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  • Stocks Fell Off A Cliff in Late August - What To Do Now

    What an absolutely CRAZY couple of weeks we’ve just been through! The collapse of stock prices around the world has stunned investors. By some measures, the plunge in the Dow and the S&P 500 in August was the worst in 75 years, even worse than the Crash of 1987. While I advised readers to reduce long-only equity exposure significantly in April and May, I was not expecting a 15% spike down in just a few trading sessions.

    Later in today’s E-Letter, I will introduce you to the latest money manager to make it on to our recommended list. This money manager specializes in buying and selling options on stock index contracts. This is one of the more unusual strategies I have seen over the years, but when you see the results, you’ll understand why I’m so excited to add ZEGA Financial to our stable of recommended Advisors.

    Before we get to the above issues, let me briefly comment on last Thursday’s better than expected report on 2Q Gross Domestic Product.

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  • Best Critique of Obama I’ve Ever Read

    The holidays sneaked up on me faster than usual this year, what with a couple of extra business projects that required a lot more time than I expected over the last few months. Given a number of year-end deadlines, I have elected to reprint an excellent article today by Peter Ferrara that is perhaps the best critique of President Obama that I have ever read. If you are an Obama fan, you probably don’t want to read this; on the other hand, maybe you should.

    Ferrara succinctly examines Obama’s upbringing, his early professional life, his liberal ideology, his ascendency into politics, his becoming President of the United States and his policies since occupying the White House. This is a very interesting and insightful read, especially in light of the challenging economic and financial times we find ourselves in.

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  • Greek Soap Opera Continues to Roil Markets

    While Greece is but a small country, its debt crisis continues to influence financial markets around the world on an almost daily basis. It is not unusual for news from Greece to send the global stock markets up or down 2-3% in a single day. Events in Greece are unfolding daily, including the resignation of its Prime Minister, George Papandreou, just last Sunday. As this is written, a new coalition government is being formed in Greece to pave the way for the latest €130 billion ($180 billion) bailout package agreed to by European leaders late last month.

    In addition to Greece's troubles, the European debt crisis is spreading to other Eurozone countries. Italy appears to be the next domino to fall, and Spain may not be far behind. Italy has the eighth largest economy in the world based on GDP and the fourth largest in Europe. If Italy has to be bailed out, it would likely spark another global financial crisis that could make 2008 look tame. The latest G-20 summit in France failed to do anything to avert another financial crisis in Europe. Surprise, surprise!

    Given the deteriorating situation in Europe, expect stock market volatility to remain very high in the months ahead. Investors are scared by the events unfolding in Greece and the rest of Europe and are herding out of stocks and equity mutual funds in droves. I can't say that I blame them. Near the end of today's letter, I offer some advice on what these investors on the sidelines should consider doing with their money that is no longer invested in the stock markets.

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  • Subprime Mortgage Crisis #2 in the Making?

    In May 2009, President Obama created the “Financial Crisis Inquiry Commission” (FCIC) to investigate the causes of the financial crisis of 2007-2009. Basically, the FCIC put the blame for the financial crisis on lax regulation, greed on Wall Street, faulty risk management at banks and other financial firms and on households for taking on too much debt.

    The FCIC’s Democratic majority placed the blame for the financial crisis on the private sector and dismissed the idea that government housing policy could have been responsible. The report went so far as to suggest that Fannie Mae and Freddie Mac, and the politicians that oversaw them, were not the cause of the financial crisis.

    I strongly disagreed in my May 18, 2010 E-Letter and now a new book on the subject comes to the same conclusions that I did. Now Fannie and Freddie and the politicians responsible are back in the news again.That’s good!

    What is not good is the recently reported fact that the government is once again pressuring regional and community banks to make mortgage loans to low income families that can’t afford them. This could be the making of subprime loan crisis #2. You need to know about this, and I will give you the details as we go along.

    To round-out today’s letter, I will show how the so-called government “Agency Debt” – that which is supposedly not backed by the full faith and credit of the government – really is guaranteed by the government. Agency Debt has exploded over the last 25-30 years, yet it is not included in our official national debt. You need to know about this as well.

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