After a short break in the Schiff videos, here’s another where he deconstructs Stephen Leeb’s hilariously off-base comments. Only when it comes to political ideologies can a person be wrong so many times and still keep the same opinion. Remember these videos where Peter Schiff got everything right and his laughing opponents got everything wrong? Or these?

Stephen Leeb just won’t learn.

In the wake of the largest swindle Wall Street has even known, everyone is questioning how this could have happened. How could anyone run a 50 billion dollar Ponzi scheme right under the SEC’s nose? The SEC, with virtually limitless resources, has the power to do essentially whatever it wants when investigating fraud. So how could they miss this? Is this just a failure of the free market, an example that those hedge funds just have too much freedom, and government regulators need more power and resources? Not at all – in fact, quite the opposite.

This is a wake up call for investors and the public. Where the SEC failed to spot a problem, the free market saw it. Eighteen months ago, a firm named Aksia run by Jim Vos and Jake Waltour, warned clients not to do business with Bernard Madoff’s investment fund. Aksia is what’s called a due-diligence firm, and they’re an example of what regulation would look like in a true free market.

Because of the lack of government regulation in hedge funds, these due-diligence firms emerged. Investors wanted to be assured that their money was going to a reputable fund, so these companies thoroughly investigate hedge funds for a fee.

Since these firms are operating in the free market and competing with one another (as opposed to the SEC, which has a monopoly on the business of regulation), they have incentives to do the best job so that they gain the best reputation in the business, thus increasing their customers and their wealth.

And Aksia was thorough; they found a number of red flags in Madoff’s fund during it’s investigation, including:

1. The Madoff investment strategy, called “split-strike conversion,” is known to be very volatile; it involves trading huge positions around options expirations. Despite that volatility, its returns over the past decade were an amazingly stable 8-10 percent.

2. Aksia discovered a 2005 letter to the Securities and Exchange Commission from a financial advisor who supposedly studied Madoff’s operations. That letter asserted Madoff was running a Ponzi scheme. There was also a Wall Street Journal story at the time about one of the Madoff’s associated “feeder funds” getting shut down in 1992.

3. Madoff’s strategy was bizarre: He said he would move $13 billion in various trades at once, yet Aksia couldn’t find traders who saw his trades. There were also no regulatory filings. And family members were running the firm.

4. The comptroller of the firm was based in Bermuda. Most mainstream hedge fund investment advisers have their comptroller in-house. Madoff’s so-called feeder funds, meanwhile, were audited by respectable auditors. That gave the impression that Madoff had a professional operation. But the central investment action wasn’t with the feeder funds, but in Madoff’s New York City headquarters. And those activities were audited by a smaller, lesser known firm.

5. Madoff sent out accounting statements by mail. Most hedge funds email statements and allowed them to be downloaded via computer for easier analysis by investors.

6. Aksia wasn’t the first firm to check out Madoff’s activities. A two-man shop (not counting the secretary) which operated out of a small office in Muncie, N.Y., was also looking into Madoff’s activities.

So whats the moral of this story? The SEC simply cannot protect investors as well as free market systems can. The SEC failed to protect investors from mortgage-backed securities and credit default swaps and collateralized debt obligations – and now it failed to notice a $50 billion dollar Ponzi scheme masquerading as a hedge fund. Unfortunately, some people will see those facts and come to the conclusion that we just need more regulation and the SEC needs more resources.

The SEC failed because it’s a centralized monopoly, it’s that simple. And Bernie Madoff’s scheme succeeded because investors had a false sense of security in that bad system and it’s regulations. Take away that monopolistic regulatory giant, and a system of due-diligence firms would spring up to take it’s place. That type of decentralized system of competing firms is many orders of magnitude better at finding fraud and protecting investors; and it’s been proven so. It would be less expensive and more efficient than the SEC, and it would lower taxes and place the financial burden on the actual investors instead of the entire US population, including non-investors.

It’s just common sense.

I haven’t said much about the whole Detroit automotive financial fiasco here, instead I posted most of my opinions about it over at Ridelust.com. Just the other day, I wrote a post called The 9 Detroit Auto Brands We’d Miss The Least that basically outlines which brands GM and Ford should sell to lighten up their load and get back on track financially.

