How can we be as obsessed as we are with so-called “reality shows,” when, as a nation, we try so hard to avoid facing the greatest reality show of all: life in these United States?

Here’s reality: if President Obama has his way. our politicians are going to vote on whether or not to spend another $50 billion on repairing our infrastructure. The Republicans will oppose it, because they oppose “yet another stimulus” without any committed means of repayment. And it will probably fail, because the Democrats fear for their political lives, having already mortgaged our grandkids’ lives on their watch.

Of course, if this country were as well off as it should be, that expenditure wouldn’t be at all controversial because, rather than being a discretionary item, it’s one of our essentials!

But the consummate reality is that we’re so broke, we can’t afford to fix our roads, bridges, and waterways. And the only way we’re going to keep from living under one of those bridges—or, in a global context, keep our nation out of the hands of other hostile nations—is to live within our means. To do that, we must either cut our costs or make more money!

What are the chances of our turning things around? Far from acting responsibly, making the tough decisions, or even knowing what those decisions ought to be, our political parties bend over backward to enfranchise those who, to feed the hungry, would make a meal out of the goose that lays our golden eggs!

The Wall Street Journal strikes again! This time it’s an article entitled “The Decline of the PE Ratio.” And once again, it was too hard to pass up as a topic for this blog.

The first sentence alleges that the PE ratio “is shrinking in size and importance.” And it points out that, in spite of the fact that U.S. companies announced record profits during the second quarter—beating forecasts by more than 10%—the market dropped 5% this month.

It goes on to connect the dots, making the point that “the market’s average price/earnings ratio…is in free fall, having plunged about 36% during the past year,” and claiming that, because PEs have declined while earnings have risen, that the PE ratio may no longer be a reasonable metric by which to value the market. They’re absolutely right…if the market is what you invest in!
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Why is it, with all the money we spend on education, we turn out so many students who are inadequately educated? Why do countries with far less to spend surpass the United States in preparing kids for careers in math and the sciences?

These are but two of a long list of questions we need to answer honestly.
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This past Saturday’s Wall Street Journal contained an article entitled “‘Hindenburg Omen’ Flashes.” Although it wasn’t offered as tongue in cheek satire, it just has to be! How else can one explain such a respected publication giving space to Wall Street’s equivalent of “Chicken Little”?

For me, the article is priceless, because it so articulately describes the kind of thinking that surrounds the herd and its minions.
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When it comes to the stock market, you’re either a gambler or an investor. You simply can’t be both. Gambling and investing are two entirely different things. And, they’re mutually exclusive.

You either think like most folks do, that investing is betting on the stock market—with, at best unpredictable, at worst disastrous, results. Or you understand that it’s putting your money to work for you in successful businesses—letting it earn more for you with little or no risk. You just can’t have it both ways.

In fact, as it happens, one group usually buys from, or sells to, the other.

Over the past 25 years, I’ve had the joy of knowing a whole lot of folks who not only “got it,” but were eager to share their convictions and their knowledge with others. So grateful were they to have learned from other willing mentors, they took pleasure in passing it on. But I can no longer find them. No longer does there seem to be anyone whose convictions—that they were right and the rest of the world wrong—move them to stand up and be counted.

It would be tragic if this commonsense, simple and successful approach to investing were to be lost to the world! But it will be, unless those of us who know what we know have enough conviction go out of our way to take sides and speak up.

It’s well past time we screamed bloody murder because a greedy and unscrupulous securities industry continues to get away with enticing the public into thinking they can get something for nothing—which is exactly what trading and buying stocks for the short term is, and what the whole business of derivatives and other speculative activity involves.

What’s as important, is convincing the public that there is a better way, and that there are some of us who are ready, willing, and able to show them how.

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Reminder: Join me on Take Stock with Ellis Traub, this coming Thursday evening at 7:30PM Eastern (6:30PM Central). Call (347) 857-3608 to listen. Dial “1″ to join the conversation. Share your point of view on this topic.

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Our nation’s founders were wise to constitutionally prohibit our country’s endorsement of any church. They were also very wise to have infused religious principles deeply into the covenants governing our nation’s founding.

