JANUARY 2009, WORST JANUARY PERFORMANCE ON RECORD, IN MIDST OF MORE SCANDALS

Markets tumbled in January in the midst of the biggest scandals in the financial markets that I have ever read. After Bernie Madoff's 50 billion dollar ponzi scheme discovered last month by the Feds, another smaller version has been found in the past week. Nicholas Cosmo, from Agape World, has been accused of running a similar version of the investment scheme. This comes as the markets have been pummeled in 2008 in the worst financial crisis since the Great Depression that has been taking place in the U.S. It has been unfortunate that these events which can cause catasthrophic repercussions on investors, have taken so long to identify while "nickle and dime" small and insignificant cases are discovered faster. More regulation involving legal and compliance means may be required going forward.
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www.foxbusiness.com/story/stocks-end-worst-january-record-losses/

www.nydailynews.com/money/2009/01/29/2009-01-29_judge_minimadoff_nicholas_cosmo_must_fin.html

MICRO CAPS HUNTING (Part 1)

I have seen many investors in my life. Each investor is different and has different qualifications for investing but all investors are similar when it comes to making a profit on their investment. Whether it's short term or long term ( if they have patience ), each investor needs to understand that an investment can be a tricky thing. You can ask Mario Gabelli, a mutual fund company owner about that. I had the honor of meeting him back in October 2003 on the Intrepid Museum for just a few minutes. My comment to him was about a penny stock called Baldwin Technology (BLD) on the Amex. He was shocked, and quickly replied that the the stock was a tricky one. All micro caps are tricky indeed. BLD sank to a low of 18 cents in April 2003 in midst of a debt restructuring and mounting losses. Mario's funds had a cumulative stake of more than 10 percent as they felt the vibrations of this equity position. The night I met Gabelli, BLD was at 99 cents as it was headed to 7.00 in the next couple of years. BLD became a classic 30 bagger plus. The level of confidence in each investor is different but investors who are searching for risk, may find remedy in micro caps. In the next posting on Micro Caps , I want to discuss the risk of investing in these tiny companies. (BLD was mentioned a past historical performer. It is not indicative of future performance, and it's not intended as solicitation to buy or sell this equity)
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(Attendees at the Small Cap Conference at the Waldforf Astoria vote for micro caps/small caps)
LINK http://www.paulsoninvestment.com/Press/PLCC%20-%20Westergaard%20Survey%2011-08.pdf
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IN MEMORY OF MARCUS TULLIUS CICERO

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BECAUSE OF AMERICAN FAT CATS GREED AND AMERICAN POLITICIAN INJUSTICES, ALL OF OUR STATES ARE NOW SUFFERING, ALL OUR FREE COMMUNITIES ON MAIN STREET ARE COMPLAINING, AND EVEN FOREIGN GOVERNMENTS AND PEOPLE ARE PROTESTING. AS FAR AS THE BOUNDS OF
THIS UNIVERSE, THERE IS NO SPOT NOW SO DISTANT OR SO OBSCURE THAT THE WANTON AND UNSCRUPOLOUS DEEDS OF THE AMERICAN FAT CATS HAVE NOT PENETRATED THITHER.
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Dear Larry,
I appreciate listening to some of your speeches. I have learnt more about what and who you are but I believe that this is a conference directed for the small stock investors. It should have a speaker who can understand and discuss the issues that the listener needs to know before he considers investing in these micro companies. Politics is an essential part of macro economics and micro economics. But politics cannot and should not persuade an economist to alter his opinion for the benefit of his fellow politicians. A media economist must remain independent at all times so he can favor what he truly believes in, and that is a fair economy and true economic growth.
Real estate as you may have learnt lately is an essential part of this economy and other economies worldwide. It is a multi trillion dollar business which affects banks, insurance companies, and any other industry that you can think of. A question came to your plate 3 years ago at this conference. It asked you if Americans had borrowed too much and if the true worth of real estate prices had been compromised. You argued that Americans had borrowed the same percentage to equity as usual and that prices were backed by the strength of the money supply of this economy. You were wrong. Freddie and Fannie were giving out or buying out loans with zero equity. When real estate gets manipulated by the politicians and by the greedy fat cats, it could overshoot causing a manic period in prices, just like small stock prices tend to soar on particular times on Wall Street. But there is a difference. Real estate affects everyone anywhere while stock prices in small stocks only affect a few. And the sad thing is that they have more regulation on small companies instead of having it on the real estate industry. You argued in the past against European policies and against its currency. You were wrong. The euro soared to 1.60. But the Europeans followed the greedy fat cats and they also fell in that fat cat trap of this global economy. Somehow, the greed of the fat cats is contagious and persuasive enough to convince people, from economies with more regulations, to indulge into an easy way out of their debt. But now change has opened its doors in America. The president elect has promised to change the way Wall Street operates. His hands are full as he inherits this financial mess. Bailouts and cry-outs are distrusting and disgusting for capitalism but not for the welfare and protection of the economy. The greedy American fat cats and those with unlimited executive compensation who don't know how or are too greedy to protect their companies on a rainy day, now will lose weight and they will feel the pain of change. Capitalism will survive in one shape or the other but it will be played on a different playground.
Taxation and regulation as well as caps on executive compensation for those public companies that are owned by private shareholders will be needed to be implemented in a fair and consistent way. This will be essential in Monitoring against excessive economic spurs that could affect anyone anywhere anytime.
For me, it was Marcus T Cicero who inspired me in writing this letter to you. Even though,
we are more than two thousand years apart, we live in a period of time that could be similar economically and politically to that of the roman senator. History usually repeats itself.
This is serious stuff. This is not what you thought just a few months ago at another stock conference. The amount of money in question here is really huge.
Sincerely, a fellow
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( written in early November 2008, ahead of the Westergaard Paulson Small Cap Conference at the Waldfoorf Astoria, NY )
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OBAMA IN FIRST RADIO ADDRESS

