Who runs the world's most lucrative shakedown operation? The Sicilian mafia? The People's Liberation Army in China? The kleptocracy in the Kremlin? If you are a big business, all these are less grasping than America's regulatory system.

The Formula:

• Find a large company that may or may not be guilty
• Threaten its managers with commercial ruin, preferably with criminal charges
• Force them to use shareholders’ money
• Drop individual charges in a secret settlement

Through this, the government gets paid and big corporate CEOs stay out of jail while victims get some cash. Although, in the case of BP, there were a ton of people simply in the right place at the right time who received so much that animosity continues to linger from those shutout over the windfall.

When I read an article that begins like this, what comes to mind is that perhaps it is a conservative magazine or a conservative website, but it’s The Economist. The Economist is a major backer of President Obama. The author managed to exclude President Obama’s name from the article, but it's clear that his declaration of the war on business has led to a free-for-all, and it’s not just the federal government.

Solutions put forth include:

• Pruning the legal system
• Make secret settlements public
• In addition, I think shareholders and boards should revolt and just say “no”.

What is nuts is how all of this is done while under the auspices of government liberation that is supposedly righting the wrongs inherent in a capitalistic system.

It is amazing the kind of grand larceny pulled off by this government against those evil corporations that in some cases, were (A) forced into certain business practices, then (B) were responsible for overseeing the new practices. In some ways, it is a great trick: making an accident the lowest, most despicable deed possible, and then putting a company out of business before sucking them dry.

It's such a great scam that from time to time, the government even ponies up taxpayer money to keep these companies and industries alive.

Question of the Week Do you feel better or worse about your economic future (and the entire country) than you were four years ago-September 2010? Click here to answer

Now What?

Corporate America is sitting on mounds of cash and households are beginning to do the same. The St. Louis Fed published a report echoing the theme of yesterday's hotline about households hoarding cash. So, with all this money on the sidelines, does it trickle up, down, or stay locked up from a general distrust of government?

Thanks for the fantastic replies yesterday to our poll question of the week, please keep them coming.

Peace by Any Means Necessary

This morning, conflicting reports on a possible ceasefire in Ukraine has helped equities ahead of the open, although Vladimir Putin has sent mixed signals. Keep in mind its really dumb of western media to quote Putin as agreeing to a ceasefire when he’s claimed all along Russians have not been involved. This thing can work itself out this week, but nudging a nut like Putin with more sanctions between now and then will backfire.

In the meantime, President Obama still is musing about a game plan for ISIS… sounds like maybe we could take decisive action to crush those sick bastards. Of course, I hope we don’t wait for the pacific island of Palau to join the fray before taking action. The investment world works best when terrorists are destroyed… not just blunted.

Today’s Session

Yesterday, the major indices finished on a mixed note with the Dow remaining in the red most of the day. So far, the indices are continuing to indicate higher this morning, and we have tons of data being released today that are potential market movers. Early this morning, the MBA purchase applications report, same store sales report, and a few other items will be released throughout the day. Also, companies in the auto industry will be sporadically releasing monthly sales results during today’s session. Below is a chart of some of the companies that reported earnings this morning:

Ticker	EPS (Actual)	EPS (Est)	EPS 1-Year Ago	Rev (Actual $M)	Rev (Est $M)	Rev Y/Y %
GIII	0.29	0.16	0.17	$           424.00	$      390.11	39.4%
NAV	-0.04	-0.79	-2.94	$        2,844.00	$   2,939.35	-0.6%
TOL	0.53	0.46	0.26	$        1,056.90	$      980.30	53.4%

 

 

 

 

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