Why you should invest in pipeline companies… Wither Geither’s stress test results? Congress vs the Treasury… Check out of USA Inc with these four BRIC EFTs… How to survive the “Great Money Famine of 2009”… Three questions for Barney Frank… Congressional panel: Liquidate banks, fire top execs… PPIP FLOP… Geithner’s latest Orwellian manoeuvre… And more!

*** We’ve added a new section to Notes.

It’s called “Must Reads” and it’s basically a list of the day’s must read articles on money-making and the markets. It’s at the very bottom of the issue. Tell us what you think: info@contrarianprofits.com.
Don’t be shy. We’ve got thick skins.

*** We love DailyWealth.
It’s quite possibly the single best free source of contrarian money-making ideas out there (apart from Notes, of course).
Today, 12% Letter
editor Tom Dyson says
an easy way of making steady yield of up to 15% on your money a year. Tom reckons that if you like earning steady income, there’s no better business right now than pipeline companies. This
is a list of pipeline stocks with yields as high as 15%. Thanks, Tom.

*** Sssshhh… Rumors persist that the reason the Treasury won’t release its stress test results for banks
is that the department doesn’t like what it found out and reckons Mr Market won’t either. Or is it because releasing the results will reveal the stress tests for what they really are: an attempt at mass deception? Read more here.
(A mysterious leak has since appeared in the NYT. See below.)

*** It’s also pretty damn obvious that Geithner’s “legacy loans” program is going to be a flop.
And a big part of the reason for this is Congress’s recent pressuring of the FASB to get rid of mark-to-market accounting rules. This
from Jack McHugh at The Big Picture:

Tim Geithner’s troops are seeing less interest in PPIC than they had expected. The program’s complex requirements and a fear of future rules changes apparently have caused fewer players to want to join in the fun of bidding for toxic assets with taxpayer-sponsored leverage. I’m sure Treasury will come up with some changes (read: sweeteners), but with banks now allowed to mark their portfolios as they wish, it is quite possible the lack of demand for PPIC will be met with an equally small amount of supply.

Chalk up the lack of interest on both sides as unintended consequences numbers one and two for our newly seated Congress. Pressuring FASB into embracing “Miss Mark-to-Market” accounting will hurt PPIC supply, while It was the retroactive attack on the employees of AIG and other financial entities by our nation’s elected officials that is likely crimping demand. A thank you note from Tim Geithner to the Democratic leadership in both chambers is unlikely to be forthcoming.

*** The U.S. is clearly on its way to becoming a banana republic.
Right now, the only thing saving it is the dollar’s reserve currency status. One of the world’s most successful investors realized this a long time ago and moved to China. One way to hedge against this outcome is to invest in BRIC nations (Brazil, Russia, India and China). Writing in Investor’s Daily Edge, Ted Peroulakis reckons you can make “hefty profits” by investing in BRIC economies at current levels. Ted recommends four ETFs to cash in on these emerging markets.

1) The best way to play Brazil:  iShares MSCI Brazil Index (EWZ). This Exchange Traded Fund holds a nice basket of Brazilian stocks and seeks to mirror the Brazilian stock market as measured by the MSCI Brazil index.

2) The best way to play Russia: Market Vectors Russia ETF (RSX). This Exchange Traded Fund holds a nice basket of Russian stocks and seeks to mirror the Russian stock market as measured by the DAX Global Russia+ Index.

3) The best way to play India: PowerShares India (PIN). This Exchange Traded Fund holds a nice basket of Indian stocks and seeks to mirror the Indian stock market measured by the Indus India index.

4) The best way to play China: iShares FTSE/Xinhua China 25 Index (FXI). This Exchange Traded Fund holds a nice basket of Chinese stocks and seeks to mirror the Chinese stock market measured by the FTSE/Xinhua China 25 index.

(To get more money-making ideas from Ted, follow this link.)

*** As millions suffer through the Great Money Famine of 2009
, my friend Martin Weiss of Weiss Research can give you access to the world’s richest depression-proof market.

It’s a market that…

1. Gives you the opportunity for substantial income and/or large capital gains no matter how ugly this recession becomes — and can keep the cash flowing to you long after the recovery arrives; literally for the rest of your life …

2. Lets you start with investments that sell for peanuts and than up the ante as you gain confidence …

3. Gives you the flexibility to spend less then a half-hour a day on this opportunity, and to take time off whenever you like …

4. Lets you do it anywhere — at your home, your office, on vacation — anywhere in the world, and …

5. Unlike a business opportunity, never requires you to hire a single employee, invest in inventory, spend a penny for marketing or any of the other expenses that cut into profits.

