US Economy: Between Barack and a Hard Place

Most TV talking heads have us believing that our short term economic recovery requires us to spend ourselves into financial oblivion. They say that curtailing runaway government spending right now would be repeating the mistake made by the Japanese government in the 1990s, which ultimately caused its economy to flat line into a “lost decade.” The point resonates with many Americans who believe that "you don’t get something for nothing," that there is indeed no "free lunch," and financial sacrifice is the only path to economic salvation. They believe that high (even hyper-) inflation, high taxes, the continued and deep devaluation of the dollar and slow economic growth are merely the penance for our financial sins.

The fact is that the spending spree of the past year has done very little to stimulate our economy. The timely, temporary and targeted stimulus package outlined by economic advisor Larry Summers never actually materialized. Instead, the Obama-blessed Pelosi-Reid $787 billion abomination of gratuitous spending and political pork turned out to be untimely (most of the money still hasn't been spent) and targeted just about everything EXCEPT projects designed to pay immediate economic dividends and put Americans back to work. Besides all the pork, a significant portion of the stimulus money was earmarked to prop up state governments and social welfare programs designed to provide a safety net to Americans in greatest need. Helping Americans in need is a noble cause, but using the money for consumption instead of for investment in America’s business prosperity does not stimulate the economy.

The good news is that if we scrap all that nonsensical spending right now and fund a plan that actually targets stimulating the economy, we may be able to have our cake and eat it too-- a robust recovery in the near term and a chance for long term prosperity. If our political leaders come to their senses and call off the stimulus waste-fest, nix multi-trillion dollar Obamacare and anti-business Cap and Trade, and redirect a fraction of those savings toward creating jobs, we may just start growing again. Robust growth will mean lower deficits, lower deficits will reduce the need for higher taxes and the impetus for high inflation, and just might save the US dollar from near extinction on the world stage. That lunch wouldn't be free, but it would be cheaper and provide leftovers that could be used to fund responsible healthcare reform and other social goodies!

Investing in a Deflationary, Reflationary and Inflationary Economy

If you’re not confused by this stock market, you’re probably not paying attention. The Dow-Jones Index halved from an all time high of more than 14,000 in October 2007 to less than 6,600 in March 2009. From March until September 2009, the index increased 50% to 9,800. Many pundits now believe that a new bull market is emerging and just as many believe a correction is coming; some believe the pullback may retrace the March lows.

The optimists believe that the speculative bubble is now deflated, reflation is well under way and that a modest correction may be coming merely because the market rallied too far too fast. They see investor sentiment as too bullish and point to retail investors pouring money back in the market as an indicator of a temporarily overheated market. (In March, cash amounting to 46% of the total value of our equity markets was parked in money market accounts, but by September that ratio fell to 30%.)

Pessimists, however, believe that the current market recovery is temporary and point to significant economic problems yet to be addressed. They believe that the looming risk of deflation will cause the coming correction to be protracted and severe; they also believe continued problems in the financial sector could catalyze another major deflationary spiral.

The consensus among optimists and pessimists is that unprecedented global government spending and deficits will eventually lead to robust (if not hyper) inflation. The pessimists, however, also believe that all those “reflation efforts” will prove insufficient to keep the world economy from returning to the brink of collapse. They argue that all the spending and expansive monetary measures should continue until deflation is realistically off the table. The Great Depression was the last major deflation, so even today’s experts are unfamiliar with the phenomenon and, as a result, are much more frightened by it than the more common inflation. Ample anecdotal evidence suggests that the risk of deflation should be seriously considered:

The goal of delevering the global economy to a debt-to-global-GDP ratio half its peak of 400% will require, for example, a 30% global debt reduction and a 30% increase in global GDP. That process will be difficult and will take liquidity out of the global economy. Current global government spending in the trillions may still not be enough stabilize the deflationary vacuum caused by eliminating all that debt;

Consumer prices continue to fall as debt-overextended consumers curtail their discretionary purchases in an effort to firm up their personal balance sheets. Private consumption representing 70% of the US economy is unlikely to bail us out of our economic doldrums as it has in the past;

The US recession may be finished, but no one expects a robust recovery. Continued rising unemployment and slow growth will exacerbate tepid consumer demand and the delevering process;

Banks are still failing at an alarming rate and many believe a looming crisis in commercial real estate, consumer credit and all types of derivative products are the proverbial shoes waiting to drop that could stress an already fragile global financial system. Additionally, financial reform designed to prevent the problems that caused this crisis is still lacking and, in fact, irresponsible mortgage lending practices continue, ostensibly to bolster otherwise lackluster residential real estate sales;

Residential real estate prices continue to fall in many major metropolitan markets;

Bank lending continues to be minimal relative to the huge amount of liquidity created by an expansive monetary policy, and money velocity remains very slow; and

Many knowledgeable investors are leery of investing in the stock market, even with this summer’s robust rally. Corporate insiders are selling shares more than usual and cash on the sidelines, at 30% of total equity value, is still well above the typical 20% average cash ratio. What do they know that we don’t?

Governments around the world seem to be cooperating to fight deflation, but what if all that reflation is not enough to plug the multi-trillion dollar hole left by disappearing debt? Additional stimulus is always a possibility, but lowering interest rates already near zero won’t add much stimulus. Japan learned those lessons the hard way in the early 1990s and is still in the economic doldrums today!

Moreover, and assuming we successfully dodge a deflationary spiral, a long period of significant world-wide inflation is likely to result from all that monetary and fiscal stimulation being employed right now. That will be bad news for economic growth, but global governments will actually benefit as high inflation over a long period of time will reduce the real cost of all that government debt and make it cheaper to repay. Governments know this and often inflate out of their debt. That fact alone almost guarantees that inflation is in our future. Some believe gold’s recent steady price rise is already signaling the inevitability of future high inflation.

Obviously, no one really knows if any of this will play out in reality. But if you subscribe to the deflation theory, you should probably sell into the current stock market rally, patiently collect cash and wait for the opportunity to reinvest when the market tanks. Also, if deflation is indeed coming, now probably isn’t the best time to borrow money or buy a house. Deflation will make borrowing more expensive in real terms and will obviously impair the real value of your home. If deflation does occur it is likely to be triggered by some economic or geo-political panic event and likely to persist for several months if not years.

If you don’t subscribe to the deflation theory, but believe high inflation is coming, you should consider repositioning your portfolio and invest selectively, especially in proven inflation hedges such as gold, oil, commodities, real estate, and other tangible assets. Furthermore, if you believe the US dollar will weaken relative to other currencies because of inflation and other factors, investing abroad or in US companies that export or otherwise earn significant income abroad probably makes sense too.

Many knowledgeable investors expect some type of correction (minor or major) within the next several months, early-to-mid 2010. In addition, some expect the Fed to start tightening as early as late 2010, which suggests that deflation risk should be significantly reduced by then and replaced by inflation as the dominant price stability concern for policy makers. A significant increase in bank lending will be another sign that inflationary pressure is building.

Are you optimistic or pessimistic? Are you more comfortable missing a market rally by selling your investments in anticipation of deflation, or ignoring the signs of deflation, riding the current rally and risking your gains on a potential big correction? A realistic assessment should probably weight each possible outcome as equally likely. Consequently, now is probably not the right time to go all in or stay completely out of the market.

Foreign Critics of US Government Spending Should Rethink Their Opinions

Foreign critics envious of America’s robust consumption and spending are taking some pleasure in seeing America struggle through its current financial crisis. However, as they celebrate our misfortune they should realize that they too have benefited from our excesses and if the golden goose dies, they too will do without its seemingly endless generosity.

By all historical measures, America is straining its purse strings. Current budget deficit and government spending estimates as a percentage of GDP are 12% and 28% respectively, and are unacceptably high levels not seen since World War II. US debt as a percentage of GDP is currently 45% and is projected to nearly double in the next ten years.

America is particularly fortunate that its sovereign friends around the world are willing and able to lend us the money we need to sustain our nation. But those lenders are being more than fairly compensated for their support. China, Japan and other nations lend us money by buying our interest-paying bonds, the most risk-free investment available, all to give us the wherewithal to buy their exports and pay for, among other things, the one trillion dollars the US spends annually to maintain the peace and security of the planet we all share. That security provides the backdrop of certainty and confidence that all the world’s nations need to grow their economies, trade freely and ultimately improve their quality of life. As such it should be obvious that our lenders have as much at stake as we do. Don’t you wish you could lend money to our government virtually risk free, instead of paying income taxes, for the services you receive?

Additionally, the US spends by far more than any other nation on global humanitarian endeavors. Even our enemies that engage us in warfare are compensated in defeat. After World War II, America practically rebuilt Europe and Japan. Plans for how America will rebuild Iraq began almost simultaneously with the war itself several years ago. Currently there are serious discussions about building infrastructure in Afghanistan as part of a strategy to achieve a victory there. Don’t you wish your conquering enemies were as kind to you?

Everyone should be rooting for America to get its fiscal house in order for our sake, and for the sake of our friends and our enemies.

Reforming Obamacare

The president addressed a rare joint session of Congress Wednesday night and rather eloquently laid out his "wish list" for healthcare reform (“Obamacare”), this time with specific talking points about who and how Americans will benefit. As far as program details or how it will be financed, the president either isn't saying or doesn't yet know.

The president's lack of transparency and detail coupled with the government's long history of profligate entitlement spending makes it easy to understand why Americans are reluctant to buy into the president’s program, especially when the reform narrative keeps changing. The original priority was to insure the 47 million uninsured, but quickly turned to overhauling our entire healthcare system, one that according to polls satisfactorily serves 75 percent of the 250 million insured. Called out by protesters at the prospect that taxpayer money would subsidize healthcare for illegals, the president changed his tune and referred to 30+ million uninsured and assured us that illegal aliens will not be insured under his program.

