrying.

Uh, yeah. That, along with Hasan giving away his worldly goods, screams premeditation to me. No doubt about it.

While much of this has been covered already, the way in which this is written really paints a picture:

Sgt. Kimberly Munley’s Shootout With Major Nidal Malik Hasan

Medley described a scenario worthy of a Hollywood script. He said Munley, who is a member of the base’s SWAT team and a weapons expert, ran towards the gunfire and came upon Hasan when she rounded a corner and saw him pursuing a soldier who had already been wounded once.

“She fired on him twice and drew the attention toward her. He immediately spun around and charged her,” Medley said. “She fired a couple more rounds and fell back, continuing to fire.”

Despite getting struck three times by Hasan’s fusillade, Munley stayed upright and kept firing at the charging gunman.

Let’s stop right there. What kind of person is capable of doing this? What kind of person puts herself in the line of fire to save someone else? What kind of intestinal fortitude must this woman have to STAY UPRIGHT after being seriously hit, firing at the gunman?

I have a close friend who was a police officer at one time before he became a minister. I asked him that question - what makes some people run into danger, be it firefighters, police officers, military personnel, when everyone else is running away as fast as they can? What kind of courage and bravery must someone have to do something like Sgt. Munley? It is hard to fathom. Sure, many of us would like to THINK we would, but honestly - WHO would rush into this situation, size it up, and intentionally put herself in the line of fire to protect others? It is simply remarkable. This breed of human being is rare indeed.

At least according to this report, if it even matters at this point, it was Munley who brought Hasan down (as mentioned above, ballistics will have the final say):

“She struck him a couple times in the upper torso and he went down,” Medley said.

“When she rounded that corner she made a split-second decision to put her life at risk,” he said.

Lt. Gen. Robert Cone said Munley’s aggressive tactics averted even more carnage.

“She had been trained in active response,” Cone said. “They had rehearsed scenarios like this. Oftentimes, the idea is you would encircle the building and wait until you have more backup. What the belief is, if you act aggressively, to take the shooter out, you’ll have less fatalities.”

Munley acted aggressively, not waiting for backup. She went after the gunman and quickly found him. As Cone put it, Munley decided “to seek him out, to confront hm.”

Medley said he visited with Munley early Friday. “She’s doing very well. She was in good spirits. She was smiling and laughing,” he said.

Her boss said he told Munley, “The action you took saved countless peoples’ lives. People are healthy, alive and walking around today because of the action that this officer took. She’s a hero.”

Munley’s grandmother, Monirie Metz, told ABC News that the former South Carolina surfer girl would probably object to being called a hero.

“Kim doesn’t want be called a hero. She’s worried about everyone else right now and is very concerned about her colleagues with whom she is very close,” Metz said.

Of course Sgt. Munley would object to being called a hero. After what we have learned about her, who would be surprised by that? Not me. That speaks even more about her remarkable character. Can anyone not be impressed by this woman? I imagine her family is extraordinarily proud of her, as they should be.

Speaking of family:

Her husband, Matthew Munley, is a soldier at Fort Bragg, N.C., and was flown to Fort Hood. She also has two daughters, ages 15 and 2, from a previous marriage.

Needless to say, Sgt. Munley’s daring feats are already garnering tributes:

Facebook Tributes to Fort Hood Hero

In the hours after the shootings, two Facebook groups sprung up dedicated to Munley and her heroic actions.

“At that tragic moment you were able to use your training and abilities to bring an end to a day that will haunt the lives of many for years to come,” one member posted in the group “God Bless SGT Kimberly Munley.” “Thank you for being a true hero.”

And in the group “Sgt. Kimberly Munley: A Real American Hero!,” one woman stationed in Japan with her military husband said that Munley had inspired her to learn how to shoot once she returned to the U.S.

A true hero indeed - I know she’s mine.

The widely anticipated November Unemployment Report covering the month of October was just released. Let’s dive right in and take a look at the numbers . . .

I. UNEMPLOYMENT RATE
July: 9.5%
August: 9.4%
September: 9.7%
October: 9.8%
- November Consensus Expectation: 9.9%
- November Actual:10.2% !!!!

>> LD’s comments: this is the shocker and will get all the play.

This rate is especially damaging because the participation rate declined. That drop would help the unemployment rate, all other things being equal. The fact that the rate jumped to 10.2% is an indication that job losses jumped much more than otherwise expected with a loss 558k jobs. The underemployment rate (U-6 rate) is 17.5%!!