Remember the story of Aron Ralston? He was the climber who was out in the wilderness when a boulder fell on his arm and pinned him there. He was stuck, unable to get free, so he did what needed to be done, he cut off his own arm. That kind of action takes massive testicular fortitude, but it saved his life in a case where, otherwise, he would have surely died. What does this have to do with Detroit? Well, right now, GM owns 12 different brands: Buick, Cadillac, Chevrolet, Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn, and Vauxhall; Ford owns 5: Ford, Lincoln, Mercury, Mazda, and Volvo; and Chrysler owns 3: Chrysler, Dodge, and Jeep. All three companies are on the verge of certain death, and something needs to be done. The question is, do they have the testicular fortitude that Aron Ralston had? Here’s a quick run down of which brands I think should go the way of Aron Ralston’s arm:

First of all, GM should unload it’s Opel and Vauxhall brands. It’s a big move considering how important they are to GM, but selling the two brands off will give the company the huge influx of cash they need, that’s the main point. Secondly, Buick needs to go. It’s the perfect time to do it too, since they offer no real value to GM here in America, and they’re loved over in China. GM could unload Buick to Shanghai Automotive Industry Corp (SAIC) and everyone will be better for it. Suddenly, with those 3 brands gone, GM’s troubles aren’t nearly as bad.

Next up on the chopping block, Pontiac. It’s a shame, but Pontiac isn’t the exciting brand it used to be, and it hasn’t been for decades. They really don’t offer any value to GM, so let them go. The fifth brand to go is Hummer. Hummer sales are bleak, and the reputation probably isn’t coming back any time soon after the beating it took from the trend toward eco-mania. Sell them off to a company that can devote more energy to making the brand work again. Same goes for Saab; it’s a good brand that just doesn’t sell well. They have expensive parts, low margins, poor sales, and they aren’t on the good end of the competition with quality Japanese cars.

GMC is a bit of a weird case. Maybe they should sell it off, maybe they shouldn’t, but they definately need to rethink their brand strategy. Chevy and GMC both makes trucks, and the market for personal trucks just isn’t as big as it used to be. So either sell GMC off, or turn the brand’s energies toward making commercial trucks only, and selling to the business market.

That would take care of GM, after selling off those brands, they’d have the money they need and be an ultra-lean profit machine. They’d be able to focus a ton of energy on Chevy and the remaining brands. As for Ford, they need to drop Mercury post-haste. Mercury is completely pointless, they do nothing but mirror Ford models and add simple options to up the price. Ford needs to cut them off now. That might be sufficient to help Ford survive this crisis, but to be safe, they should also sell off Volvo. Recent reports say that Ford wants $6 billion dollars for Volvo, and I think they can get that. Do it to it, Ford, you can make it out alive.

And that’s it, that’s all nine brands. Chrysler can’t drop Dodge or Jeep, so they remain intact in my plan; maybe after GM is done lopping off it’s dead limbs, they could buy Chrysler, although I’m not so sure it’d be a good idea. So pass it along, maybe the head execs at the Big Three will read this and be inspired to summon up some testicular fortitude and do what needs to be done.

In a surreal scene of consumer frenzy this morning, a Wal-Mart employee in suburban New York was crushed to death by a wave of shoppers who broke down the doors just minutes before the store was set to open. It was 4:55 am when the sliding glass doors finally came off their hinges due to the weight of over 2,000 holiday shoppers. As they piled into the store, 34-year-old employee Jdimypai Damour was knocked to the ground and trampled to death. No one stopped to help, not even when police arrived. The officers giving Damour CPR were being shoved and jostled around by shoppers trying to enter the store themselves.

“They were like a stampede,” said Nassau Det. Lt. Michael Fleming. “Hundreds of people walked past him, over him or around him.”

Mr. Damour was eventually taken to nearby Franklin Hospital, where he was pronounced dead. Three other shoppers were injured as well, including a woman who was eight months pregnant. She was taken to the hospital for observation.