Weiss’s depression investing plan is a blend of currency ETFs, high-return currency CDs, and World Currency Options. You can get all the details here.

*** Barney Frank is a populist idiot.
Maybe this is too obvious a point to make, but we’ll make it anyway. Frank’s brilliant new idea is to take a pot shot at Moody’s rating agency. He’s displeased with the possibility that Moody’s may downgrade U.S. municipalities. Frank says this action “would raise interest rates on cities and towns making it expensive to borrow funds for infrastructure developments.” What’s the people’s champion gonna do about it? He’s gonna rake Moody’s over the coals at a Congress hearing, that’s what.

*** Notes
has some questions for Frank.
Why didn’t he have a problem with Moody’s upgrading toxic assets during the boom? Doesn’t he realize that dodgy ratings were a major cause of the current crisis? Does he intend to lean on other ratings agencies? Does he want Congress to control the ratings over other securities? Idiot.

*** Frank isn’t the only politician fascinated by flying in the face of common sense.
Despite being told in simple terms by the Congressional Oversight Panel that firing top executives and liquidating insolvent banks may be a better way to solve the economic crisis, the Treasury continues down the path of creating zombie banks courtesy of the U.S. taxpayer. “All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets,” the panel, headed by Harvard Law School Professor Elizabeth Warren. (Hat tip to The Big Picture.
)

*** The government’s shenanigans and incompetence will bring dire consequence.
Porter Stansberry of Stansberry & Associates puts it best in the most recent issue of the S&A Digest
(available only to subscribers of Stansberry & Associates
research):

Our leaders have grown arrogant. They’ve forgotten what made America great. They seem to believe God bestowed wealth upon our country. They’ve borrowed an unfathomable amount of money – confident they’ll be able to tax future generations of Americans. But in fact, the wealth of our country is almost completely owned by individuals. And right now, these individuals see nothing but endless decades of additional government deficits, rising taxes, and a paper currency that’s being destroyed. They see the free market system being corrupted. And most importantly, they see a nation that used to espouse the ideals of limited government and personal liberty heading down the road of a socialist experiment, led by an inexperienced, charismatic, and wildly popular leader. They know what’s coming. And so should you.

What do you
think? Send you comments to info@contrarianprofits.com.

*** My old man is in town today.
He’s down here to see his grandson, among other things. Yesterday, we went to a local parrilla
(grill restaurant) around the corner from out new offices in the Palermo Viejo part of Buenos Aires. Dad thinks we may have been a little hasty here at Notes

yesterday in calling the end to the sucker’s rally. This is what he had to say
on the subject in yesterday’s Daily Reckoning:

It could be that the rally is over… and at only about 15% up from the bottom. That would be a disappointment to many investors. They were just beginning to think the worst was over.

Which makes us think that the rally is probably NOT over. It’s too soon to hammer the bulls. Not enough of them yet. This market should rise more… in order to draw in more suckers.

You saw our guess yesterday. We’re headed towards a Great Deception.

The bulls are deceived into believing we’re in a new bull market. They’ll be disappointed when this rally falls apart. They’ll give up on stocks and sell the market down to the 5,000 level…or below.

The gold and commodities markets deceive the bears. They expect prices to go up as the feds put in more money. They’ll be disappointed when gold sinks. You saw the big whack they gave gold on Monday. It went down hard. Yesterday, it recovered slightly – back up $10.

The big spenders will be disappointed too. They’ve got debt. And they’re counting on consumer price inflation to lighten up those debts, making them easier to pay. Instead, deflation will make their debts heavier… weighing down so heavily on the debtors that many of them will be crushed by it.

*** Annoyingly, today’s market action tips the argument is dad’s favor.
At the time of writing, the Dow, the S&P 500 and the Nasdaq are all up between 2% and 3%. News that Wells Fargo’s preliminary Q1 results were stronger than expected has boosted optimism. So has a handy leak
in the New York Times
that the 19 major banks will indeed pass the Treasury’s stress tests.

*** We’re fascinated by the timing of this leak… and its contents.
As we’ve been saying for weeks now at Notes

the prime mover in the markets right now is Uncle Sam. Here’s how it works. The government announces some sort of positive announcement about its fight to ‘fix’ the economy, moving the markets higher. Then, after traders have time to digest the news, the markets move lower again (PPIP, Fed’s quantitative easing initiative, the various bailout behemoths, etc.)

The NYT leak is no different in our view. When the real data comes out, expect it to be a lot worse than the convenient NYT leak makes it out to be. A couple of things stick out as significant:

1) The only ‘source’ quoted in the NYT article is “officials involved in the examinations.” This story is a plant by the Treasury. Nothing more.

2) These two sentences also tell a story:

Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it.