II. NON-FARM PAYROLL (click here for definition of this term)
July: initial loss of 467k initially revised to a loss of 443k and now revised to a loss of 463k
August: initial loss of 247k revised to a loss of 276k, further revised to -304k
September: initial loss of 216k, revised to a loss of 201k, revised to a loss of 154k
October: a loss of 263k, revised to a loss of 219k
- November Consensus Expectation: loss of 175k
- November Actual: a loss of 190k with revisions of +91k to prior months

>> LD’s comments: this month’s print is slightly worse than expected, but given the revisions the overall non-farm payroll could be spun in a somewhat positive fashion. In my opinion, there has been massaging of these numbers for many months and dare I say market participants are questioning the integrity of the reports. Recall that the birth-death model has likely overestimated job creation by upwards of 800k jobs. More of the same here? Perhaps, if not likely. Temporary workers did increase by 36k jobs.

III. AVERAGE HOURLY EARNINGS
July: 0.0%
August: +.2% revised to +.3
September: came in at .3 but then revised to .4%
October: .1%
- November Consensus Expectation: +.1%
- November Actual:+.3%

>>LD’s comment: a positive for those working, but in conjunction with no movement in the hourly workweek this is muted.

IV. AVERAGE HOURLY WORKWEEK
July: 33.0 hours
August: 33.1 hours
September: 33.1 hours
October: 33.0 hours
- November Consensus Expectation: 33.0 hours
- November Actual:33.0 hours

>> LD’s comments: no indication here of any strength. This number rests at a low going back to 1964.

V. FURTHER COLOR
It’s all about the headline print of 10.2%. That number will spook consumers and keep Consumer Confidence under pressure. The Fed will clearly remain on hold for as extended as extended can be. I expect this report will cause Washington to talk about the need for another stimulus package.

VI. MARKET REACTION
At 8:10am:

2yr Tsy: .89%
10yr Tsy: 3.52%
S&P 500 Futures: +2
DJIA Futures: +14
U. S. Dollar Index: 75.78

At 8:50am, Post-Report:

2yr Tsy: .85%
10yr Tsy: 3.47%
S&P 500 Futures: -8
DJIA Futures: -68
U.S. Dollar Index: 75.86

Questions, comments, constructive criticisms always encouraged and appreciated. Thanks.

LD

Who would have projected the twists and turns we have experienced on our global economic landscape? Who would have forecasted the ups and downs in the markets? Who has the global perspective to project where our economies and markets are headed? While the future is always uncertain, experience is always the best teacher. Where can one turn to gain riveting insights and perspectives from some of the sharpest minds in the market today?

Welcome to No Quarter Radio’s Sense on Cents with Larry Doyle as I welcome Keith Fitz-Gerald to my show tonight at 8pm. So, who is Keith Fitz-Gerald? From Keith’s own website, we learn:

When Keith speaks, savvy investors listen. He is one of the few to correctly call the dot.bomb collapse in 2000, the cyclical recovery in 2003 and the credit crisis in 2007 – a full year in advance. He’s got one of the best documented (and most accurate) predictive records in the business.

Keith is the Chief Investment Strategist for Money Map Press and Money Morning, is read by more than 500,000 subscribers each day in 30 countries. It’s free just in case you’re wondering. He also writes the following paid publications: The New China Trader, The Money Map Report, The Geiger Index and The Time Trader Pro – each of which is also read by customers around the world.

A former professional trade advisor, Keith has provided analysis, trading direction, and performance measurement to institutions and qualified individuals for more than twenty years. He is regarded as one of the world’s leading experts on global investing and is a popular, highly sought after speaker at financial conferences around the world – especially when it comes to Asia.

A frequent traveler who lives part-time each year in Asia, he believes in boots on the ground when it comes to identifying opportunities that will profit.

Keith is also a founding Fellow of the Kenos Circle, a Vienna, Austria-based think tank whose members work with institutional, corporate, and government clients worldwide to predict future economic and financial events.

Keith authored the recently released book, Fiscal Hangover, which addresses how to protect your money and profit in the new global economy.

Keith speaks at conferences and symposiums around the world. Don’t miss him on Sunday evening for what will assuredly be a fascinating conversation as we collectively ‘navigate the economic landscape.’