The crowd actually began forming outside the Wal-Mart at 9 pm on Thursday, and continued to grow throughout the night. Store employees finally called police at 3:30 am to report the massive crowd, and they attempted to organize the line, but were called away to try to help manage crowds outside the local Best Buy and Circut City.

As the opening time came near, six Wal-Mart employees were actually lined up against the locked doors, pushing on them trying to hold back the crowd. They were eventually overwhelmed, the doors snapped loose, and the crowd forced their way in. Several people fell on top of eachother and 34-year-old employee Jdimypai Damour unfortunately ended up at the bottom of the pile.

One shopper who witnessed the event, Kimberly Cribbs, said she was standing near the back of the crowd when people started clamoring their way into store. She said many people were knocked down, and parents had to grab their children by the hand to keep them from being caught in the madness.

“They were falling all over each other,” she said. “It was terrible.”

This past November 3rd, early on that Monday morning, literally hundreds of parents were lined up outside of the Brandywine School District’s offices to sign their children up for the school choice program. More than 30 parents actually camped out overnight for a spot at the front of the line. The first people started forming the line at 2 pm on Sunday. All this for the opportunity to snatch up some of the district’s limited number of spaces.

“They closed so many schools this year, everybody’s panicking,” said Carla Woods of Claymont. She was one of the parents who camped out outside the office. “I’m freezing,” she said.

This is not the way things are supposed to be. But what’s the problem?

The Cato Institute’s blog, Cato-at-liberty.org, makes a great analogy: Imagine if the story’s headline was “Bread Lines Form at Whole Foods” and the lead read “hundreds of shoppers lined up early this morning hoping to be among the lucky few to get their groceries at the Brandywine Whole Foods store, taking their place behind about 35 others who had camped out overnight for a spot at the front of the line.”

That would be unthinkable; because in a free market, if a business has increasing demand, they just expand their supply. The idea that there would only be a limited amount of bread in any given area is absurd. But the education system operates outside the free market. Schools don’t open or close or grow and shrink based on market pressures. Competition doesn’t affect the quality of schooling. So, as Cato puts it “when parents are offered even some paltry degree of choice within their public school district, it must be rationed like bread at a centrally planned Soviet bakery.”

So what’s the common sense thing to do? It’s a tough question, vouchers are a step in the right direction, but we should think about a drastic measure. What would happen if public schools were abolished? Would it be that terrible? What do you think, Common Sense Investors? Check out Lew Rockwell’s essay on the subject and let me know your opinion here in the comments.

The DHL unit of Germany’s Deutsche Post (DPWGN.DE) announced today that it will stop making express deliveries within the U.S., close all of its 18 main distribution hubs there, and lay off all but a few thousand of its remaining 13,000 U.S. workers. Although it will still continue to make delivers to and from the US and other countries.

DHL purchased Airborne Express in an attempt to challenge FedEx (FDX) and United Parcel Service (UPS), but has lost nearly $10 billion in the US market in the 5 years since that purchase. The company is actualy a dominant force in the global market, but it was never able to compete with the stronger UPS and FedEx on American soil.

DHL’s failure in the US is a perfect example of the financial crisis knocking off the weaker players in the market. Financial crises always favor the larger companies, and society as a whole comes out the other side stronger because of that. Whether is was poor management or just a series of bad luck that plagued DHL’s US business, the fact is, they didn’t compete on the same level as UPS and FedEx, and now they’re out of game.

This will undoubtedly be the first of the big dead wood, meaning we’ll see markets where 2 or 3 or more companies are competing for limited resources, and the weaker ones won’t be able to survive this financial crisis. The lean times are here.

Imagine a nuclear power plant the size of a garden shed able to power your house plus 20,000 of your neighbors houses. That type of machinery is on the horizon within the next five years according to scientists at Los Alamos. The mini-reactors will be completely self contained and sealed, with zero moving parts and be buried underground.

This tiny technology was originally developed by the US government’s Los Alamos laboratory, but the development rights have been licensed to New Mexico-based company Hyperion Power Generation (HPG), which has taken it’s first firm orders and plans to start mass production within five years.

