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  • How Over-Regulation Hurts Us - Some Eye-Popping Numbers

    Today we'll look at a recent study which quantifies just how much over-regulation hurts the US economy each year. The numbers are incredible! The US economy would be almost double what it is today were it not for the maze of costly regulations that hinder big and small businesses alike.

    Reducing harmful and unnecessary regulations should be a top national priority, but hardly anyone in Washington talks about it. Name me one national political figure that has run on scaling back government regulation in recent years. It’s hard to find one. Presidents John F. Kennedy, Ronald Reagan and Bill Clinton were effective at limiting regulation, whereas President Obama is rated the worst of all time.

    Over-regulation has been a main contributor to the decline in the growth rate for worker productivity. Historically, worker productivity has grown by 2.5% per year. Last year, however, productivity grew by only 1.1%, and it actually declined by 3.2% in the 1Q of this year.

    According to a recent report, the government has implemented almost 90,000 new regulations over the last 20 years (an average of 4,500 per year), and many of these new regulations decrease worker productivity and increase costs for just about everything we buy.

    If that weren't bad enough, the US has seen its "economic freedom" ranking plunge from being in the top ten a few years ago all the way to #12. In fact, the US is the only developed nation to see its economic freedom ranking fall for seven straight years! When it comes to free trade, we've fallen all the way to #36. And I have even more stats on this as we go along today.

    Let's jump right into what should be a very interesting, although discouraging, letter. But we need to know these things.

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  • Financial Reform or Government Takeover Revisited

    The sweeping new financial regulatory bill was signed into law last Wednesday by President Obama. It will create a huge new government bureaucracy over the next year or so including 13 brand new federal agencies employing thousands of new government workers. The heads of these agencies will be appointed (not elected) by the president. These agencies will have the power to seize any companies that they deem to have 'systemic risk' and liquidate them if they so choose. One specific agency will have the right to demand any and all information from financial companies, including your personal account information, and it will have subpoena power over any firms that don't cooperate.

    The vast new reform law does not solve the 'too-big-to-fail' problem; in fact, it institutionalizes it. Likewise, the new law does not at all address Fannie Mae and Freddie Mac, both of which continue to lose billions every month. The reform law will create a new Bureau of Consumer Financial Protection, which will have the authority to write rules for consumer protections governing all financial institutions – banks and nonbanks – that offer consumer financial products or services. While some financial reforms are needed, this giant new bureaucracy will cost taxpayers and financial firms billions every year, and these costs will be passed down to their customers like you and me.

    There is probably nothing we can do to stop this new law and replace it with something smaller and more focused, but I wanted you to know the facts about this new bureaucracy. Suffice it to say, Big Brother just got a whole lot bigger!

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  • Bernie Madoff - How To Avoid A Ponzi Scheme

    This week, I'm going to address the $50 billion "Ponzi Scheme" allegedly masterminded by Bernard Madoff. The question we receive most often is how a Wall Street icon like Madoff got away with such a huge fraud for a period of decades? As you'll see in this week's E-Letter, the answer lies in a structure that lends itself to conflicts of interest, plus a lack of regulatory scrutiny. The lesson to be learned by all investors is to be sure to conduct due diligence on any money manager, no matter how famous they may be. I'll also review the many steps we go through in our due diligence process before recommending a money manager....