LD

1. Warren Buffett makes his single largest acquisition ever with the $34 billion purchase of Burlington Northern

2. Ford posts surprisingly strong auto sales

3. Royal Bank of Scotland becomes the biggest banking bailout yet with another injection of capital

4. Johnson & Johnson announces plans to layoff 7% of its global workforce

Each of these developments is truly meaningful. Interestingly enough, numbers one and two are decidedly constructive while numbers three and four are clearly quite bearish about global prospects. Despite the magnitude of these stories, in my opinion, they pale in comparison to developments in the precious metals and bond markets today. What is happening? Let’s navigate.

The Treasury yield curve is steepening dramatically today with yields on longer term notes and bonds rising by 6 to 8 basis points, while shorter maturities are unchanged. A snapshot of the Treasury market is provided by WSJ Market Data.

Why is the curve steepening? What does that mean? What are the implications for other markets? All great questions. Let’s navigate further.

In my opinion, the Treasury yield curve is steepening as hints of a second economic stimulus package work their way through Washington. I definitely sense growing unease and anxiety over the state of the job market. The story about layoffs at Johnson & Johnson only adds fuel to the fire.

A second stimulus will only build upon the already out of control fiscal deficit which will need to be funded by increased government borrowing. As our borrowing needs increase, the demand for the funds will drive the price for the funds ever higher. The price is the interest rate on Treasury notes and bonds.

Why would the curve be steepening, though? Why aren’t rates on short maturity bills and notes also going up in sync with the longer term notes and bonds? The rates on shorter maturity Treasury bills and notes is most heavily influenced by Federal Reserve policy. It just so happens Fed governors are meeting today and tomorrow and assuredly they will leave their current policy unchanged. That policy is one of very easy money with a Federal Funds rate of 0-.25%.

The prospects of (1) another economic stimulus package; (2) a continued policy of very easy money supported by an accomodative Fed; and (3) a steepening curve with a rise in long term rates, all collectively point towards a greater likelihood of inflation. What segment of the market gives us a hint as to inflation? Gold.

What is gold doing today? Rallying in a big-time fashion. Gold is up 3% on the day as Bloomberg reports, Gold Climbs to Record as India’s Central Bank Buys IMF Bullion:

Gold jumped to a record after India’s central bank bought 200 metric tons of the metal from the International Monetary Fund, heightening speculation that there may be more official purchases.

Gold futures for December delivery rose to a record $1,087 an ounce on the New York Mercantile Exchange’s Comex unit and traded at $1,084.20 at 1:28 p.m., up $30.20, or 2.9 percent. A close at that price would be the biggest gain for a most-active contract since March 19.

“This will encourage other countries and other investors, especially Indians, who are big buyers anyway, to jump into the market,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.

The Reserve Bank of India paid $6.7 billion for the bullion, which it bought from Oct. 19 to Oct. 30. It was “the biggest single central-bank purchase that we know about for at least 30 years in such a short period,” said Timothy Green, the author of “The Ages of Gold.” “The only comparable event was the U.S.’s steady purchases in the 1930s and 1940s.”

Now what was going on back in the 1930s that would have prompted steady purchases by the U.S. government?

Oh, no. I’m not going there. That thought is a little too ‘depressing.’

What do you think?

LD

High five to JD for tipping me off to a segment about Bernie Madoff that just aired on CNBC. While little is truly new in this segment, Bernie’s assessment of his relationship with former FINRA head and current SEC chief Mary Schapiro is startling. While Ms. Schapiro and her colleagues at FINRA have downplayed any sort of relationship with Madoff, Bernie has a different take.

There’s something about Mary as Bernie calls her “a dear friend.”

Will the government powers have the cojones to more fully explore this relationship? Or, are they already aware of it? As I wrote in my commentary of October 22nd, “Nasdaq Sale: Why Would Schapiro and FINRA Execs Lie?”:

Did Ms. Schapiro receive the “E-Z Pass” to the SEC from FINRA with the support of the powers that be on Wall Street? Was the chair of the SEC the ultimate payoff to Ms. Schapiro for the successful completion of the merger between NASD and NYSE Regulation to form FINRA?

What does Bernie have to say? Let’s review the CNBC segment, Madoff: It’s ‘Amazing’ I Didn’t Get Caught Sooner. . . (video clip after the fold).

Jailed swindler Bernie Madoff said it was “amazing” that he didn’t get caught sooner in his multi-billion-dollar Ponzi scheme, and that everything the SEC did to investigate him prior to 2006 was a waste of time, according to a jailhouse interview he gave to SEC Inspector General H. David Kotz.