“Our goal is to generate electricity for 10 cents a watt anywhere in the world,” said John Deal, chief executive of Hyperion. “They will cost approximately $25 million each. For a community with 10,000 households, that is a very affordable $2,500 per home.”

Nuclear power is actually a very safe and clean way to produce a lot of energy. Many people don’t understand how a nuclear power plant even works. Basically, the plants are just huge steam engines. Nuclear material heats water, which turns to steam in a boiler and is forced through a turbine. The spinning of that turbine is what actually generates the electricity.

One of the main arguments against nuclear power plants is the high cost of building a new plant. In fact, despite being relatively safe and clean, nuclear power has never been profitable. It always requires some form of government assistance to make it economically feasible. A traditional nuclear plant can cost around $5 billion dollars to build, and a huge amount of money to maintain, making it extremely difficult to just break even. A few years ago, the Department of Energy commissioned a financial report of the nuclear industry by Scully Capital Services, an investment banking and financial services firm. They determined that, without certain federal subsidies, the entire nuclear industry would “grind to a halt”. But the mini reactors will only cost $25 million each, which could change the whole financial picture of nuclear power.

Hyperion plans to set up three factories to produce 4,000 plants between 2013 and 2023. They already have more than 100 firm orders, largely from the oil and electricity industries, but the company is also targeting developing countries and isolated communities.

The reactors are only a few meters in diameter, and can be delivered easily on a truck, dropped off and buried with very little effort. They must be refueled every 5 to 10 years, depending on which source you hear it from. The waste is a softball-sized amount of recyclable material, but other than that, it’s completely pollutant free.

Some other companies are known to be designing micro-reactors. Toshiba is the most visible and has been working on their reactor for some time. They have been testing 200 kilowatt reactors measuring roughly six meters by two meters. Designed to fuel smaller numbers of homes for longer, they could power a single building for up to 40 years. Competition in this sector is ideal, since once more companies start getting involved, the quality of these micro-reactors will increase and the cost will go down. That’s when thing will really get interesting.

Just last year, European private equity company 3i bought high-end UK lingerie brand and retailer, Agent Provocateur, in a reported $120 million deal. AD has been doing well since the company was founded in 1994 by the son of Vivienne Westwood Joseph Corré and his wife Serena Rees, but things have been especially good since 3i’s acquisition. Just recently, the company set up a plan for aggressive worldwide expansion.

The company already 40 boutiques across 14 countries, and their plan is to open more stores in areas directly competing with similar shops in their niche. There are already 8 stores in the United States and AD plans on building at least 2 more: Boston and Chicago. They also have Bahrain, Geneva, Puerto Barres, Madrid, St. Petersburg, and Germany in their crosshairs.

Agent Provocateur is consistently voted one of the UK’s top ten cool brands. In addition to lingerie, the brand has launched a line of very successful fragrances and added shoes to its product range. It’s e-commerce business is one of it’s fastest growing outlets for revenue.

3i’s massive amount of cash will help Agent Provocateur grow in the face of the current economic slowdown. Without that funding, AD probably would have been cutting back instead of expanding right now.

My prediction: It’s a shame AD is in the hands of private equity, because I think it’s going to come out the other side of this economic trouble patch as the worlds leader in high-end luxury lingerie/fragrance/woman’s accessories

(via AdSavvy)

Sometimes companies do things that have no obvious direct benefit but do have an indirect benefit. One example is Amazon.com’s recent frustration-free packaging idea. They’re basically making the world better because of the indirect benefit to the company.

Amazon doesn’t have any obvious reason to make product packaging less frustrating. On the surface, it doesn’t seem that they make any money by doing it, but by making the online shopping experience even more appealing than it already is, customers are more likely to buy online. Plus, Amazon gets the positive press of being the driving force behind a project that makes the world a bit less frustrating. That’s the indirect, intangible benefit.

Another great example is Google. Google gets a huge percentage of the internet’s ad dollars, so it’s willing to do things that make the internet a better place, just for the indirect benefit of having more people shopping online. I’ve talked to people that work at Google, and they can attest that Google has done some pretty large projects with the only goal being “make the internet better”.

