The BIS calculates the value of global derivatives, as of 3/31/04, at $392 trillion as measured by underlying assets. This is a 31% increase year-to-year, the biggest gain since the 55% surge in the first quarter of 2001, which was at the beginning of the last recession, which we have never really exited. Despite all the aggregate creation, money and credit and major negative interest rates, the real monetary base is rapidly decelerating and money velocity appears to be at risk of deceleration, along with decelerating real money supply. Asian buying of Treasuries now exceeds total foreign purchases of Treasuries, which implies non-Asians are net sellers of Treasury securities. Despite all the creation of aggregates and derivatives, the financial system is still headed downward.

            Mr. Cheney’s favorite firm, from which he still receives compensation, Halliburton, has been issued a grand jury subpoena seeking information about its Cayman Islands unit’s work in Iran where it is illegal for US companies to operate. This company breaks the spirit of our laws with impunity. The case has been transferred from Treasury to Justice so we can expect a whitewash. Justice and the SEC are investigating their subsidiary Brown and Root on overcharges for fuel and service contracts in Iraq. Halliburton has 90% of the contracts in Iraq presently. Most all of them were no-bid contracts. We know what would happen to you or us if we had offshore companies doing business in Iran. We would go straight to jail. All that can happen to Halliburton is a $500,000 fine for the company and a $250,000 fine and up to 10 years in jail for individuals. There will be a few fines and that is it, because elitists never go to jail, only us commoners do.

The employment tax dollars that come into the US Treasury in behalf of Social Security recipients has been spent. All there is in the Social Security Trust fund is an IOU. The surplus created over the years was a slush fund for politicians who did not have to raise taxes to pay for their deficit spending. The surpluses are about to end, the cookie jar is being taken away as Social Security and Medicare programs start absorbing the employment tax income designated to the trust.

            Sir Alan Greenspan in his semi-annual report to the Senate Banking Committee dismissed concerns about recent softness in economic data. He said, the economy was prepared for gradual rate hikes and also could handle “less gradual” rate hikes if necessary. He was not yet sure whether the benign inflation environment would persist or if there were more deep-seated forces at work pushing prices higher. The Fed will pay close attention to incoming cost and price data.

            Mr. Greenspan is telling us he will raise interest rates faster if inflation suddenly worsens. He well knows inflation is 9.5% because he looks at the same numbers we do. He is still nine months to a year behind the curve and is holding back rate increases for political reasons and risking a financial collapse. He said there were significant gains in employment, which he knows is untrue. He made small admissions, which tells us he is looking for cover.

You are all well aware of the recent mutual fund scandals, which had to be exposed by NY AG Eliot Spitzer because the SEC refused to pursue the matter when presented with the same evidence. Many funds were fined, but as usual, no one went to jail. Today, money is far more important than jail time. Until these scandals, no one ever thought that mutual funds would steal from them when on top of that for the past 4 1/2 years these same funds performed so poorly. For such performance, the fund owner had the privilege of paying expenses of 1.56%. Why do funds do so poorly in bear markets? It’s because they are part of the establishment and they never sell or tell you to sell in a major way when the market is headed lower. They are usually 95% invested and that is where the problem lies. They, Wall Street, the banking establishment and our government want you to buy and hold indefinitely. That is so they get ever bigger management fees and if no one ever sells in a large way the market seldom goes down. These management fees are paid whether the market goes up or down. Many are realizing this and on the tail of the scandals many are leaving and using Exchange Traded funds. Thus, most mutual funds are now charging higher redemption fees if you take your money out within a specific time period and that is not fair. Management and redemption fees and lack of performance in down markets justify the sale of funds. The alternatives are Exchange Traded Funds and a solid stockbroker. We have been in the markets for 45 years and overall professional management has not done well in the fund industry. It is time to take hold of your own money and invest it yourself. Today, there is plenty of information available to make you successful, give it a try.