Madoff also told Kotz that SEC Chairwoman Mary Schapiro was a “dear friend,” although she “probably thinks, ‘I wish I never knew this guy.’”

• For a Full Text of the Interview, Click Here

Madoff gave the interview to Kotz in June while awaiting sentencing for one of the largest financial frauds in history. At the time, Madoff was being held at the Metropolitan Correctional Center in New York. He agreed to speak to Kotz, who was investigating the SEC’s decades-long failure to uncover the scheme. The SEC released notes of the interview along with hundreds of other exhibits in the investigation following a request by CNBC under the Freedom of Information Act.

US Department of Justice Bernie Madoff mugshot

Madoff tells Kotz he feels “misunderstood” by prosecutors in his case, and that there is ” a lot of misinformation” circulating about the scandal as a result. However, he adds, “I’m not saying I’m not guilty.”

Madoff says that in multiple encounters with SEC investigators over the years, he never had to tell them about his role in the industry because “they already knew.”

The Inspector General’s report, released in early September, found multiple lapses at the SEC, but said there was no evidence of improper influence by Madoff.

Kotz told CNBC in a statement Friday that he found no evidence to support Madoff’s claim of a close relationship with Mary Schapiro.

Perhaps Mr. Kotz might be interested in the allegation embedded in the lawsuit brought by Amerivet Securities. Yes, that suit alleges that FINRA, the organization headed by Ms. Schapiro, had an investment in Madoff. For more info on that claim, I submit “Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff.”

Did Mary protect Bernie unwittingly or unknowingly? “A dear friend.”

Who in Washington has the guts to dig deeper into this story and reveal the full extent of the relationship between Ms. Schapiro and Mr. Madoff?

The American public and especially those who invested in Madoff deserve nothing less.

LD

Or, are the Uncle Sam economy and numerous global economies blazing new trails and redefining the economic landscape?

As with most things economic and market related, the answers are never ‘crystal’ clear nor do they fit like a ’slipper,’ but let’s do our best to read the October market moves and project our way forward.

ECONOMY

The U.S. economy came out of recession in the 3rd quarter with a positive 3.5% print. While that number surprised to the upside, please review my post “Grossly Distorted Product” or “Christmas in July” to get a pulse on just how weak the American consumer remains. Further confirmation of a subdued American consumer is reflected in the decidedly weak Consumer Confidence report highlighted in my post, “Jobs + Housing = Consumer Confidence.”

Around the globe, non-Japan Asia is generating some real growth. To wit, we have already seen Australia raise interest rates to stem fears of inflation. Who next raised rates? Norway. The U.K remains mired in a recession. Eastern Europe is struggling while Germany is leading the EU. If we know anything about Germany, they have little interest in any hints of inflation.

While there are pockets of strength around the globe, many economies - including the U.S. - remain challenged. What will continue to happen? International trade tensions as weak countries try to generate greater exports via weak currencies.

Let’s review market returns.

CURRENCIES

The U.S. Dollar Index spent the better part of the month below 76 and even broke below 75 for a short bit. That said, it closed strong over the last few trading days of the month. Given the weakness in the U.S. economy and a Fed which will likely remain on the sidelines at least until mid-2010, many speculators and traders look for the dollar to remain weak.

Will a further selloff in the equity markets force a wave of dollar short covering? I believe that phenomena occurred on the last day of the month and may spill over into November, as well. Please review “Nouriel Roubini Agrees With Jeff Gundlach” on the prospects for dollar strength due to deflationary pressures.

COMMODITIES

A combination of factors drove a stellar month for commodities. What happened?

>> A weak dollar throughout the month kept a solid bid to commodities as a haven from potential inflation. This dynamic supported all commodities and especially gold and oil.

>> The supply of certain crops is expected to be curtailed by weather-related issues. This expectation of lessened supply kept a bid in those commodities.

>> Oil was supported by discussion of having it no longer traded in dollars.

EQUITIES

The first down month since February. It has not been about value in the overall market for a long time, but rather the cheap funding provided by Uncle Sam which has flushed the system with liquidity. The general lack of consumer demand for liquidity is only outstripped by the disinterest from banks in providing it. Where has the money gone? Into an array of market segments including equities. I still have a very difficult time recommending people put money in the market in the face of the consumer, commercial, and industrial problems.