Originally, healthcare reform was going to be substantially paid for with cuts in Medicare and new taxes on the wealthy. Seeing backlash from seniors probably led the president to rethink that approach and definitively say that there will be no Medicare cuts to pay for Obamacare. The president is now saying that half the costs of Obamacare can be paid for by eliminating the waste, fraud and inefficiency from the existing system. That's a difficult one to swallow especially knowing that one of the House proposals calls for 53 new government bureaucracies to be created under Obamacare!

President Obama is urging us to “trust him,” but has not earned that trust. Critics of Obamacare point to language in the various proposals that refute many of the assertions made by the president in his speech. The president hasn't backed up any of his statements with any details or actual documentation. In addition, he "sold" us Obamacare by hyping the positives, without acknowledging even the possibility that there will be unintended and potentially negative repercussions from such comprehensive and complicated changes to our system. Finally, his stimulus plan early this year showed us that he has neither the experience, expertise nor the inclination to add value to his own programs.

Notwithstanding all the evidence to the contrary, the president says that he is seeking incremental reform that fixes the problems with our system. If he truly means what he says, his “incremental” reform should consider the following common sense suggestions:

Enable interstate competition among insurance companies. Greater competition among insurance providers should lead to cheaper insurance for consumers. We buy our home, auto and life insurance in a national marketplace, why shouldn’t we buy our health insurance there too? Instead, Obamacare proposes to create some type of national exchange for insurance companies. Apparently, no one knows how it will work, including the president.

Eliminate mandates for minimum insurance coverage. One reason health insurance is so expensive is that we’re forced to buy insurance for every conceivable health condition and situation. Again, Americans select their home, auto and life insurance by making choices among coverage alternatives, why should health insurance be any different? Let consumers select from a menu according to their own needs, once their basic needs are met. Healthy young people, for example, who otherwise would not seek any insurance, should be encouraged to purchase “catastrophe insurance” to insure against major events that can potentially strike at any time.

Reform medical malpractice law (tort reform). The president mentioned tort reform last night, but his comments clearly indicate that he has no intention of taking decisive action in the time frame contemplated for his reform package. Many believe tort reform is critically needed in order to contain future healthcare costs. If the president is serious about reforming healthcare, he needs to put aside the long-standing allegiance of the democrats to the civil trial lawyers of America.

Tort reform refers to making changes to our civil justice system that would limit the incidence and monetary awards arising from litigation. Should victims of medical malpractice be compensated for their misfortune? Absolutely, but does the average settlement need to exceed a million dollars, and should that practice be allowed to paralyze and potentially bankrupt our healthcare system? Approximately one third of our healthcare costs are driven by “defensive” medicine and more than 80 percent of U.S. doctors admit they require unnecessary tests for their patients just to avoid potential patient lawsuits arising from alleged negligence on their part. Tort reform has the potential to save $100 billion annually in healthcare costs and any proposed reform of healthcare should address the cost, waste and inefficiency created by the current law.

Provide tax incentives to individuals who purchase health insurance. Employers and businesses pay for employee insurance premiums with after tax dollars, why shouldn’t all of us be able to do the same?

These ideas have the advantage of being straightforward and can be implemented incrementally. I hope the president will keep his promise and seriously consider them for his healthcare reform program.

Consumer Banking Tip: the Devil is in the Details

As the euphoria of averting the collapse of the world’s banking system wears off, it is clear that banking’s halcyon days have ended and its road to full recovery will likely be long and difficult.

The good news is that the Fed is managing to keep the yield curve steep. As a result, banks today are able to borrow money effectively for free (have you checked your bank’s interest rates lately?), lend at much higher rates and thereby generate significant profit margins. And, with tons of cash parked in banks and reluctant to move back into the stock market, total bank profits are likely to continue to be substantial. Those profits will be needed to ultimately offset the unprecedented asset losses and write downs continuing to occur on bank balance sheets.

The bad news is that all the pending bank failures, mergers/acquisitions, and cost reductions are negatively affecting the quality of the customer experience. Bank staffs are increasingly short-handed, untrained and inexperienced, and with banks revising their operating procedures according to those of new corporate acquirers and new federal banking regulations, it is no wonder customer service is suffering.

Even the banking giants likely to survive and thrive in the future are as deficient in their customer service as many of the smaller community banks that will likely disappear from the treacherous banking landscape during the next few years. Consequently, in order to insure a satisfactory level of customer service, customers will need to take a more active role in managing their banking. The following tips should assist you in that mission:

Know the FDIC insurance rules and limitations. Make sure you set up your accounts in compliance with those rules and that your accounts are fully FDIC insured. Bank personnel don’t always communicate accurately or completely when answering questions about those issues. However, many banks will offer you a free FDIC brochure that tells you everything you need to know on the topic, or you may download it yourself directly from the FDIC via the internet.

Banks believe that paper is so twentieth century. Many banks will do almost anything to avoid giving you a paper receipt that specifies the important details of your account, such as the interest rate, expiration date, balance, etc. Many look at you dumbfounded when you remind them that CD is the acronym for “Certificate” of Deposit. They sincerely believe that in this age of online account management hard copies that verify that you’ve turned over your life savings to them are completely unnecessary. Insist on receiving that paper receipt, as it is often useful in revealing clerical mistakes that you will then be able to correct immediately.

Verify account tax IDs. Always check the accuracy of account tax identification numbers, which are typically social security numbers for individual accounts. Do it every time you receive an account correspondence or statement. Wrong numbers on year-end tax forms, such as 1099s, may lead to problems when you file your income taxes. Don’t be surprised if you find yourself reporting disparities often, as some banks claim to have several files for accounts all of which do not automatically revise your change. Another typical excuse for such errors is that bank computer software may override and undo revisions according to some corporate compliance measure. Banks readily blame their computer software for many of their administrative screw ups.

Account titles can be problematic. Pay very close attention to how you title your accounts. Trust accounts can be particularly confusing, even when titles are specified by competent legal counsel. A typical trust account title might be “John Doe Revocable Trust UA (under agreement) dated 01/01/09.” The next line usually indicates the names of the designated trustees, in this example let’s say “John Doe and Jane Doe Trustees.” Such simple time-tested legal language should be foolproof. However, that language is often ambiguous to bank lawyers and their amateur acolytes who administer your account. Some interpret the “and” between trustee names to mean both trustees must sign off in order to execute transactions. They believe that if the intent is to have either trustee act unilaterally, then the title should read “John Doe or Jane Doe trustees.” Others believe that if the intent is to have either trustee act unilaterally, the title should refer to them as “co-trustees.” When the lawyers don’t agree, everyone in the bank gets to offer an opinion. By the way, your opinion doesn’t count.

Keep bank account-related documents handy. Periodically, and certainly every time a bank is acquired or merged with another, new account administration procedures are implemented, which often require account owners to verify the ownership structure of their accounts. Be ready to take all pertinent documents to the bank frequently to satisfy those new requirements. As unfair as it sounds, banks apparently take no responsibility for verifying once-and-for-all your authority over your accounts, so be prepared to clarify your accounts periodically.

Avoid automatically renewing CDs and other savings accounts. Do not lose sight of the fact that most banks exploit your laziness or lack of vigilance to seek the best financial terms for your accounts. In the old days, expiring CDs were automatically rolled over with the reasonable expectation that your renewal interest rate for a certain term would compare closely to the prevailing rate for that term shown on the market yield curve. Today, promotional rates are offered for bank-favored maturities and all other rates are set artificially low. Those bank-favored maturities change frequently, which almost guarantees that your account with its set maturity will not receive a favorable rate upon automatic rollover. Worse yet is the fact that promotional rates are often two or three times greater than the rates for other maturities. So, if you miss the promotional rate, you are likely to receive a mere fraction of the prevailing market rate for your account. You must actively manage your CD rollovers.

Frequently monitor money market account rates. A casual inspection of your monthly money market account statement will often reveal a slight but continual reduction in your interest rate every month, even though other current money market rates at your bank might be much better. You need to actively manage your money market accounts and inquire constantly about upgrading your account to prevailing money market rates.

Beware of bank investment services. It’s bad enough you need to struggle to get a banker’s attention to assist you with your legitimate account needs, but these days you must fend off the army of bank-sponsored financial consultants who may be trawling your accounts in an effort to entice you to invest your bank account money into non-bank (non-FDIC insured) and often much riskier types of investment accounts. Be able to differentiate between bank and non bank types of accounts.

Avoid banks that really don’t want your business. You may have already noticed that banks seem unwilling to offer preferred customer rates for savings accounts and loans unless you are willing to make some concession to them, such as opening a direct deposit savings account or checking account. In the current low interest rate market environment preferred customer rates are substantially more favorable on a percentage basis than other rates. Clearly, they don’t want your business unless you submit to their concessions and you don’t need their below market rates. So, do them and yourself a favor and consolidate your banking needs with a few banks. The recent decision by Congress to extend until year-end 2013 the FDIC insurance increase, from $100,000 to $250,000 per account, will make that consolidation easier for everyone.

What if Big Brother (Government) Turns Out to be a Bully?

Harsh recent criticism of our free market economic system has resulted from the long standing belief that the greed and self-interest that drives our private sector were the major culprits of our current financial and economic mess. Some of those critics now believe that government control and regulation offers the only solution to the problem and many elected officials are seizing the opportunity to insinuate government into many of our major industries, including automobiles, banking, energy, healthcare and many others.

