Heyer Capital, LLC

Estimates are that global government banks and agencies have shoveled against the bubble upwards of $30 Trillion (that’s a ” T “) in direct aid and indirect guarantees.  Does that mean we’re facing a hyperinflationary hell?

Not necessarily.  If the trillions upon trillions were in the form of currency, then we’d be on a direct path through Thermopylae. Instead, the vast vast majority of the aid is in the form of credit reserves and contingent taxpayer guarantees.  So long as the reserves remain just that — reserves — and are not put into general use, then their effects on the system are limited only to keep zombie banks (and their creditors & establishment owners) above ground.

Behind the curtain — think Wizard of Oz — the central banks are trying to figure out the best way to remove these reserves from the system.  And government/central banks have never been able to time that shift correctly.  Fortunately, the public’s unwillingness to borrow and the bank’s unwillingness to lend keep the reserves out of reach.

(BTW, I facilitate the local Dave Ramsey Financial Peace University course. Believe me, people are increasingly very unwilling to borrow.  I mean not a thin dime  ever, ever again.  And we’re teaching our children that too. There are inter-generational consequences to this extended crisis.)

Oh, to be free enough in time and money to attend a bona fide economics conference; such are the dreams of nerds. As the Austrian School economists congregate in Spain, we can only tune in via blog updates from the dapper Jeffrey Tucker.

The second full day in Salamanca – by Jeffrey Tucker

Here was a nugget from a presenter, a businessman from London. “…As he was attempting to transact business in Iceland, he recalled very well correspondence with the Iceland central bank. He asked whether he can send Euros in a business deal. They wrote back “no, we are in danger of going bust.” He praised the bank for being honest, and keeps the email as a historic memento.”

This video interview of a soda pop emporium owner is very infectious.

Retail sales fell last month, despite the “cash for clunkers” taxpayer transfer to the auto companies.  As it turns out — don’t tell Washington this and burst their bubble — but when poor people (that drive old cars) sign up for a boatload of consumer debt on a rapidly depreciating new clunker and a new monthly payment, they don’t actually run to the mall right away to spend like mad.

Austerity is the new ‘in.’  But now that Congress has shifted the demand curve back to present, expect a vacuum-collapse in auto sales now that the layer of demand is instantly removed.

Before they get too far with the “cash for house clunkers” program, recall that something like 30% of Americans would sell their house if they could get a good price.  That’s a heck of a price overhang and pending supply.  Do the world a favor and laugh out loud whenever someone on the TV or in polite company says, “Housing prices are coming back.”

“Investor’s Business Daily” founder Bill O’Neil provides an insightful interview on KOA radio earlier last week. Here’s the link if you need browsing background-sound.

http://www.investors.com/MediaCenter/default.aspx?mediaID=482737

The three key take-aways are that 1) he believes a new secular bull market began in March; 2) tune out Wall Street noise and predictions from the overeducated talking head. Discern what the facts of the market tell you;  3) entrepreneurial America will thrive, regardless of Washington’s follies.

Zero Hedge: Terminated Chrysler Dealers Are Heard; The Clinton Scent Redux.

The Zero Hedge blog has been uncovering a statistically “interesting” correlation with the Chrysler dealership closings and Clinton donations.  The link above relays sworn testimony from a dealer who was closed who also notices the dealerships owned by former Clinton Chief of Staff survived.

White House to Sonia Sotomayor critics: Be ‘careful’

“Be Careful?”

Ahem.

It was the Bolsheviks that demanded judges neglect the law and rely on their “revolutionary  consciousness” to decide cases.  

Peter Schiff points out: The central government’s Constitution isn’t something that needs to be “interpreted.” It’s not written in Mandarin.  It needs to be enforced. The problem is that judges want to apply their agendas, empathy, and ideology to places they don’t belong. A proper judge needs to be able to hand decisions that enforce the Constitution regardless of how it plays out. 

To deny the Constitution is to violate the law.

I’m neither star-struck by palace intrigue nor an exuberant Anglophile –Daniel Hannan & John Locke aside–, but I can only hope that the Queen uses this as her excuse to dissolve parliament and start anew. 

Left Out of D-Day Events, Queen Elizabeth Is Fuming – NYTimes.com.

In the course of a mere two weeks, a political storm has erupted in Britain. This is a Cat 5 hurricane that has MP’s afraid to even leave their offices. (It reminds me of the heat of the Milwaukee county pension scandal where the county board member called the sheriff at 2 AM asking for him to declare martial law to cool things down.)     The expectation is that fully half of the members of parliament will be tossed out on the ears in the coming elections, if they don’t join the 30 that have already resigned. This tempest took two weeks to brew.

The British Member of European Parliament Daniel Hannan – who famously criticized PM Gordon Brown as a “devalued prime minister of a devalued government” — has been canvassing his enormous constituency the past month and only recently found one solitary voter supporting the governing Labor party. 

If you’re interested in following the opinions of a feisty politician who advocates lower taxes, less government, and local control and spending, then I recommend his blog, linked here: 

Daniel Hannan : Telegraph Blogs.

I have long advocated a fully open government here.  Every government email is mirrored to the web.  Every elected official wears a wi-fi microphone streaming onto the web. Every hearing on Youtube. Every government check is posted online.  With technology costs so low, any minor expenses would be more than recovered through reduce savings. Not convinced? Just imagine what taxpayer advocacy groups would be willing to pay to have the governor wear a wire full time.

Today, right now, send your stockbroker or mutual fund salesman a letter asking if your account is handled by a fiduciary and in what capacity.  I’ll wait right here for you to return, but I won’t wait for an answer from your salesman.  I’ll bet I know the answer.  

[interlude]

If you work with an “investment advisor” they are a fiduciary to you. They must always act in your best interests and describe when they are not. Period. Full stop. End of story.  Any other investment relationship less than fiduciary is ripe with conflicts of interest. 

A good example is buying a mutual fund.  The mutual fund itself is an investment company that has a pool of assets. Who manages those assets?  An investment advisor to that investment company. There is a fiduciary relationship between those two.  How does that investment company gain assets?  Typically through a sales effort with the public.  The salesmen who sell those mutual funds and collect commissions typically are NOT a fiduciary to their clients.   Good, bad, right, or wrong, I won’t say.  But Wall Street is set up for investor protection for itself, but not necessarily for you, unless you demand it. 

Ask your advisor in writing for a response in writing. 

Next important point: where is the money? Literally.  Where is your account held?  Many brokers are “introducing brokers.” You may go in to visit and discuss investments with your broker at his local office, but your actual account may be held at a third party.  This is very common.  You must be aware of the financial health of the firm that actually has your account.  Is it insured? To what amount?  Is there supplemental, private insurance above and beyond SIPC?

Key in on, “Who creates the statements of the account?” If an investment broker has access to your money AND creates the statements themselves, that is a recipe for trouble.  There should be more safeguards for your money and distinct segregations of advice and access to the account. 

For instance, (if you’ll permit a brief commercial) most of my clients’ accounts are held at TD Ameritrade.  I have strictly limited access to the accounts; basically I can place trades for the accounts and instruct Ameritrade to send the clients themselves a disbursement check directly from the account.  TD Ameritrade takes care of everything else.  They send the statements. They send the confirmations.  They take the transfers-in. They handle the securities & checks.  They handle settlements. They send out third party checks.  They change the address on the account.  These distinct segregations of duties protects clients. The custodians take care of the money, which permits me to focus on trading, performance, and talking with clients.

The client owns the account directly. I trade for the client.  Simple. Everyone knows where everything is and in what amounts, so we can all see how the account is doing.