BONDS

As of today, the Fed will no longer purchase U.S. Treasury notes and bonds via its quantitative easing program. People should not discount the importance of this development. As other global governments also begin to wind down quantitative easing programs, the demand for funds by these governments may begin to push global interest rates higher while also crowding out other borrowers. What may support the bond market? Deflationary pressures in the labor and real estate markets.

SUMMARY

The economy continues to try to adapt to the lack of any real shadow banking system. Consumer demand has been pulled forward via government programs. The deficit is mounting. How will that be handled? Increased taxes and fiscal discipline. Can our economy take either of those shots across the bow right now? I think not.

Questions and comments always appreciated.

Please listen to my show, No Quarter Radio’s Sense on Cents with Larry Doyle, tomorrow evening from 8-9 pm EST as I interview noted attorney Helen Davis Chaitman and discuss a variety of issues including the Securities Investor Protection Corporation.

Thanks for your support. Have fun Trick or Treating!

LD

A full 2.2% of the 3.5% rise was directly correlated to Uncle Sam’s support of the auto and residential construction sectors of the economy. Another .6% of the GDP was directly correlated to federal spending. Obviously, the Uncle Sam economy implies a large presence by that jolly old man. However, all that money Sam is pumping is nothing more than borrowing from future generations and pulling demand forward.

What would the economy have done on its own without the government support? Let’s listen to Christina Romer. Recall that Ms. Romer referenced last week that this quarter would provide the peak impact of benefits accruing from Uncle Sam’s economic stimulus. What does she say about this GDP report?

The Wall Street Journal references Ms. Romer in writing, Economy Snaps Long Slump:

Without stimulus programs such as “cash for clunkers” and a first-time homebuyer’s credit, “real GDP would have risen little, if at all, this past quarter,” Christina Romer, president of the White House Council of Economic Advisers, said in a statement.

Why does Ms. Romer provide that sobering view of the economy? Very simply, if the American consumer represents 70% of the economy, then we should largely focus on that consumer. What did we learn about the consumer over the last quarter?

The Financial Times’ John Auther informs us in writing, Short View: GDP Grows, but Pain Remains:

Household disposable incomes actually fell during the quarter, by 3.4 per cent, but consumer spending rose, also by 3.4 per cent. This is not a pattern that can be sustained for long, and it is inconsistent with the need for US families to pay down their debts.

What does that disparity between income and spending represent? An unsustainable economic path. What else does it mean? The U.S. economy just had “Christmas in July.”

Did you get anything in your stocking?

LD

GMAC is back in line for another injection of YOUR money. Recall that GMAC was bailed out initially during the government takeover of GM. GMAC was then spun off in order for Uncle Sam to effectively provide taxpayer funded consumer auto loans and mortgages.

GMAC is not a public entity and thus not currently able to hoodwink investors and raise equity capital. What’s a cash strapped entity to do? Let’s play some more of that ‘bailout bonanza.’ The Wall Street Journal just reported on this developing story and writes, GMAC Asks for Fresh Lifeline:

In a stark reminder of how some battered financial firms remain dependent on government lifelines, GMAC Financial Services Inc. and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, people familiar with the matter said.

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said.

The latest infusion would come in the form of preferred stock. The government’s 34% stake in the company could increase if existing shares eventually are converted into common equity.

The willingness by Treasury officials to deepen taxpayer exposure to GMAC reflects the troubled company’s importance to the revival of the auto industry. Founded in 1919, GMAC has $181 billion in assets and is a major financing provider on car purchases from General Motors Co. and Chrysler LLC. The new capital would help firm up GMAC’s balance sheet and solidify its auto-loan business.

Federal officials also are moving to shore up GMAC’s ability to fund its daily operations, with the Federal Deposit Insurance Corp. telling the company Tuesday the agency will guarantee an additional $2.9 billion in debt, according to people familiar with the discussions. The FDIC guarantee will make it easier for the company to sell debt to investors. The FDIC backed $4.5 billion in GMAC-issued debt earlier this year.

The FDIC approval came just four days before the expiration of the regulator’s program that guarantees debt issued by certain banks. It ended months of tense negotiations between GMAC and regulators. Without a deal, the company would have been forced to further reduce its lending volume. New-car loans by the company tumbled 55% to $5.6 billion in the second quarter from a year earlier.

Given these developments with GMAC, why are we allowing Barney Frank and friends to pander to the American public about how plans are being developed to wind down firms rather than bailing them out?