Although the free market system is far from perfect, history has clearly demonstrated its superiority to all others, especially systems where government has primary responsibility for driving the economy. And, if “greed” and “self-interest” are the catchwords of private sector capitalism, “corruption, waste and inefficiency” have become common descriptors of the public sector and government.

Furthermore, somewhat ironically and despite the rap against the private sector, it is clear that government was complicit in the acts that led to our financial debacle. First, during the prosperous 1990s the Clinton Administration paved the way to financial ruin by implementing a public policy that encouraged home ownership among our most economically-challenged and pressured banks into providing financing that ultimately led to an explosion of sub-prime mortgage lending. That policy, coupled with others that encouraged banks to lever up their balance sheets as an easing monetary policy reduced interest rates to multi-generational low levels, created a financial maelstrom we have barely been able to escape. In addition, the Bush Administration, by its own admission, knew this disaster was coming and claims to have urged Congress to take preemptive action to prevent it. It should have tried harder.

America is now being asked to choose between the free market’s invisible hand and the dictatorial hand of government. A free market system allows us to choose the products we wish to consume; it relies on prices set by the interaction of supply and demand, which ensures that suppliers offer products consumers want to buy. A government run economy encourages us to vote for public servants who we must trust will represent our interests; it relegates production decisions and who and how much we consume to public sector bureaucrats. Do you want the government telling you what car to buy, how much energy to consume, and what healthcare you will receive?

If you still believe bigger government is the answer and have faith that our government will serve our best interests, consider the following: First, even though government does not take private sector pride in greed and profit motives, it trades money for power and plenty of both is involved in greasing the gears that drive government and its participants. Second, many of those wanton capitalists from the private sector ultimately seek government office, and not necessarily because they feel an overwhelming desire to serve the public. Third, Barack Obama did not become president by accident; he had the greatest financial backing of any presidential candidate in history, especially from the liberal rich and famous, and received a resounding if tacit endorsement of most of the mainstream (read liberal) media. Contributions to all election campaigns last fall totaled more than one billion dollars and media support for Obama’s candidacy could not have been more apparent. It should be no surprise to anyone that our president (who campaigned as a moderate) should be pushing an emphatically liberal agenda, instead of pursuing the center-right interests of the American public who voted for him.

The last 100 years of world history has proven that economies work better as free markets than under government control. But even capitalists know that there is a role for government to play in correcting the failures of free market capitalism. That’s what our government should be doing, not attempting to supplant our free market system altogether.

Obama and Bernanke-- U.S. Economy’s Yin and Yang

There is a tug of war of negative (yin) and positive (yang) energy in our economy evidenced by a stock market that cannot seem to break free from a very tight trading range. Over the past year the Federal Reserve, led by Ben Bernanke, pumped an unprecedented amount of capital into our economy to keep a fragile financial system from falling apart. At the risk of completely trashing the dollar and potentially igniting a high (even hyper) inflation rarely witnessed in the northern hemisphere, the Fed lowered and has kept interest rates near zero since late last year. It also exploded its balance sheet by trillions of dollars by buying a variety of government and mortgage-related bonds. The Fed's plan was to reinforce the financial system by flooding the market with liquidity in the hope that all that cash would encourage banks to lend and individuals and businesses to spend, invest and ultimately spur economic recovery.

Despite all that capital and the bailout of our financial system by TARP, bank lending has continued to languish. Banks have cited poor borrower demand as the cause, but the fact is that banks are terrified to lend. They have been to the brink of extinction and have been forced to submit to government control in order to avail themselves of the capital needed to survive. They fear that even the strictest of lending criteria may not keep them from falling further into the financial abyss as asset values (loan collateral) continue to fall; they also dread the prospect of ever having to seek additional capital from the government. In addition, the Obama administration’s willingness to change the rules of the game and to abrogate the rule of law in order to further its political agenda has compounded those fears and has contributed to an environment too uncertain and risky to justify new investments.

As experts extend their expected time frames for economic recovery, the banks know that conditions are unlikely to improve in the short-to-medium term, and could indeed be exacerbated by the president’s continued priority to implement the most liberal agenda in our nation's history. The stimulus plan executed last February has thus far proved to be a bust and a growing consensus believes his current “cap and trade” and “healthcare reform” initiatives could have catastrophic effects on the economy and our exploding government deficit. Furthermore, the president’s stated intention to raise taxes on investment capital and small businesses is providing a backdrop of negative energy that could hold both the economy and the stock market hostage for many years to come.

Aggravating an already bad situation is the possibility of replacing Mr. Bernanke when his term expires early next year. The real concern would be if the president replaces him with an individual more sympathetic to his own thinking. That would not only taint the historically arms-length relationship that has existed between the executive branch and the Fed chief, but it could also suck out all the positive energy currently being provided by the Fed. The prospect of replacing Mr. Bernanke is especially ironic because it would appear that replacing Obamanomics with more traditional policies might be just what our economy needs now. Have you noticed that the market seems to rally lately at the slightest hint that the president’s policy initiatives may not pass muster with Congress?

I am hopeful that Congress, especially blue dog democrats, will press the Obama administration to abandon its politics for the sake of our economy and that it will do so before our nation’s yin and yang becomes Cheech and Chong, and sends our economy and our future irretrievably up in smoke!

Ascent of Money: Must See TV Documentary

This interesting and relevant TV documentary is currently viewable in South Florida at 9pm Wednesday evenings on PBS. The documentary is presented in hourly installments that roughly track the chapters of Niall Ferguson’s 2008 book titled The Ascent of Money. Each segment, narrated by its author, examines milestone events from world history from the perspective of their financial and economic roots. In a few short episodes, it has already answered questions that had never even occurred to me, for example: Did you know that the French Revolution had its roots in a government-created speculative investment scheme that occurred in France decades earlier? Did you know that the U.S. Civil War’s turning point might be traced to the role of cotton in financing the war and the Confederacy’s loss of control of the City of New Orleans? Did you know that world bond markets were borne out of the need for capital by Europe’s sovereign powers to finance wars?

Particularly noteworthy for its relevance today is episode six, titled “the return of risk,” which directly relates to our nation’s current debate about the role of government in our financial crisis and for bringing about an economic recovery. That episode discusses the historical tendencies of societies to “nationalize risk” by making governments responsible for the risks its citizens face; it introduces the welfare state and identifies the apparent successes and failures of a few examples from history, including the United Kingdom, Japan, and Chile.

The episode also makes the point that while some welfare states are considered successful in their ability to satisfy basic societal needs, none has been particularly prosperous economically. For example, the author suggests that Japan’s welfare state may be at the root of this otherwise industrious nation’s inability to recover from its economic collapse more than a decade ago. And, in stark contrast to Japan, Chile’s ability to climb out of its economic doldrums might be attributed to its overhaul of government in the mid 1970s and its institution of a new capitalism.

Those are important comparisons and relevant situations to consider as we witness the rapid expansion of our own government according to the apparent liberal agenda of the Obama administration. You may find, as I did, that episode six provides an insightful perspective from around the world about the historical successes and failures of these ideas, and some useful context as the debate over government intervention in our economy and our lives rages on. Episode six is must see TV, especially for the most civic minded among us.

After viewing half of the episodes, I am confident that business and non-business types alike will find viewing this entire series worthwhile for its sheer novelty, entertainment value as well as its eye-opening perspective on much of the history you “thought” you learned years ago in school.

Congress Must Veto Cap and Trade and Healthcare Reform Legislation

In this uncertain and fragile economy, it should be apparent that the decisions to approve or reject proposed Cap and Trade and Healthcare Reform legislation may be among the most critical our lawmakers have made in decades. The good news is that with each passing day the costs and benefits of each proposal are becoming clearer and a growing consensus is building that each proposal should be emphatically rejected by both Houses of Congress. Each piece of legislation represents the worst of the liberal agenda of this administration, is likely to cost our economy dearly and will not accomplish its stated goal.

Cap and Trade is intended to mitigate global warming. That was tried and failed in Europe and without participation by China, India and other emerging industrial economies, it will fail this time too. However, the charade will cause electricity costs to skyrocket and inflate the cost of virtually everything we consume. It will also encourage U.S. industrial companies to move abroad, where they can avoid its onerous limitations, and take our jobs with them. At the moment, Healthcare Reform proposals favor some form of government-controlled or sponsored program. Those proposals will likely bankrupt the nation. We need healthcare reform that will expand insurance coverage to everyone and improve the quality and availability of healthcare for all of our citizens. That reform will also need to pay for itself and keep costs from skyrocketing over the long term.

Some believe that the pending bankruptcy of California, New York and New Jersey, bastions of liberalism and free government spending for decades, offer a glimpse of the future of America, if either piece of legislation, as proposed, becomes law. Those states are attempting to hold their state legislatures accountable for their respective predicaments, and some are contemplating rewriting their state constitutions in order to prevent irresponsible government action in the future. We should hold the U.S. Congress similarly accountable for its actions before it’s too late for our entire nation.

It is a pathetic fact of life that Congress cannot always be trusted to act in our best interest and even more pathetic that our only recourse as a nation is to vote its members out of office years after the damage has been done. After more than two hundred years of weeding out the bad through elections, the best we have been able to do is to seat a Congress that has difficulty abiding our own laws and upholding the public’s trust. The sad truth is that, with far too few exceptions, many of these men and women might be serving time in prison if they had not been elected to serve time in Congress.

However, as trustees of our government, Congress does have an obligation to act in the nation’s best interest. I fail to see how hastily ramming through either piece of thousand-page-plus significant legislation, especially without reading it (as they did the stimulus plan earlier this year), is in our nation’s best interest. The effective dates for most requirements imposed by either—Cap and Trade or Healthcare Reform—is many years in the future, so what’s the rush?

