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  • Consumer Confidence Plunging – Recession Ahead?

    The stalemate in Washington continues, the government remains in partial shutdown and the debt ceiling looms on Thursday. A bipartisan deal to fund the government until January 15 and raise the debt limit until early February is working its way through the Senate and could be voted on later today or tomorrow. It is unlikely that the Senate bill would pass in the House, which is reportedly working on yet another bill (see link below) that is unlikely to pass in the Senate.

    The mindless gridlock continues and the Treasury Department warns that it will run out of “extraordinary measures” by the end of this week and the statutory debt ceiling will be eclipsed on Thursday or Friday. While this will technically be a “default,” the Treasury will continue to collect enough revenue each day to pay the interest on all of our outstanding debt. Still, things are likely to get increasingly crazy in the next few days.

    As a result of all the hype and anguish over the shutdown and the debt ceiling, consumer confidence has plunged since the beginning of this month. The confidence index, as measured by Gallup, has declined by the most since September 2008 when Lehman Brothers went bankrupt at the height of the financial crisis. And it continues to fall. This raises fears that consumer spending will drop significantly and a recession could unfold just ahead.

    Following that discussion, we’ll look at some interesting facts surrounding our national debt which now stands at a mind-boggling $16.965 trillion. Since our national debt is Issue #1 on the minds of most Americans, the discussion below should be very timely.

    Finally, today’s E-Letter will print longer than usual because we have lots of charts and graphs.

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  • Congress Drops the "F-Word" (Fiduciary)

    No, you're not going to have to hide this week's E-Letter from the kids. The F-word discussed in today's issue is 'fiduciary.' As you probably know, financial regulatory reform has been getting a lot of attention in the financial press lately. Unfortunately, many investors do not know that a provision to require brokers to act in your best interests rather than their own (a concept known as the 'fiduciary standard') was an early casualty of the financial reform effort, thanks largely to Wall Street's lobbying efforts.

    There are some investment professionals who are bound to exercise fiduciary duty in relation to your investments, while others are held only to the less-stringent 'suitability standard.' However, many investors do not know what a fiduciary standard is, or how the absence of this duty can affect their investments. In this week's E-Letter, I'll compare the two standards as well as fill you in on why the large Wall Street brokerage firms are so opposed to brokers having a fiduciary duty to clients.

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