I would recommend we eat our loss on the money already injected in GMAC. Wind it down and let the free market work.

Rest assured, any new money injected in GMAC is nothing more than ‘good money after bad.’

LD

As I think more and more on the compensation topic, I have come to the following conclusions:

1. Those who work at companies in which Uncle Sam has injected life-saving levels of capital should be subject to compensation restrictions. Why? I would maintain that these employees are quasi-government employees and thus subject to having Uncle Sam involved in the compensation process. To the extent that people do not like working for Uncle Sam, then leave. They would not have a job without Uncle Sam in the first place.

2. Is it any wonder why Goldman Sachs and JP Morgan were so eager to repay the TARP funds? Lloyd Blankfein and Jamie Dimon certainly saw the handwriting on the wall. Some would argue that Goldman and Morgan should not be subject to compensation controls imposed by Uncle Sam. Others would argue that they should given the fact that Uncle Sam saved the entire financial system. To a certain extent, I am in the camp “to the victors go the spoils” and thus Goldman, Morgan and others should be free to compensate their employees accordingly.

3. To an ever increasing extent, however, I view Wall Street as nothing more than an oligopoly. The key problem in an industry that is oligopolistic is the issue of collusion amongst participants at the expense of the public. I do not think there is any doubt that Wall Street has experienced characteristics of an oligopoly and is experiencing them now to an ever greater degree.

How should this be addressed? The boards of the Wall Street firms need to practice real corporate governance in terms of compensation and all other business practices. Good corporate governance would implement quality compensation practices so Uncle Sam does not have to get involved. Regrettably, ‘Wall Street’ and ‘good corporate governance’ are mutually exclusive.

Thus, what should Uncle Sam do? I disagree that Uncle Sam should dictate compensation practices in private companies. What Uncle Sam should do is impose on businesses capital ratios that are so restrictive that Wall Street thinks long and hard about how much risk they take in those business lines. Those risk controls will restrict compensation along with addressing systemic risks while maintaining the integrity of the free market. In fact, if the capital ratios are as restrictive as I believe they should be, the firms would reconsider having the business at all.

Perhaps the business line would then be spun off or privatized and Uncle Sam and the taxpayers would be off the hook of supporting a business housed within an institution deemed ‘too big to fail.’

In my opinion, that approach is far better both in scope and practice.

What do you think?

LD

*****************
Follow the money. Despite what analysts and pundits may say, if you want to get to the root of an issue, there is one simple rule …follow the money. In taking that track, more truth will be revealed than we might ever imagine. To that end, No Quarter Radio’s Sense on Cents with Larry Doyle welcomes Allan Dodds Frank who perhaps more than any other investigative reporter and journalist has been ‘following the money’ for the last 40 years. Who is Allan Dodds Frank? He is currently the President of the Overseas Press Club of America and has been on the cutting edge of almost every major financial scandal of our lifetime.

Allan Dodds Frank is a contributor to The Daily Beast, the website founded by Tina Brown. He has been a television correspondent for ABC News, CNN and Bloomberg. Frank has been an Overseas Press Club member since 1985, most recently served as second vice president and previously OPC treasurer, governor, chairman of the OPC Awards Committee and President of the Overseas Press Club Foundation, where he serves on the board and executive committee.

Developing the OPC as one of the leading forums and meeting places for journalists continues to be his top priority. He would like to expand the OPC’s reach among younger journalists, especially those committed to international reporting. He also strongly supports the OPC’s embrace of the Internet as a way to enrich and enhance its role in defending reporters and freedom of the press.

His career includes reporting for the Anchorage Daily News, The Washington Star, Forbes, ABC News, CNN and Bloomberg. His specialties include reporting on complex white-collar crime and terrorism. Among his awards: the Gerald Loeb Award for the best Financial Reporting on television and Emmys for reporting on the financing of terrorism and for exposing the degree to which presidential candidate Ross Perot relied on taxpayer funding to build an airport in Fort Worth, Texas. Frank also has won newspaper guild and Alaska Press Club awards for outstanding reporting at The Washington Star and the Anchorage Daily News.

What drives the men who engage in financial frauds? Where does the money come from that funds international terrorism? How has Washington fought these crimes? How has Washington facilitated these crimes? How has white collar crime grown over the years? What has changed? What remains the same?