Absent any real recourse, Congress should be required to “eat its own cooking” and feel firsthand the impact of its actions. It should be forced to consider the impact on global warming of its members jetting off to attend frivolous engagements. If Congress’ actions fail our economy, its own ranks and million-dollar office budgets, paid for with tax dollars, should be streamlined accordingly. Furthermore, congressional pensions should shrink as social security and Medicare benefits shrink and Congress should be prevented from raising their salaries until the economy substantially recovers. President Obama campaigned for healthcare reform by proposing healthcare insurance for everyone similar to that enjoyed by members of Congress and I hope he keeps his promise. If some version of the current healthcare proposals passes into law, I look forward to chatting with my local congressman as we wait in line for hours to see our doctors.

Bernie Madoff Needs to Come Clean

Bernard Madoff, perpetrator of the crime of the century that spanned probably three decades (and two millennia), was yesterday sentenced to a measly (if maximum) 150 years in prison for his multibillion-dollar Ponzi scheme. Madoff's defense attorneys had sought a laughable 12 years, which would have offered the scoundrel the possibility of seeing freedom at the ripe old age of 83.

Manhattan District Court Judge Denny Chin threw the book at Madoff in order to send a clear message to the world that a man capable of such "extraordinary evil" should be shown no leniency. Judge Chin said he was especially moved by a letter he received describing how Madoff conned an 86-year-old widow by putting his arm around her and told her not to worry, that her money was safe with him. The judge also noted that he had not received a single letter from friends or family coming to Madoff’s defense. Madoff's thousands of victims are estimated to have lost $13 billion to nearly $65 billion of their wealth. The rest of us have lost our faith and trust in our financial system, our government's ability to protect us and in humanity itself.

Does a 150-year imprisonment represent real justice for Madoff? Burt Ross, a Madoff victim and a former mayor of Fort Lee, N.J., who lost $5 million with Madoff, said he was satisfied with the sentence and that Madoff deserves to go to his grave "an unmourned man." However, in a letter to the court, Mr. Ross also wrote that Madoff's crime "far transcends the loss of money, it involves his betrayal of the virtues people hold dearest—love, friendship, trust—and all just so he could eat at the finest restaurants, stay at the most luxurious resorts, and travel on yachts and private jets. He has truly earned his reputation for being the most despised person living in America today." Mr. Ross's words have persuaded me that much more needs to be done not merely to punish Madoff but to learn from his crime, prevent its recurrence and to restore our faith in our financial system and in each other. (Mr. Ross's full letter invokes vivid imagery from Dante’s The Divine Comedy, is available at The Daily Beast and is well worth reading in its entirety.)

Keeping Madoff from being murdered by any one of his victims and allowing him to spend the rest of his natural life in prison, at taxpayers expense, is not nearly enough punishment, especially if Madoff ends up in anything less than the most horrific penitentiary imaginable. Madoff has robbed thousands of their life savings, their families of their dreams and has caused some to take their own lives.

Has he shown any remorse for his repeated and continuous acts of betrayal, fraud and complete indifference toward the welfare of others? I think not. His courtroom speech shortly before sentencing was a half-hearted plea for his own leniency and a manifestation of self-pity. A true act of contrition would include, at minimum, his full disclosure of how he perpetrated the crime and an identification of others, including members of his own family, who assisted him. He also needs to either relinquish the remainder of the wealth he has stolen over the years and secretly stashed away somewhere, or convince us there is none.

Our legal authorities need to show Bernard Madoff no mercy unless and until he fully cooperates with them and answers all the requisite questions. Until that time, his incarceration should be as unpleasant as legally possible and should allow each and every one of his victims an opportunity to torment him each and every day until he comes clean or dies.

Obama’s Healthcare Prescription for America

America's understanding of healthcare reform needs to move beyond news headlines and 30-second sound-bites toward a deeper understanding, and Wednesday night’s ABC-TV presentation by the president -- Prescription for America -- did little to further that cause. The president seemed to be over his head talking about the issue, which probably explains why the audience appeared distant, bored and even catatonic. Most of the audience questions and anecdotes were off-point and not relevant to the big picture and the president's comments seemed at times to be incoherent and confusing. ABC’s news anchors Charles Gibson and Diane Sawyer did their best to focus and clarify the discussion, but even they were unsuccessful keeping the session on track. It was 60 minutes of regurgitated Obama-ganda and not his best effort.

President Obama asserted that one-third of current healthcare costs are unnecessary, but didn't elaborate. He should have offered some details, such as where those unnecessary costs reside in the system. Is it with the doctors, the hospitals or the drug companies? Is it the routine doctor visits or the (hopefully) once-in-a-lifetime hospital stays that are causing the unnecessary costs? The president also said “we know what works and what doesn’t work” in providing healthcare, but offered no examples of either. One of the factoids posted on a slide before a commercial break indicated that 50% of America 's healthcare costs can be attributed to heart disease, diabetes and obesity. Important, big picture findings such as that deserve some commentary and clarification, wouldn't you agree? Specific answers and examples might have helped set the stage for serious discussion and debate, which was the stated purpose of his presentation. As important, they might have given the growing number of skeptics in America confidence that their political leaders and bureaucrats actually know what their talking about on the healthcare issue.

Furthermore, I was amazed that the president could talk for an hour about healthcare reform without even mentioning tort reform, which many believe is needed to contain healthcare costs going forward(and many other costs in our economy). If he is serious about reforming healthcare, he needs to put aside the long-standing allegiance of the democrats to the civil trial lawyers of America who represent a major party constituency.

Tort reform refers to making changes to our civil justice system that would limit the amount of, and monetary damages arising from, litigation. Should victims of medical malpractice be compensated for their misfortune? Absolutely, but does the average settlement need to exceed a million dollars, and should that practice be allowed to paralyze and potentially bankrupt our healthcare system? Anyone seriously attempting to tame our healthcare cost burden must at least put tort reform on the table for discussion. Serious omissions such as that undermine the administration’s credibility and confirm our worst suspicions about how politics can distort our nation’s most important institutions.

Some democrats contend that America 's economic survival depends upon successful healthcare reform and just as many republicans contend that democrat proposals for reform will push us further into an economic abyss. Most disturbing, however, is that lawmakers from both sides of the aisle seem to be approaching the problem piecemeal and from the perspective of what will sell politically, rather than what will successfully reform our healthcare system.

The Obama administration promised government transparency and post-partisan decision-making. Now would be a good time to make good on its promise. We need to engage in a substantive discussion of the real issues surrounding healthcare reform, not just those that will lead to a politically expedient solution.

Healthcare Reform Should Begin With Medicare

The president spoke about healthcare reform again yesterday. The president seems to enjoy reciting the same talking points repeatedly, especially the innocuous platitudes everyone agrees with. We all agree healthcare is a huge problem and a major stumbling block for our economic recovery and long term prosperity. We all agree something needs to be done. We all agree reform will not occur unless we take action. The president added a factoid I had not heard before that, without reform, in 30 years $1 out of every $3 our economy produces will go to pay healthcare costs. (Within a decade it will be $1 out of $5.)

The president says he wants healthcare insurance for everyone in America, dispensed through a system that will allow everyone to select their own doctors and their own care, while saving taxpayers boat loads of money over the long term. How can anyone argue with those goals? However, is such a healthcare insurance plan possible? If the president thinks so, he needs to start showing us exactly how it would work. It is not obvious how his plan can add nearly 50 million of the currently uninsured to a reformed system that will maintain quality and availability of healthcare while saving taxpayers money. The Congressional Budget Office estimates that reforming healthcare will increase our budget deficit more than $1 trillion over the next decade, and speculates that it will ultimately be paid for with $600 billion from raised taxes and approximately $400 billion in cost savings from cuts to Medicare. Raising taxes makes no sense in this economy and Medicare cost savings will likely reduce the quality and availability of care for seniors.

The president denies allegations that he is seeking a single-payer insurance program sponsored by government, and claims his plan will enable us to keep our current insurance programs, if we so choose. However, some democrats and some republicans are skeptical, but for different reasons. Some democrats are betting that no one will want to keep their current insurance once they see the superiority of a government-sponsored plan. They believe the American public will abandon its current insurance plans and opt into the government plan. The republicans expect the government to artificially under price their plan until they drive private profit-making concerns out of business. Either way, America will end up with a single-payer insurance program, sponsored by the government. It will be the government’s way or the highway.

The obvious prototype for a new government-sponsored insurance plan is unfortunately Medicare, which continues to be a huge financial drain on our government and taxpayers. By the way, some believe that the availability of private insurance to supplement Medicare is the main reason Medicare works as well as it does. What happens if those private supplemental plans disappear?

Prudence and common sense should suggest that the president should do his best to fix Medicare before embarking on his ridiculously ambitious plan to overhaul our entire healthcare system. It should occur to him that if he is successful in demonstrating that he can devise a better and more cost effective Medicare program for our seniors, we would be far more confident in his plan to reform healthcare for the rest of us.

News Media Bias: Do You Know What's Really Going On?

Technology makes the instantaneous and virtually ubiquitous observation of world events possible, but evidence of bias in the news media can make you wonder whether you can believe what you see and hear. World news is being transmitted by a global media, through a prism of sometimes deliberate and sometimes inadvertent bias.