We generally think that it’s a bad thing when one company controls most of a market, but as these examples show, there are some advantages. The company has incentive to act on behalf of the interests of consumers. This is one of the unseen factors to the free market.

In case you missed it, October 29th was the official “Day of Prayer for the World’s Economies” according to international nutcases, Mike and Cindy Jacobs. And what did they do on the day of prayer? They went down to Wall Street and prayed to the big bronze statue of the bull. Sound familiar? Good thing Moses wasn’t there.

“We are going to intercede at the site of the statue of the bull on Wall Street to ask God to begin a shift from the bull and bear markets to what we feel will be the ‘Lion’s Market,’ or God’s control over the economic systems.”

Wow. I remember reading somewhere that god’s not a big fan of people worshiping golden cows. Maybe I’m wrong, who knows. Check out the video:

And this is Cindy Jacob’s statement from her website:

For thus says the Lord of hosts: ‘Once more (it is a little while) I will shake heaven and earth, the sea and dry land; and I will shake all nations, and they shall come to the Desire of All Nations, and I will fill this temple [house] with glory,’ says the Lord of hosts. ‘The silver is Mine, and the gold is Mine,’ says the Lord of Hosts.” Haggai 2:6-8

We are calling for prayer for the stock markets, banks, and financial institutions of the world on October 29, 2008. Why the 29th of October? The stock market of the United States collapsed on that day in 1929 and a great economic depression ensued.

At the beginning of the 2008, intercessors began to hear from the Lord that without divine intervention, a major shaking was coming to Wall Street. This would spread until there were food shortages. In fact, we heard that 2009 would be worse than 2008! Of course, it goes without saying that this would affect markets around the world.

During the same time period, a dream was given that showed 50 boxes of iniquity representing the economic systems in all 50 states. The lid was off and the stench was terrible. God gave an instruction in that dream that we were to “put the lid back on the boxes” until a biblical economic structure could be built in its place. Of course, this could be said of economies around the world as well.

For this reason, we are meeting with intercessors at the New York Stock Exchange and the Federal Reserve Bank and its 12 principal branches around the U.S. on October 29, 2008. We are also going to intercede at the site of the statue of the bull on Wall Street to ask God to begin a shift from the bull and bear markets to what we feel will be the “Lion’s Market” or God’s control over the economic systems. While we do not have the full revelation of all this will entail, we do know that without intercession, economies will crumble.

Please gather with your prayer groups and networks at financial institutions around the globe. Intercessors are already going to some of the stock exchanges in other nations, but do not assume this is so and make sure that the one in your nation is covered in prayer. Also intercede for the banks and financial institutions in your area.

Here are a few suggested prayer points for the day:

1. Repent for any personal greed. Ask God to show you any personal connection that you have with mammon.
2. Repent for the economic sins of your nation. Ask God to forgive the greed, avarice, participation in mammon, etc., that has taken place in your nation’s economic system.
3. Repent for any excessive participation in debt and the use of credit. Ask God to give a strategy both to you, personally, and to your country to heal your economies.
4. Repent for a lack of love for the poor. Ask God to forgive any way in which you and your nation have not addressed the needs of the poor, either in the work force or through racism.
5. Cry out to God for mercy for your nation. Plead with Him according to 2 Chronicles 7:14 and tell the Lord that you will turn from your wicked ways.
6. Pray for wisdom for the leaders of your nation on how to deal with the current financial crisis.
7. Ask God to stabilize the nation’s economy, putting the lid back on the box as shown in the dream given.
8. Begin to intercede and ask God to establish righteousness in the stock exchange, expose corruption and bring to justice those who have sinned against God and the nation. Ask God to heal the economy.
9. Pray that God will raise up an economy based upon biblical principles.
10. Intercede that a great revival will break out in the marketplace as a result of the shaking. Pray that God will begin to give wisdom in the midst of the shaking to shift the wealth of nations in to the hands of the righteous.

Cindy Jacobs

via Pharyngula