Please join me on BlogTalkRadio this Sunday evening October 25th at 8pm EDT as we address these questions and so much more with the Emmy-award winning investigative reporter and journalist Allan Dodds Frank.

LD

Fully appreciating that merely asking these questions is aggressive by its very nature, I do not ask them in a derisive fashion. The fact is, the answer to those questions in the eyes of Richard Greenfield is an unequivocal, “Yes!”

Who is Richard Greenfield? I had the distinct pleasure of chatting with Richard last evening on my weekly Sunday evening radio program. Richard Greenfield of Greenfield & Goodman is an attorney with over 40 years of experience in banking, securities, and consumer litigation. Amongst other legal venues, Attorney Greenfield has been admitted to practice before the Supreme Court of the United States.

Our conversation last evening was riveting. If you have an interest in the markets, our economy, developments on Wall Street and in Washington, I strongly encourage you to listen to the interview in its entirety. I will share with you some of the highlights which Richard provided. (The timing I provide for these highlights can be used in the audio player provided here.)

> 16:40: FINRA’s mindset has never been on major league enforcement, but rather relatively picayune broker-dealer violations and even then the violations are more technical than they are real. Greenfield said, “the big boys always seem to get away with murder.”

> 18:30: The NASD coming out of the 1930s initially did a good job, but over time it became less and less concerned with enforcement and more concerned with the appearance of enforcement.

> 20:00: Most state attorneys general don’t have resources to devote to securities regulations. It’s the rare state, California and New York for example, which undertakes real enforcement activities. (LD’s comment: I would add that Massachusetts has also aggressively undertaken serious enforcement of securities regulation.)

> 22:00: Too Much Wall Street money finds its way into campaign warchests with the result that its special interests rival those of the insurance and defense industries and as a result Congress and many state government initiatives have been subverted.

> 25:00: Every major financial institution has ‘cooked their books’ for the last five years.

At the 29 minute mark or thereabouts, our conversation truly elevates from the general nature of financial regulation to the very specific details of the cases Richard Greenfield and colleagues from the Washington D.C. based firm of Cuneo, Gilbert, and LaDuca are bringing against FINRA. I STRONGLY encourage you to listen to the next twenty minutes.

> 29:30: Greenfield provides background information on the complaint filed on behalf of the California based FINRA member firm, Standard Investment Chartered against FINRA.

> 32:00-44:00:
- Greenfield comments on some interesting connections between Bernie Madoff and Mary Schapiro, former head of FINRA and current head of the SEC.

- Documents provided by the NASD (now known as FINRA) to Greenfield and his colleagues show unequivocally that the NASD defendants lied to the NASD member firms regarding distribution of funds from the sale of the Nasdaq. Greenfield reiterates that these individuals lied blatantly and unequivocally. They intentionally lied. The lies are repeated over and over in a proxy statement provided to the member firms. The lies were repeated at roadshows which took place all around the country.

Who is they? Who lied? Who repeated the lies?

Mary Schapiro and senior officers in the NASD (FINRA)!!!

> The primary lie is the misrepresentation of the maximum proceeds that could have been paid to the NASD member firms. That figure was represented as being $35k when in fact it could have been much, much higher.

> Greenfield also highlights the fact that FINRA failed to perform in protecting investors from the Auction-Rate Securities scandal while liquidating its own ARS investment position in 2007.

> Greenfield sheds some light that he believes New York AG Andrew Cuomo is investigating FINRA’s liquidation of its Auction-Rate Securities investment.

>47:00

- Greenfield repeats his assertion initially made on September 3rd while appearing on America’s Nightly Scoreboard on Fox Business News (video clips can be seen here) that, based upon information and belief obtained from a source which Greenfield and colleagues believe to be reliable, FINRA had made investments with Bernie Madoff!!

- Greenfield believes that FINRA may have to be disbanded and the self-regulation of Wall Street may have to be scrapped because the self-regulatory model for this industry has failed.

- Greenfield concludes that Mary Schapiro talks a tough game, but is truly a non-regulator.

While Greenfield makes some serious allegations and charges in the course of this interview, he has unquestioned credibility and experience which comes from 40 years of fighting these battles.

Will the truth and transparency being sought in these complaints and which the American public so badly needs at this time come out? Do not discount the power of information. Please share this information which Richard Greenfield so descriptively and professionally detailed last evening with your friends and colleagues.

I thank you.

Questions, comments, constructive criticisms always appreciated.

LD