The most timely and blatant example of bias in the media continues to be the coverage of President Obama, which began in earnest during his presidential campaign and has gathered momentum ever since. The mainstream media’s favoritism for Barack Obama during the general election was even more egregious than that alleged by the Hillary Clinton campaign during the democratic primary. Studies show that candidate Obama received more media coverage overall than other candidates and much less negative press than his opponents. The media’s extraordinary deference to the president often makes us wonder if the media is acting more as an eager extension of his public relations team than as a group of supposedly impartial journalists. They appear to be advocating rather than reporting on the president’s activities.

Members of the media would have us believe that the appearance of bias is a figment of our imaginations, but do not publicize the fact that more than a third of them identify themselves as liberal compared to less than ten percent who claim a conservative orientation. The media also does not readily admit that most journalists tend to vote emphatically democratic, and have done so for decades. Most interesting, however, is that although they fail to see bias in themselves, more than two-thirds of reporters, editors, producers, and executives of mainstream media outlets readily agree that Fox News is decidedly conservative. Are we really supposed to believe that the media’s obvious orientation toward liberal ideas and democratic candidates has no bearing on its objectivity? You may draw your own conclusions.

In addition to the obvious lopsided political orientation of the media generally, mounting commercial pressures in journalism are also causing many media sources to succumb to sensationalism in order to capture market share, attain popularity in ratings and ultimately to make profits. Is it any wonder that we question the integrity of our news media?

Bias takes many forms. Facts may be distorted in news stories or may be conveniently omitted. Newsworthy stories may be completely excluded from newspapers or TV programs or buried so far back in printed media, or so late in televised programs to insure that they are glossed over or missed altogether. Other sources of bias may be less obvious, such as when stories load up with expert testimony to support one viewpoint, or when stories use language to “spin” the facts to favor one side over another.

What is the average person to do in order to get to the truth? First, know the difference between news commentary or editorials and the news itself. The former is, by definition, opinion and likely to be biased; the latter is supposed to offer a balanced view of all sides of a story. Unfortunately, traditional news outlets, such as The New York Times, NBC, and many others, have blurred the line between traditional news reporting and opinionated commentary. On cable TV, chances are high that if a “news program” is interesting and entertaining, it is probably news commentary. Offerings such as “Hardball,” with Chris Matthews and “Hannity’s America,” with Sean Hannity are examples.

Second, ascertain the most knowledgeable sources and focus on individuals who substantiate their viewpoints with concrete examples or experience. I have found only a handful of politicians, government officials, industry experts, and media pundits that actually provide thoughtful insight and meaningful perspective on topics and issues. (Many commentators speak in generalities, make non-committal comments or repeat the mainstream view.) Verify the credibility of the sources you choose by researching their backgrounds and their affiliations on the internet. Understanding their backgrounds and professional ties may help you to verify expertise and identify conflicts of interest that may bias a source’s perspective on a topic.

Third, limit your news venues, such as newspapers, televised programs or internet-based media, to those offering the most substance and a broad range of perspectives. In addition, for national political, economic and societal matters, you should consider viewing C-SPAN, which televises congressional hearings, important speeches and other events on numerous topics. Although a time-inefficient medium, C-SPAN provides a valuable opportunity to hear directly from people creating the news, without the filter of a third party.

These are difficult times and decisions are being made today by our leaders that will have a far-reaching and profound effect on our lives for many years to come. As citizens of a free democracy, we have both a right and an obligation to get to the truth.

Stock Market Future: Will the Cyclical Bull Slay the Secular Bear?

Even with a robust rally since March, the stock market has been net flat for more than a decade, in fact since the tech boom of the mid 1990s. The flat market performance is understandable because the run-up after 9/11 was more the result of financial engineering than it was due to fundamental economic growth. Artificially low interest rates, aggressive lending practices, exotic financial products and an overdose of false optimism “primed the pump” and propelled the market higher during those years. Those conditions evaporated in 2007 along with the balance sheets of some of the world’s most venerable business organizations and took the market’s heady performance with it.

The cyclical bull market refers to short term, intermittent rallies within a longer term, secular bear market trend. It is difficult to know when the bear will turn bullish, or what will ultimately cause the turn in the market and the global economy. However, against the strong headwinds of global recession and the urgent need to revamp and reduce the debt structure of our global economy, the catalyst for turning the market bullish will need to be far-reaching and transformational in nature.

That catalyst will not be the result of intentional action by government or the private sector, although government has so far been successful in delaying the seemingly inevitable collapse of our global economy and financial system. Various stimulus plans, the relentless growth of the money supply by the world’s central banks and the worldwide bailout of key financial institutions have probably kept us from complete financial disaster for the past couple of years. All government can do now is to implement policies and programs that encourage the private economy to invest capital, take risks and expand operations. The objective should be to boost investor and consumer confidence in order to keep the economy and stock market afloat until the relentless hand of progress propels us forward.

The impetus for propelling the market to new highs will likely come from some major technological advancement, in the same way that personal computers and the internet caused the market to boom some 15 years ago. In the early 1990s after more than a decade of solid performance, many predicted the stock market was doomed to a severe downturn. However, by the mid 1990s until the decade’s end, the market exploded like never before in its entire history. Many will give credit to the Clinton administration’s policies and programs, but the tech boom was obviously the driving force behind our prosperity during that period. This market will need that type of economic juggernaut to clear away the cobwebs and dispel its current funk.

Some new “game changing” technology will need to come along that will improve our lives. Perhaps it will be a new source of renewable clean energy, a cure for a major disease, a new technology to control weather, a commercially viable method of desalinating sea water, a discovery from space with the potential for widespread commercial application, or, who knows, it might result from a visit from outer space itself!

Our potential to advance our way of life is as strong as it has ever been, even though we face severe global economic conditions, limited natural resources, and a climate of global political unwillingness to manage our planet responsibly. It is the best reason I can think of to stay invested in this market.

If Obama's Right, Everything You Know Is Wrong!

Are you having trouble wrapping your mind around some of the Obama administration's falsisms about the economy, energy, healthcare, national defense/security and immigration? You're not alone. Some personal favorites are highlighted below:

The government bailout of GM will save the company. It is not clear what "save" means in this context. The government has invested and/or committed $50-60 billion to GM for a 60% ownership share that's virtually worthless, so it would appear that "saving" GM doesn't include getting taxpayers their money back. The consensus is that the government will need to spend billions more continuing this charade in the future. The government is also forcing GM to build "green" cars Americans don't want to buy and won't be able to afford, because of the costly new technology and the still bloated labor cost structure of the UAW, the autoworkers union.

America doesn't torture, and, besides, torture doesn't work. I don't approve of torture any more than the next guy, but if the choice is to subject a few alleged scoundrels to minutes of discomfort in an effort to save thousands of innocent people from death, what would you do? The Bush administration claims that the government has documented proof that its methods (torture or otherwise) have worked and have saved many lives. We need to see that evidence to decide for ourselves and should not have to rely on interpretations from Nancy Pelosi and others. Torture may not always work but doing nothing certainly never works. Those who claim torture doesn't work obviously never thought about what it must be like to be subjected to torture themselves.

Healthcare reform will save us money in the long run. Is there excessive waste and corruption in our current healthcare system? Absolutely, and the Obama administration should immediately seek a private industry solution to the problem. Expecting the government to cut out waste and corruption in an enterprise and improve productivity and efficiency is a little like putting the fox in charge of the hen house. Have you been to a post office lately? Do you really want to spend several years and waste trillions of dollars to prove the obvious?

Wind farms and solar energy will help us achieve energy independence. This is pie in the sky nonsense, even if we devise a way to harness the hot air from a perpetually bloviating Congress and place mirrors in space to focus and concentrate solar energy into productive use on earth. Some are considering the latter and we all should consider the former, but while wind power and solar energy is clean, these technologies cannot begin to address our energy needs. Everyone knows nuclear power is the cleanest and most effective medium term alternative to solving our energy needs, although nuclear waste poses a significant environmental concern to some. If energy independence is a serious goal, nuclear energy should certainly be part of the solution. Also, any plan for near term energy self-sufficiency must also include expanding our own oil, natural gas, and coal resources, which are still plentiful .


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Reducing our national defense budget will make us safer. Spending money on defense may not necessarily improve our national defense, but neither does cutting defense spending, especially when the main tenet of the new plan seems to be to apologize to our enemies. Being "mean" to our enemies may anger them, but does anyone really believe that being "nice" to terrorists that think nothing of killing themselves is really going to make them stop terrorizing us? Did you ever confront a schoolyard bully? How did being nice work out for you?

Raising taxes on investments will not discourage investment capital. Really? Do you like paying sales tax when you go shopping? The fact that empirical evidence shows that lowering investment taxes actually raises tax revenue doesn't seem to faze this administration in the least. After the extreme market fallout of the past two years, the government should encourage private investment back into the market by all means possible instead of doing the opposite.

Building a wall between the U.S. and Mexico will not reduce illegal immigration. A wall may not guarantee border security, but common sense suggests that if you make it harder to traverse an area, it's going to be something of a deterrent. Preliminary evidence already suggests that extending the wall is helping keep out drugs and illegal aliens.

Many of the beliefs of the Obama administration seem to fly in the face of simple common sense, which apparently isn't so common anymore. The last time we took leave of our common sense we ended up with (and are still battling) one of the worst global economic calamities mankind has ever seen. Do we really want to repeat the mistake?