We were under the impression that the stress test was to determine whether insolvent banks should be taken into a government-sponsored receivership and liquidated rather than sucking up more tax dollars by way of bailouts. But if even the regulators say this is a test that a bank simply won’t fail, what is the point of them?

*** Geithner’s stress tests are just another Orwellian smoke and mirrors manoeuvre from a dishonest Treasury department
– and by extension a dishonest administration (sorry, Obama supporters) – determined to subsidy banks with taxpayers’ money.

*** This from William Black, a former senior bank regulator and S&L prosecutor,
courtesy of Naked Capitalism:
“There is no real purpose [of the stress test] other than to fool us. To make us chumps.” Black says Geithner is now essentially saying: “If we lie and they believe us, all will be well.”

*** The depressing reality is that the stress tests are reversed engineered nonsense
designed to provide cover for the Treasury’s massive wealth transfer from you, the taxpayer, to failed banks.

Josh Rosner at Graham Fisher & Co (a guy who predicted the peak of the U.S. housing market and the likely contagion of structured securities into the real economy) says
there’s not a single regulator in Washington that takes Geithner’s test seriously. The trick is to make the stress test not terribly “stressed.”

Here are quick initial thoughts on the stress test…

The underlying macro-economic assumptions of the stress test are not terribly “stressed”. They are more probable than unlikely:

* 0.5% GDP growth in 2010, after -3.3% in 2009 is now looking quite realistic

* 10.3% unemployment rates in 2010, after 8.9% in 2009. We have estimated, if government stability plans fail, the rate will rise to 11% in 2010)

* 7% declines in home prices in 2010, 22% in 2009 (They are down 18.8% y/y and 27% since 2006 peak, we have estimated a 2011 trough. Long term trends in home prices suggest that we will revert close to the peak levels of the previous cycle)

Go figure…

*** With meager oil or gas resources of its own
- yet with a combined energy need of 27.7% of world supplies - Europe’s at the mercy of petroleum powerhouse Russia…

But now, China’s deep pockets are challenging Russia’s deep reserves for control of Europe’s energy supplies. And three strategically located petro-players will soon play a crucial role in European energy independence - or Chinese energy dominance…

Either way, you stand to gain as much as 183 times your money - if you’re invested in these “target” companies before April 30th. Follow this link
to learn more.

*** From the mailbag…

**
Explain to me in economic terms where you came up with this “factoid”:
If the bear market rally in U.S. stocks fizzles out, risk appetite will plunge, triggering a return to gold. That is not fact nor is it even common sense. A plunge in stock DOES NOT mean a run in gold. That is absurd. It is possible but in no way factual. For one thing, gold is a speculation and if people are risk averse, as you stated they would be (”widespread systematic risk in the financial system”)
then common sense says they would be risk averse to ALL markets. Why do you make these claims when you must know they are bogus? And Shah Gilani who is a Contributing Editor to Money Morning has given as good a reason as any why stocks will go up. But who says any of you newsletter guys know what you are talking about. You are trying to sell subscriptions and more. Steve B.

Notes
comment:
It’s widely understood, Steve, that the recent rise in gold prices is linked to the recent fall in stocks. It’s hardly controversial. Investors sell gold when they think things are getting better. What part of that is “bogus”? Gold is a hedge against risk (“disaster insurance as commodities investor Rick Rule puts it). It may be common sense to you that when people are risk averse, they’re risk averse to everything. But this isn’t the case. As to us “newsletter guys” trying to sell subscriptions. You’re right. We do sell subscriptions. That’s what pays for all the free money-making you get. Of course, the subscriptions we sell make a lot of people a lot of money. Otherwise, there wouldn’t be a newsletter business. Not big on logic, are you Steve?

*** Quote of the day:
“Cramer is a buffoon. He was one of those who called six times in a row for this bear market rally to be a bull market rally and he got it wrong. After all this mess, and after Jon Stewart, he should just shut up because he has no shame.” New York University economics professor Nouriel Roubini.

Have a great weekend,

Will Bonner

Must reads:

• Cramer vs Roubini: Another war of words for CNBC star (The Independent)
• Obama wants taxpayers to bail out banks directly (NYT)
• Elizabeth Warren introduces Congressional Oversight Panel’s April report on the first six months of the TARP (YouTube)
• At least ten states consider major tax hike… Better hope you don’t live in one of them (WSJ)
• Unemployment claims at 5.84 million – the all time record (Calculated Risk)
• Interactive graph of the Fed’s balance sheet (Real Time Economics)
• Kass buys Berkshire (TheStreet)
• Former regulator on why Geithner’s stress test for banks is a “complete sham” (Clusterstock)

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