• In his first radio address to the nation, President Obama has outlined his proposed stimulas plan. He wants to promote education, green renewable energy, health care and security. So far, the economy has continued to deteriorate with unemployment insurance claims rising to new highs and housing starts falling again. With the Dow Jones declining almost 8 percent in 2009 and banks under serious pressure, another stimulus plan looks likely to be passed in the next few weeks. Obama also said that he wants accountability for the spending and has initiated a new website for taxpayers who wanted to know how the money is spent at http://www.recovery.gov/.
  PROPOSED STIMULAS PLAN
  SECURITY
• <>BOOST SECURITY AT 90 PORTS
  <>BETTER COMMUNICATION BETWEEN LAW ENFORCEMENT AND PUBLIC OFFICIALS IN CASE OF AN EMERGENCY
  EDUCATION
• <> MODERNIZE 10,000 SCHOOLS
  <> PROVIDE HIGHER EDUCATION TAX CREDITS TO 4
  MILLION STUDENTS
  HEALTH CARE
• <>NEW TAX CREDIT FOR PEOPLE LOOSING THEIR JOBS
  <>INCREASE MEDICAID BENEFITS
  <> EXPANSION OF CHILD TAX CREDIT
  ENERGY
• <> 3000 MILES OF NEW TRANSMISSION LINES TO CONVEY
  ENERGY FROM COAST TO COAST
• <>BUILD UP CLEAN ENERGY INDUSTRIES

I HAVE A DREAM TOO

Today, MLK's birthday is a day of reflection. While Martin Luther King was fighting for civil rights, he was dreaming of a day when equality for all would be in existence. Today, the eve of Inaugural Tuesday, we can feel that the day for equality is getting closer, as tomorrow, the first ever African-American president will swear the Oath of Office. I would have liked to be there to witness that feeling of joy by many. But perhaps my dream is a bit different. I have a dream that is not as simple as King's. My dream is more complicated and harder to understand. I will mention my dream in some future post, but now I would like to take this moment to wish good luck to Obama , as the 44th president of the United States.

PAX OBAMA vs PAX ROMANA

The economy in Roman times had its ups and downs, from times of civil war to times of peace, from times of political corruption to times of political stability. Take for example Augustus (Octavius) or Vespasian. These were two candidates who would never have been emperors but they got their lucky breaks. Octavius' lucky breaks were the death of Caesar who was his uncle and adoptive father by will, and the grain shortage that led to the civil war with Mark Anthony. Vespasian's lucky breaks were his skills as a siege general that made him famous among the legions, and the civil war that erupted after Nero's death. (We know of Obama's lucky breaks) Both emperors believed in rebuilding the infrastructure after it was damaged by civil wars. Both believed in creating an atmosphere of peace called the PAX ROMANA. Complete peace in the roman world never existed but the people in the italic peninsula felt a peaceful period after the torment of civil wars. Both emperors were not concerned too much with enriching themselves. They were humble people who instead were concerned in creating a better economy by building a better infrastructure. Augustus known for building new roads and the water acqueducts, Vespasian was known for his stadium called Colloseum, a gift he made to the people. And now Obama finds himself in a similar position. The United States has suffered from financial mishaps and financial scandals of dynamic proportions. Can we find a better way to appease the people? The infrastructure program will need lots of capital. Minimal distraction from wars is necessary to better implement the program. In order for Obama to be successful, he needs to be humble and he needs also to create a feeling of peace, perhaps a PAX OBAMA. This will make it easier for him to face today's financial challenges. Even though the US will probably be distracted by Iraq, Afghanistan, the Middle East and other war events, minimizing the effects of these events will be crucial for this administration.

MALL STREET vs WALL STREET

As President elect Obama said, Wall Street should not thrive while Main Street suffers. Any person with a small degree of education understands this. Wall Street has been the Wild West Wicked Street for a very long time and somehow, there was an ongoing chain of balancing that was put in place to keep superior Wall Street in better shape than Main Street but at the same time, keeping inferior Main Street happy about the overall situation. A run-on sentence indeed. The relationship between Wall Street and Main Street was a run-on, a peaceful coexistence that kept the overall steam engine of an economy running at all times. When Wall Street cried the Fed monetary policy would kick in, and when Main Street cried, the Fed fiscal policy would trickle in. I would like to create a graph here. Any thoughts? Okay let me just say that this (year end-beginning of year) rally has been a significant relief rally where investors are looking for cheap valuations after a damaging disaster of 2008. My question is " Can this continue while Obama has just said that things are bad and are likely to get worse? " Well, we know Wall Street is looking at 6 months down the road and perhaps we will find a bottom in this new 4 year administration, but many variables can change this picture around.

HAPPY NEW YEAR 2009

It has been a while since I had posted. It did look bad back in the summer, bad enough for me to stop writing. I had summarized it as "we were heading towards the most depressive period since the Great Depression. I knew Obama would have taken the White House after he took out Hillary Clinton and that socialism would say hello to capitalism in a big way. Today is a day of reflection, a day of planning of doing the right thing for the rest of this new year. Today is a day of believing that there is a future rather than a gloom and doom scenario. But even if we believe that there is some light at the end of the tunnel, I feel that the unexpected is more powerful than any person or government in the world. It's like a meteorite heading towards us at the speed of light and we can't do nothing about it. Or just perhaps we can do something about it, if we have the will to do so. Yes, we can , he says to the people. Let's all watch and see if these words can become reality.