Soda Tax Will Not Reduce Obesity or Pay For Healthcare Reform

The president is now considering a tax on sugary soft drinks (a “soda tax”), ostensibly to improve U.S. healthcare by focusing on “preventive care,” in this case, by mitigating obesity, a leading global healthcare concern. The real motive behind the tax is to partially offset the cost of the president’s healthcare reform plan. Ironically, Americans have gotten fatter over the decades by disregarding their expanding waistlines and the government’s soda tax idea is borne out of a necessity to reign in its steadily expanding fiscal waistline. However, much like curbing obesity itself, the government’s fiscal problem will not be quickly and magically fixed, especially with the imposition of one seemingly innocuous tax. Preliminary estimates are that a soda tax will raise a very small fraction of the billions of dollars that the president’s healthcare reform plan will cost.

The soda tax also lacks the fizz to address the obesity problem. Although high caloric intake is probably a major cause, soda is hardly obesity’s biggest culprit. Why single out sugary soft drinks? What about all those salty snacks and sugary junk food that all that soda washes down? Why not tax them all?

What about taxing our sedentary lifestyle? Lack of physical activity also contributes to obesity. These days most of us work with our heads, not our hands, and rely exclusively on motorized transportation even for our most trivial trips. Maybe we should consider taxing white collar jobs and local transportation.

Why not tax leisure activities that encourage us to become TV couch potatoes and provide the venue for consuming all of the aforementioned soda and junk food? What about taxing fast food vendors whose TV commercials encourage us to eat junk food? Or TV commercials generally, which cause us to eat out of boredom? What about taxing the video games or the Internet that keep us from physical exertion on weeknights, weekends and days off? Furthermore, the combination of no physical exercise, passive pastime activities and all those snacks before bed undoubtedly keep us from a good night’s sleep, which also promotes obesity. And, thanks to modern air conditioning, we don’t sweat or shiver nearly as much as we used to, which keeps us fat and happy. Does anyone want to tax air conditioners?

Smokers who quit smoking have been known to gain considerable weight, yet we continue to tax tobacco products heavily to discourage their use. Is getting sick from obesity, say diabetes or heart disease, preferable to getting lung cancer?

Discouraging the consumption of sugary soft drinks through taxation is obviously a political expedient for raising money for the president’s healthcare plan, and is hardly a credible starting point for fighting the ubiquitous, seemingly inexorable, yet theoretically preventable, obesity problem we face. If the Obama administration is serious about discouraging obesity-prone behavior through taxation, it should at least present a more consistent, if not comprehensive, approach by considering taxing some other behavior contributing to the global obesity pandemic.

But, not so fast! Before we go too far down that road (or on that slippery slope) we should consider whether mitigating obesity by taxing bad behavior is worth having the government micro-manage every aspect of our lives. For example, do you want our government to have the right to discourage our American idles from watching “American Idol”?

Obama’s Presidency -- a Gift or a Trojan Horse for America?

At the president’s inauguration some members of the mainstream media fumbled to find words to capture the momentous occasion. Many compared the event to a coronation of royalty and went so far as to compare the inauguration to the Second Coming. Some commentators saw the new president as a divine gift sent to save America and the entire free world. That gift may turn out to be somewhat of a Trojan horse.

In his inaugural speech, the president extended himself to our enemies by saying "…that we will extend a hand if you are willing to unclench your fist." His statement was conciliatory and firm and we all hoped it would begin a peaceful dialogue with those who would do us harm. Our president may truly believe that he can talk our enemies out of killing us, and I give him credit for trying. Unfortunately, to buy into the president’s approach we must believe that we can rationalize with terrorists who think little of killing themselves, let alone us. We must also believe that our enemies hate us because they hate Republicans, former President Bush and/or America’s attitude and behavior toward the rest of the world in recent years. However, terrorists have been trying to kill us long before anyone ever heard of George W. Bush. Remember the botched attempt to blow up New York’s World Trade Center in 1993, during the Clinton administration?

My real concern is not that President Obama seeks to talk to our enemies but that he seems to be signaling his intent to dismantle certain elements of the national security infrastructure that arguably kept us safe since 9/11. Thankfully, the president now seems to appreciate the actions of his predecessor concerning national security and is moving cautiously in implementing changes. However, proposing cuts in national defense spending and eliminating enhanced interrogation techniques make me wonder if the president is taking national security just a little less seriously than he should. The president seems preoccupied with securing the civil rights of terrorists when his objective should be to keep us safe. While those two objectives are not always mutually exclusive, they do compete and giving weight to the former is likely to hinder proper execution of the latter at times. We need to know that our interests will come first next time we’re attacked.

It is impossible to prove that the methods and tactics employed by the Bush administration kept us safe, but it is at least heartening to know that none of the more than 11,000 terrorist attacks (and more than 14,000 deaths) that took place worldwide since 9/11 occurred on American soil. It is equally impossible to claim that the absence of terrorist activity in the U.S. under this new administration thus far proves the success of the president’s approach. In fact, contrary to Joe Biden’s assertion during the presidential campaign, it is plausible that our enemies will choose not to test our new president’s mettle early in his administration. Why should they? If they believe the new administration will relax national security measures, even slightly, going forward, they would be wise to bide their time for a few years, and attack us later when we least expect it.

Citi Field Is No Substitute for Shea Stadium

My neighbor Jeff returned from his annual spring weekend in New York City with nothing good to say about Citi Field, the New York Mets’ new stadium. You need to understand the significance of his commentary. Jeff loves the Mets even more than the game of baseball and makes Seinfeld’s Mrs. Sokol look like a fair-weather fan. Mrs. Sokol may have watched every inning of every game played by the ’86 Mets, but Jeff has been a fan through thick and thin and has personally endured their agony and ecstasy over their 47-year history. If the new stadium didn’t impress him, who’s going to be impressed?

Jeff complained about the fact that the new stadium’s Jackie Robinson Rotunda pays tribute to New York’s National League roots, but pays no homage to the Amazing ’69 and ’86 Mets, Tom Terrific (Seaver) or any other stars of its story book past. Notwithstanding the venue’s physical superiority to Shea Stadium in so many technical ways, it falls short on a few features that matter most to fans. First, athough the seats themselves are two inches wider than the old ones, they number 15,000 fewer than in good ‘ol Shea. Second, while seats may be more spacious and provide more leg room, their relative comfort is debatable as their slight alignment toward home plate makes viewing the whole field more of a chore for even the most physically dexterous. Finally, the new venue has several blind spots obscuring the view of the action on the field from most seats, even apparently from those in the press box. For true fans that go to the ballgame to actually see the game, such tangible shortcomings cannot be compensated for with a larger team store, more luxury suites, and more restaurants. However, even Jeff would agree that all fans will benefit from more elevators and more toilets (per seat) that the new venue offers. Jeff shared his views with his friends attending the game with him, and given the reaction of fans seated around him listening to the conversation, Jeff’s sure many others share his disappointment.

How could that be? The new $900 million stadium was designed by HOK Sport, the internationally renowned architectural firm. HOK Sport has designed and renovated 13 of the 30 major league ballparks in use today and seven of the last eight to open in Major League Baseball. Shea Stadium cost less than $30 million to build and even though that was real money nearly 50 years ago, dramatic improvements in both technology and building materials since then should have guaranteed a physically superior stadium in every way. Also, thousands of people were involved for years with the planning and development of the new stadium. Didn’t any of them ever go to a ball game? The New York Mets will be paying the bulk of the tab for Citi Field until the cows come home in the form of principal and interest on the $850 million in municipal bonds issued to cover most of its construction cost. I hope at least they’re happy with their new home.

New Yorkers are among the world’s greatest baseball fans, but they are also among the least forgiving. I have little doubt that by the end of this inaugural season Citi Field will have many new nicknames. The most obvious will come from an unflattering mispronunciation of its first syllable from a “C” sound in "Citi" to “Sh.” Some may say the mispronunciation incorporates the memory of old “Shea,” but most will know that the deliberate mispronunciation more aptly captures the fan experience at the new stadium.

U.S. Supreme Court Needs Justices with Proven Capabilities and Integrity

Senate Majority Leader Harry Reid was recently asked who he thought President Obama should select to replace retiring Supreme Court Justice David Souter. In his reply he indicated that the list should not be limited to candidates with experience as judges. Senator Reid also said he preferred someone from the real world and not someone who had spent most of their career among others who wore black robes. Many other democrats have indicated a preference for a candidate who will empathize with disenfranchised Americans and bring a sense of fairness and social justice to the position. Still others think that diversifying the bench by adding a woman, a Hispanic and/or perhaps even an Asian should be an important consideration. We know for sure the appointment will be political, as it always is, and given the president’s political leaning, the nominee is likely to come from the liberal camp.

All of those considerations notwithstanding, isn’t the job of the Supreme Court to interpret the Constitution of the United States? Shouldn’t a nominee’s proven ability to do that be the starting point for the selection process? I would have thought that a nominee with background as a judge would have a decided advantage for such a job. He didn’t say but I wonder if Mr. Reid would concede that all prospective nominees should at least be lawyers. If recent history has taught us anything it's that we really shouldn’t take anything for granted.

We elected an inexperienced president with an unproven track record. Taking our lead, our new president promptly nominated many individuals for his cabinet that lacked experience and gravitas for their respective positions. However, the nominees that failed their confirmation hearings did so not because of those professional deficiencies, but because they had legal, tax and other skeletons hanging in their closets that caused even the most unassuming among us to question their integrity. Before this year, would anyone have believed that a proven tax cheat would be in charge of the U.S. Treasury, the agency that oversees the IRS? Although unquestionably the most egregious example, it’s only one on a shamefully long list of questionable nominations. Why assume this time will be different? We elected a president who had been barely a senator. It’s certainly plausible that he could appoint a Supreme Court Justice who was barely a lawyer.

Harry Reid ended his interview on the topic saying that he thought that the President’s selection to the Supreme Court would be as good as the men and women he selected for his cabinet. That’s what worries me.

