The Double Standard of Fraud

Between endless television coverage and heated congressional hearings, the Bernie Madoff scandal has received a great deal of attention lately. Yet another fraud, one even more brazen and nefarious, has received scant notice.

Advertisers nationwide are cutting back, but not Amtrak. The government-owned railroad has just launched a TV and print campaign promoting its new Acela Express service. Pricey pages in The Wall Street Journal and New York Times along with local TV are among the media exposure the company will be purchasing this spring.

Of course, it’s easy to spend money when you’ve got a sugar daddy in Washington. Amtrak is on track to receive up to $1 billion from the “stimulus” bill. It has received over $40 billion of taxpayer dollars over the past four decades and, unlike Citigroup (C) or Bank of America (BAC), has never made a profit in its history.

Amtrak has been a financial disaster since inception, perfectly demonstrating why government ownership of the private economy is an economic death wish. Yet as we’ve been pointing out for almost an entire year now, that’s exactly the direction in which Washington is moving. Running the banks or the health-care system in the same semi-socialist fashion as Amtrak has been will garner the same results: losses, stagnation and waste.

Warren Buffett’s track record is slightly tarnished as of late, as the Oracle of Omaha has taken lumps on investments in Goldman Sachs (GS) and General Electric (GE), among others. Yet these setbacks don’t seem to bother the world’s richest investor, who emphasized in a recent New York Times op-ed, his belief that investors should “Be fearful when others are greedy, and be greedy when others are fearful.” Just today he announced another deal to inject more capital into Swiss Re (SWCEY).

No question that fear is now firmly in command. Although consumer confidence data released this week ticked slightly higher, it remains just a hair off its all-time low reached the last week in January. With unemployment and socialism rising fast, Americans aren’t merely downtrodden…they’re downright depressed.

Source: Bloomberg, Rosewood Research

Plotting the consumer confidence data against the S&P 500 reveals a fairly obvious trend: that confidence, especially since the modern investor class emerged in the mid-1990s, tends to follow the stock market quite closely, albeit with a slight lag.

With virtually no leading sectors, unprecedented government intervention and a nearly $1 trillion pork-laden stimulus bill likely to pass, investors have good reason not to be optimistic. Yet if Buffett’s adage holds up, the collapse in confidence to record lows could be offering up the stock market sale of the century. As always, only time will tell.

Among the regional stock and future markets, none was more beautiful than the Minneapolis Grain Exchange, with a stunning trading floor featuring 32-foot ceilings and hand-painted frescoes depicting the various uses of wheat. After 127 years, the exchange closed its floor last year, moving all contracts to its electronic platform. The YouTube video documents the historic trading floor’s final closing bell.