The distinction between “religion” and “church” is one most of us miss. The former is a set of principles—a philosophical common denominator among all faiths that represents “best practices” for man to live with man. The latter is man’s imperfect effort to document, offer some divine authority for, teach, and enforce those principles.

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  The genie is indeed out of the bottle; and the point when it became clear to me that it’s an evil rather than a benevolent genie was when the captains of the securities industry stood before a Congressional Committee and had the temerity to announce that their industry was the “backbone of the American economy.”

Once upon a time, a broker was a facilitator and nothing more. He was someone who was in a position to bring a willing buyer and a willing seller together and help them effect a trade. At that time, bringing investment money to enterprises in need of capital was constructive and deserving of the label of, if not the “backbone of the economy,” certainly its enabler.

Even after 1792 when those 24 brokers, meeting under the buttonwood tree at the foot of Wall Street, formed the New York Stock Exchange, the ability to assist investors desirous of owning shares in one or another company could be considered a wholesome service—but not for very long. Realizing that they could make more money from investors than from investments, the securities industry pioneers guided their industry down a path that took it from constructive investment to gambling, from earning money with one’s money to seeking something for nothing.

Financial innovation has been a characteristic of that industry; and, as the years have passed, the public has been duped into thinking that trading—short term speculation on the movement of the market itself—was actually investing, deserving of the same respect as the part-ownership of thriving businesses.

The genie’s name is Credit. At first reserved for fiscally responsible purposes—collateralized leverage that could produce revenue and income more rapidly than could resources limited to what existing assets could afford, financial innovation carried credit beyond its constructive business use and found justification in encouraging home ownership, collateralized to be sure, but by a home, an asset of substance but one which produced no income.

Eventually, such innovation carried it beyond the point where it was used solely for business and major purchases of valuable assets to the point where, today, credit is used for expendables and to satisfy the self-destructive trend toward converting luxuries into necessities: now the overheating engine of our economy. Like a Ponzi scheme, our society’s misuse of credit has an ultimate dead end. Credit is simply an obligation that extends into the future. And the future is not infinite! As it is, we have already mortgaged our own futures and those of our offspring; and we are well into committing the lives of our grandchildren to satisfy our own cravings for material things to which we are not entitled by virtue of our own productivity.

So, like the Ponzi scheme or chain letter, the trend must end. And just how chaotic and traumatic that end will be depends, unfortunately, upon the courage and intelligence of our elected representatives.

General Stanley McCrystal is an accomplished warrior, a great pick for the job he was charged with. And, as a former Marine, I gotta believe that his allowing the most radical of media access to his inner thoughts and his staff’s was deliberate and not simply careless or stupid. He was just too good an officer for that!

That scenario never would have happened, had either of the Commanders-in-Chief following the attack on the WTC on 9/11 shown the wisdom and courage that a former Missouri clothing salesman once had when in their shoes. President Bush should have made it clear to those hostile tribes that our enemy is anyone who so easily sacrifices innocent lives—including their own. Especially when they use themselves, their women, and their children as weapons of mass destruction. And he should have given his theater commander the go-ahead to act accordingly. Read more…

On this anniversary of the birth of our republic, it’s only fitting that we reflect a little on what we won in the Revolutionary War. Just what did we get in return for the sacrifices made in that conflict? Did we really get a republic? Or has it turned into something else?

Populism is a political model that would have the government champion the “common man” and satisfy his needs and wants. Many definitions of this term refer to the struggle of the lower class against the elite. Prime examples of this are Bolivia or Venezuela, where Evo Morales and Hugo Chavez, respectively, have been elected by the people to act in their best interests. And, in those nations, it is a neglected, indigenous population or an underprivileged underclass that has placed their trust in these demigods—someone whom they believe is “one of them” but who, they think, has the ability to act as capable steward of their nation. Read more…

Now comes our Congress, eager to feed the public’s lust for punishing the banks for having done our economy so much damage, and ready to impose a new bunch of regulations on that industry so as to protect the consumer from…. From what?

Here’s what the public really needs protection from:

1. Its own ignorance. This is certainly number one! Had the public been at all intelligent or educated about borrowing, they would have known better than to expect either the government or the lenders to protect them against borrowing beyond their means for homes they couldn’t afford. The first issue is financial literacy, which is sadly lacking in our society, our schools—and especially our Congress to begin with! Read more…