Exploding U.S. Debt May Haunt Us Forever.

Sometimes I imagine our President many years in the future, sitting at a desk in the oval office early in the morning softly singing a particular refrain from the tune “Paradise by the Dashboard Light.” The President rewrites the words to secretly confess a pressing desire: “So now [we’re] praying for the end of time to hurry up and arrive cause if [we] gotta spend another [dollar on debt] I don’t think that [we] can really survive. I’ll never break [our] promise or forget [our] vow, but God only knows what [we] can do right now. [We’re] praying for the end of time, it’s all that [we] can do. Praying for the end of time, so [we] can end [our debt] with you!

The media pundits debate the outlook for our future if our spending continues out of control but the cold hard reality is that our Government’s debt has already grown to an unfathomable level. One source estimates that current and future obligations of the U.S. Government, including social security and medicare payments, exceed $65 trillion. That is 65 with twelve zeros after it! It’s also more than the entire world’s GDP and more than four times our own. The Congressional Budget Office (CBO) projects our national debt to rise $9.3 trillion in the next ten years under team Obama, and some have estimated that the average 20 year old today will pay $114,000 more federal taxes during his/her working life just to pay the interest on that incremental increase. Can you imagine the total interest that debt will produce? Can you imagine actually trying to pay back the principal?

I agree that worrying about budget deficits while the world faces economic Armageddon makes little sense. However, our critical need to spend, and spend big, at this time should be tempered with at least some acknowledgment that an 800-pound gorilla of a national debt threatens to crush our economy for at least many generations to come, if not bankrupt us once and for all.

Now may not be the time to attack this problem, but our leaders better make it a serious priority soon. Having the Obama administration cite its intention to cut our budget deficit in half in five years when it knows full well that during that same period our total debt will grow $4.6 trillion is, to say the least, disingenuous. Further, Obama announcing a measly $100 million budget cut when apparently many on both sides of the aisle in Congress agree that more than $300 billion of unworthy projects is just begging to be cut immediately is insulting to Americans and should embarrass our leaders.

No one is suggesting that the solution to our growing debt problem will come easy. Even world-renowned economist, John Maynard Keynes, could offer little solace back in the 1930s Great Depression when asked about the long-term effects of higher deficit spending. His glib answer then is the now famous quote: “In the long run we’re all dead.” That’s not much of an outlook for the future and it certainly isn't change we can believe in.

Will Chrysler’s Bankruptcy Uphold the Rule of Law?

The President recently announced that despite the Government’s best effort to save Chrysler from bankruptcy, greedy bondholders are forcing a bankruptcy because they want a better deal. Once again, the President mischaracterized reality to suit his own political agenda. He claimed that certain bondholders refused to make sacrifices that other stakeholders did. He did not tell us that those bondholders were put off by the fact that the Government proposal offered them less than 30 cents on the dollar, some $2 billion in cash for their nearly $7 billion investment, with no equity stake in the new company. He also conveniently omitted that the autoworkers union (UAW) would receive half of the value owed it in stock of the new company and would become New Chrysler’s majority stakeholder. Does it really make sense to reward the guys (the union) who significantly contributed to Chrysler’s demise in the first place by giving them a huge stake in the new company? Isn’t it just a bit sneaky to completely ignore the fact that in bankruptcy bondholders would be among the first to be paid and probably walk away with substantially more than 30 cents on the dollar-value of their investment?

The major issue isn’t the obvious unfairness or idiocy of that proposal. It is about the Government using its discretion to change the way business is done America. Politics clearly played a key role in formulating the Government’s proposal to save Chrysler. The autoworkers union and others were a significant factor in electing President Obama and it is obvious that he was attempting to reward them for their support. It will be interesting to see if those politics play a part in structuring a deal in bankruptcy. If it does, the deal’s ramifications will extend well beyond its impact on the parties to the struggling automaker.

American business thrives because it relies on the rule of law and the sanctity of private property rights and private contracts. Throughout our history, through thick and thin, that system and its precedents have provided a framework of predictability, certainty and impartiality to the way business is done here. It has also been a major reason why foreigners and Americans alike would rather do business in America than anywhere else on the planet.

The world’s major governments were justified in intervening in private industry in an unprecedented manner during past two years in order to save our global financial system. However, they may have now overstayed their welcome. Either way, America will need to know how Government intends to proceed going forward. The Government has already become ensconced in our financial system and because of its demonstrated ad hoc and lacking management approach, there is a growing reluctance among private investors to collaborate with it to recapitalize the banks. Investors are quite rightly concerned that submitting to an investment program where our Government changes or makes up the rules as it goes along presents risks that outweigh even the most attractive of returns expected from the public-private partnership to purchase toxic assets from the banks. It is also clear that the Obama administration plans to replicate its onerous management format in order to play a major role in our energy industries and healthcare system going forward. You can bet those efforts will be met with a similar lack of enthusiasm, skepticism and confusion by the private sector.

The Obama administration may truly believe it is implementing change we can believe in, but it is rapidly becoming change Americans cannot invest in.

Did Obama’s First 100 Days Meet Your Expectations?

It will be interesting to see how the media spins the president’s first 100 days in office, but will come as no surprise if Democrats are deemed to be more satisfied than Republicans with the “results” so far. Don’t be surprised if some Democrats are also deemed to be more disappointed than Republicans.

President Obama is presiding over the most emphatically liberal Democratic agenda in our nation’s modern history. He has taken steps to dramatically grow government and is proposing to spend money like it’s going out of style. He justifies his radical moves by claiming it’s the only way to undo the economic peril left by the previous administration. He has used that assessment to effectively exclude Republicans from important budgetary and other legislative matters so far. Democrats should be delighted, but are they getting what they bargained for from team Obama?

Most Democrats believed Obama was going to change the corrupt and special interests that have heretofore characterized national politics. They also expected him to rise above partisan politics for the greater good and involve people of integrity in his new and transparent administration. Instead, the president’s first 100 days has shown his willingness to set unilaterally (with his democratic and liberal congress) long term, financially irreversible and profound strategic directions for our nation. Transparency seems to have vanished as a general objective but has been used as a weapon for political expedience to embarrass his opposition, such as to punish the Bush administration for war crimes. His cabinet nominations have been drawn from the same pool of tainted politicians that his administration was supposed to eliminate. So much for cleaning up old-style Washington politics.

Furthermore, the fiscally-conservative Democrats and Independents that bought into the moderate, centrist persona that Obama conjured up to win the election are still recovering from the whiplash of him darting to the left soon after his inauguration.

Most Republicans saw that head fake coming and probably feel they got what they expected from an Obama presidency, even if they’re now horrified with how the nation is being managed. The good news for them is that so far Obama continues to be a talker and not a doer, and given his penchant for popularity he may change directions if the political tea leaves so dictate.

Obama’s inaction may also be bad news for the nation. If Obama doesn’t take definitive action soon to put us on a path to economic prosperity, our American goose may be cooked. We’ve gotten plenty of lip service about change, but only after the details are worked out and actually implemented will we know if it’s change for its own sake or change we can believe in.

Is Iran's Ahmadinejad for Real?

I was transfixed and hopeful when I heard the news yesterday that Iran's President Mahmoud Ahmadinejad was preparing a proposal to begin "a fresh start with the West." Apparently, however, the forthcoming proposal may not adequately address Iran's uranium enrichment program. That quickly turned my hope to solid skepticism. I was heartened to learn that the U.S., the European Union, China and Russia had already rejected Iran's proposal probably because of that glaring omission. It's obvious that Iran has everything to gain and the West (most probably) has everything to lose with the proposal as it stands now and I was glad that at least the major world powers rejected it unanimously and emphatically. Isn't this the guy who vowed to wipe Israel off the face of the Earth and take the U.S. with it? Isn't Iran working tenaciously to develop nuclear weapons in order to accomplish that mission? The U.S. and the West have been desperately trying to keep Iran from getting those weapons. There can be no "fresh start" without first addressing and reconciling those opposing points of view.

It appears that Ahmadinejad has at least three reasons for wanting to chat it up with us and the rest of the West, without conditions of course. First, he is apparently fighting for his political life in the upcoming June national presidential election. The polls apparently indicate that his opponent, Mr. Mousavi, is cleaning his clock, so Ahmadinejad could think that making nice with the U.S. and the rest of the West might win him some support at home. Second, the West can't very well continue its effort to stop Iran from building nukes if it is "negotiating in good faith" with Iran. Third, and for the same reason, it is unlikely that Israel will take military action against Iran, which it vowed to do because of Iran's horrific threat against it, while its best ally, the U.S., and Iran are engaged in discussions to begin anew and bury the hatchet.

The bottom line is that if Iran wants to forge a new and more moderate relationship with the West, it must know that it must first knock off the nuke activity. Claiming that Iran's interest in nukes is for electricity generation is insulting. And, insulting the intelligence of those you're supposedly trying to make nice with is hardly the way to bring about a new beginning. It will be interesting to see just how serious Ahmadinejad is about reaching out to the West in the weeks ahead, especially as Iran's June election nears.

Obama's New Economy May Be a House of Cards

There was nothing new in the President's speech yesterday. The first half blamed the Bush administration for our current economic woes and the second half consisted of general highlights of his broad economic agenda.

The President intends to set the nation on a firm foundation for long term growth and prosperity by implementing an agenda that he’s outlined ad nauseum every week since his inauguration, but now summarized succinctly with five points:

1. Regulate Wall Street;
2. Improve education;
3. Champion the use of alternative renewable energy;
4. Reform our health care system; and
5. Reign-in and ultimately reduce the exploding Government deficit.

Everyone knows that cultivating renewable energy and health care reform are in our nation's long term best interest, but everyone also knows that these profound changes will not come cheap or without some sacrifices. And that's the problem. We still don't know any more about the specifics of his plan than we did when Mr. Obama was a candidate for President. We do know that the last two points are at odds with one another and that points one and three could severely stymie our economic recovery. Expanding Government's role in our health care system while trying to reduce the Government deficit would be as futile as putting one's finger in a dam to hold back a raging flood.

It's not obvious that more Government regulation of our financial system would be beneficial either, considering the Government's demonstrated incompetence in managing Citigroup and AIG and other financial institutions during the past couple of years. Imagine the damage it could do with permanent authority to micro-manage our entire financial system. Also, a carbon tax on oil is expected as part of the President's plan to encourage the use of alternative renewable energy sources. That will effectively increase taxes significantly for everyone and stall our economic recovery.

The President's convenient use of "straw men" to undermine and downplay substantive and serious criticism also reduces confidence in his agenda. In his speech, for example, he said his critics want to reduce Government spending, when in fact they advised against his proposed dramatic increases. The President also said he inherited a large Government deficit, which is true, but does that justify proposing to double and triple that deficit during the next five and ten years, respectively?

The President's credibility is also called into question when he shades or tells half-truths. He says that greed and lack of regulation on Wall Street got us into this financial firestorm, but conveniently overlooks the fact that the Clinton administration ignited the fire, when in the late 1990s it created the boom in subprime lending and risky mortgage-backed securities in order to push its agenda to enable more Americans to buy homes. Also, the President's claim that Government spending must increase to spur economic recovery is not supported by empirical evidence. Most economists, including his own advisors, know that fiscal stimulus, especially government spending, has never been particularly effective in shortening recessions or precipitating economic recovery.

Mr. President, it's time to put all your cards on the table and tell us in detail what you really have in mind. You should also tell us the inconvenient truths along with the benefits of your plan. We don't need to be "sold," we need to be persuaded by facts and reason.

New World Order Must Require G-20 Nations to Pay to Play

At the G-20 meeting last week, President Obama apologized for America's "failure to appreciate Europe's leading role in the world." I didn't know Europe had a leading role in the world. Besides, what more could or should the U.S do to show its appreciation? The U.S. and shamefully few allies have defended Europe's as well as the rest of the world's freedom since World War II. They have also intervened to quell skirmishes, encroachments, conflicts, attacks and other acts of international aggression faithfully many times over the past 60 years. U.S. military spending exceeds one trillion dollars a year, which amounts to more than half the world's total military spending. That saves the rest of the world more than one trillion dollars every year to spend at its discretion. All America receives in return is criticism for its motives and its methods for keeping the world safe. The U.S. also spends by far more than any other nation on earth for global humanitarian endeavors for which it receives criticism for not contributing a greater percentage of its gross domestic product. Who should be apologizing to whom?

Europeans cheered the President's denigrating remarks about our nation, but the U.S. received little in return for its confession and apology. The G-20 rejected the President's plea to them to use stimulative spending to support their own economic growth. At least they agreed to spend $1.1 Trillion assisting the global financial system. France and Germany agreed to "fully support the U.S. strategy in Afghanistan" but fell short of committing troops to support our own. They will, however, provide personnel for training and development. Americans have become so riddled with guilt about its bad behavior around the world that we are conditioned to feel grateful when other nations cooperate with us, even when they contribute to their own cause!

Going forward, it will be interesting to see if the new spirit of cooperation garners any G-20 support for our security efforts with regard to Afghanistan, Iran, North Korea and any other problem areas that threaten the security of the entire free world. Why should they? They know the U.S. is prepared to get the job done without their assistance. They can wash their hands, literally and figuratively, of all the dirty work and sleep soundly knowing they retain the option to criticize the U.S. if public opinion turns against the actions it chooses to take. Many nations revel in their envious positions of being both beneficiary and critic of U.S. efforts to keep them safe.

The G-20 is now discussing the concept of a transnational agency that would oversee and regulate the global financial system, promote free trade, and oversee other matters of an international economic nature. For it to work effectively it will require the U.S. and other G-20 nations to relinquish their sovereign control over significant aspects of their economies and financial institutions. If it proceeds, some global bureaucratic regulatory authority effectively accountable to no one in America would be empowered to make decisions with far-reaching impact on our economic well being. It's a bad idea and anyone willing to trade our Government "by and for the people" for such an arrangement should seriously rethink their position. Clearly, the U.S. has more to lose and less to gain than all the other parties to such a plan. Luckily, I don't see it happening any time soon.

Without sovereignty or "teeth" to enforce its policies, a transnational regulatory agency is likely to be a feckless waste of time and bureaucracy. The European Union and United Nations are living examples of transnational entities without sovereignty, and both are impotent and ineffectual to the point that many question their continued viability and existence.

Regardless of the outcome of the creation of a transnational regulatory agency, the President's effort to elicit the trust and cooperation of our global community makes sense and should be applauded. The world would be better off if the U.S. remains its leader. However, in a New World order with the U.S. sharing the status of just one nation among many, I would hope that it would share its resource burdens accordingly. Going forward every member nation wanting to "play" should have to "pay" for the privilege, because partnerships work best when all partners have a meaningful stake invested in their success. The U.S. must insist that participating nations ante up money and manpower, commensurate with their capabilities, to insure their tangible stake in and ongoing commitment to the global collaborative effort.

Stock Market Crash 2008-9: Lessons for Investors (Part 2 of 2)

Part 2 highlights lessons specific to managing your money in these uncertain and turbulent times:

LEVERAGE CAN BE A DREAM COME TRUE IN UP MARKETS AND YOUR BIGGEST NIGHTMARE ON THE WAY DOWN. Cheap and plentiful debt reinvigorated the market after the fallout following 9-11 and ultimately propelled the market to new heights in a few short years. That debt also led to a housing bubble that burst in 2007 and single-handedly nearly brought down our entire global financial system. At its peak, global debt levels exceeded global GDP by nearly a 4-to-1 ratio. Experts believe that the global debt ratio will need to be cut in half or more before the massive de-levering of the global economy occurring now comes to an end. The process will be painful and is expected to last for several years. At a micro level, investors need to consider debt/equity ratios in their investments and understand that higher expected returns are often the result of higher debt/equity ratios. Those investments are inherently riskier and ultimately vulnerable to being lost during severe market downturns.

FINANCIAL MEDIA AND TV PUNDITS CAN OFFER VALUABLE MARKET INSIGHTS, BUT RARELY PROVIDE WORTHWHILE INVESTMENT ADVICE.. Mark Twain once quipped that "if you don’t read the newspaper you’re uninformed; if you do you’re misinformed." For the past two years, the mainstream financial media seemed as numb as the rest of us to market realities, as their reports vacillated between optimistic and pessimistic market forecasts. Look to the media to gain important insights about the mechanics of how the market works or to provide a historical context for market events, but resist acting on media advice when managing your portfolios.

YOU MUST PLAY A MEANINGFUL ROLE IN MANAGING YOUR MONEY. Recent financial scandals, such as Bernard Madoff’s $65 Billion Ponzi scheme, make it clear that you can not be too careful in managing your money, even when employing long-standing reputable professionals. So, even if you trust and respect the expertise of your broker/financial advisor/investment manager, remember that you are uniquely qualified and motivated to watch out for your own interests.

YOU SHOULD INVEST IN SMALL INCREMENTS, SLOWLY OVER TIME. Dollar-cost-averaging is one popular technique for implementing such a discipline, and directs investors to periodically commit (e.g., monthly, quarterly) a fixed amount of money to their investment portfolios. Doing so will guarantee that you buy more investment shares in down markets than up markets, which can make a real difference in your investment returns in these volatile markets.

DON’T BE GREEDY; TAKE PROFITS AS THEY BECOME AVAILABLE. No one ever went broke taking a profit, and the mirror image of investing slowly is to take some profits periodically as they arise. In rising markets you may feel foolish cashing out of investments as they appreciate, but when the bottom drops out of the market, suddenly and unexpectedly, you’ll feel vindicated and relieved that you conscientiously took some of those profits.
ALWAYS KEEP SOME CASH ON HAND FOR UNEXPECTED BUYING OPPORTUNITIES. Extreme market volatility is unsettling, but volatility creates significant buying opportunities when you least expect them. You need to be ready. As you trade in and out of your investments, you should hold at least 5-10% of your portfolio in cash at all times.

STRIVE TO MINIMIZE INVESTMENT COSTS. This may be the most important lesson highlighted herein, and the one most likely to yield tangible results. The investment environment for many years to come promises to be fraught with many serious challenges, such as high inflation and high interest rates, which will make attractive investment returns more difficult than ever to achieve. You can’t control market movements but you can control many of your investment costs, and reducing them may be easier than you think. For example, stock index funds that deliver the same returns often vary materially in the annual fees/costs they charge investors. Sometimes cost disparities may be as much as 50-100 basis points (or 0.5-1.00%) and those seemingly small cost differences can add up to substantial cost savings over long time periods. A 50 basis point saving on a $10,000 investment in a stock index fund that grows at 8% per year can produce a total cost saving of nearly $800 over ten years. In addition, you should avoid "load" mutual funds that charge an up-front fee, or at least have a compelling reason to choose one when you do. Some funds can be complicated, especially funds wrapped in annuities, and don’t always clearly delineate the various of fees and costs inherent in such products.

Managing your money has never been more difficult than it is today. These lessons are intended to provide some discipline for managing your money effectively during the challenging times ahead.