Remember those terrible 1980s cereal commercials? They were almost as bad as the cereal itself.

Trix, Captain Crunch, Cookie Crisp, Frankenberry... they might as well have called the stuff "chemical-coated sugar puffs." It makes you wonder whether General Mills had a secret deal with the American Dental Association to prop up the cavity-filling business.

Anyhow, those Saturday morning breakfast cereals remind your humble editor of government stimulus: Lots of sugar... lots of hype... 98% artificial coloring and flavoring... and pretty much zero nutritional value.

In keeping with the analogy, Fed Chairman Ben Bernanke is like the white rabbit from the Trix commercials. You know, the one who always got foiled with the tagline: "Silly Rabbit, Trix are for Kids!"

Except in Bernanke's case it would be: "Silly Chairman, Stimulus is for Gold Stocks!"

Here's the deal as your humble editor sees it:

• The U.S. economy's biggest problem is structural unemployment.
• There are various causes for this, but mass unemployment is the effect.
• Urgent calls of "more stimulus" to improve the unemployment picture won't help.
• In fact, such stimulus is mainly likely to help gold and gold stocks.
• Stick with me here as we walk through the logic...

Keynesians With A Hammer

You've surely heard the old saying, "To a man with a hammer, everything looks like a nail." For proponents of Keynesian economic theory, the "hammer" equates to counter-cyclical government spending and deliberate attempts to prop up the economy.

To these guys, every single problem looks like a nail. They want to hammer everything with money.

Whether this money comes directly from the halls of congress or indirectly from the Federal Reserve, they don't really care -- as long as Uncle Sam blows the dough.

The lead hammer-wielder in the Keynesian camp is NYT columnist (and Nobel Prize Winner) Paul Krugman. For months Krugman has been pounding the table hard enough to nearly break it, demanding that the government shell out dough for another big-bucks stimulus package.

Krugman's latest is a call for congress to blow another $800 billion, saying the chronically weak economy proves his hunch that the first stimulus package wasn't big enough.

Other Keynesians of lesser stature basically follow Krugman's lead. For example, in his latest "Global Central Bank Focus," Managing Director (and die-hard Keynesian) Paul McCulley of PIMCO had this to say (emphasis mine):

The nation deserves better, especially the 8 ½ million Americans who have lost their jobs. When deflation is the fat tail risk, when the Fed is willing to monetize deficits, there is no excuse for the fiscal authority to resist running bigger deficits to directly finance job creation.

Spend money to create jobs. That's the magic formula. But it comes with a very big assumption.

The assumption itself comes in two parts: First, that unemployment is a problem that government can solve... and second, that government can solve this problem quickly through sheer fiscal will.

It is a very dumb assumption on both counts.

The unemployment issues plaguing the United States right now are structural. Not temporary, not quickly and easily solved, but deeply rooted with no simple fixes. The various root causes were a long time in the making. And no amount of stimulus will quickly solve the problem.

This, in part, explains why inept Keynesian policies of "pushing on a string" wind up doing jack squat for the real economy, yet act as a boost for safe haven asset classes like gold stocks.

The gold stock dynamic comes in because all the money that was supposed to help get the economy out of the muck just winds up debasing the currency and deteriorating the balance sheet instead.

And so, as investors look around and see a stagnant economy just sitting there like a flooded engine, they rationally assess the situation and decide that, in a time of globally coordinated fiat currency debasement, "gold in the ground" starts looking pretty good as a store of value.

More on that in a minute -- but first let's take a closer look at the jobs problem.

No Skills, No Mobility, No Recovery

There is a great article in the latest issue of The Economist titled "Bad Circulation," with the opening summary, "There is more to America's stubbornly high unemployment rate than just weak demand."

As laid out by The Economist, here are some of the biggest structural issues:

• The U.S. economy has suffered a "trauma, not a scrape."
• Extended unemployment benefits dampen willingness to look for work.
• Jobseekers "no longer have the skills demanded by employers."
• Upside down households "often opt to stay put rather than default."

The last two are the real killers.

In regard to the demand-skills mismatch, a curious phenomenon of the present environment is a worker shortage in certain specialty areas. The United States is still very good at high end manufacturing, for example... but there just aren't enough skilled applicants to fit the job requirements that this type of employment requires.

Job openings in the United States are increasingly of the specialized skill variety. There are multiple factors contributing to this. First, globalization has led to a migration of many low-skilled jobs overseas. Second, businesses small and large have used the downturn to "trim the fat" and remove as many unnecessary positions as possible. Third, because America's edge has long been productive labor rather than cheap labor, job requirements have steadily advanced in technical complexity.

This is an area where America has been falling behind for years. There was a large and growing "skill gap" in respect to the skill-based education of America's workforce long before the global financial crisis hit. It was just covered over for a while, in part because of all the extra jobs created by consumer spending and the real estate boom.

View Larger Chart

The above chart from McKinsey shows you how serious the problem is.

The three major "large employment sectors" of the U.S. economy are "construction," "financial activities," and "retail trade," accounting for more than 22% of U.S. jobs collectively. And what do those three areas all have in common? They have all been crushed by the retreat in consumer spending and the collapse of the real estate bubble.

We can't create jobs fast enough no matter what we do, because the gaping hole in the U.S. employment picture is far too big. Prior to the collapse of the housing bubble, a significant percentage of Americans were employed in relatively non-skilled sectors directly tied to the U.S. housing ponzi scheme.

Now I don't want to start any fights here. I am not at all saying that construction workers, real estate agents, or retail store managers should be classified as "not having skill."

But a defining factor of the jobs created in these areas is that the expertise is not truly specialized... except in the case of construction, where one's specialty may be out in the cold if the pace of building projects has ground to a halt.

So a big problem is that the "skills gap" between jobless Americans and higher specialization job openings is staring us in the face. Another big problem is that many jobless homeowners are unable or unwilling to relocate, because of the albatross around their neck that is an unsellable, upside-down home.

An awful hidden side effect of the housing bust is millions of upside down homeowners. A certain portion of these homeowners have chosen to say "screw it" and default on their mortgages, a trend we have talked about in these pages. But an even larger percentage of homeowners have decided not to default... to instead ride out the pain as best they can.

The macroeconomic problem with this strategy of "riding it out," though, is that the stuck homeowner can't go to where the jobs are. He or she has to stay with the house, even if the region is economically depressed. This lack of mobility is another killer for the jobs and employment picture, forcing homeowners to either go without jobs or take a lower end jobs in a depressed region of the country.

And of course, don't get me started on the baby boomer retirement effect, or the de facto looming bankruptcy of various cities and states...

The bottom line here is that cheap money will not help the jobs picture. Anyone who is banking on the Federal Reserve, the White House, Congress, or any combination of the three to "solve" the U.S. unemployment problem simply doesn't have a full grasp on the serious structural issues we face -- issues that cannot be solved with a simple cash infusion.

Stimulus is No Solution

As far as I can tell, Paul Krugman and his ilk must be smoking banana peels, because "Let congress spend more money" is a solution so bad it is comical. Those idiots in Washington can barely find their butts with both hands and a flashlight, and we are supposed to give them another $800 billion to throw at lobbyists? How is that possibly going to help?

The most sensible "stimulus" type solution would probably involve enacting large tax cuts for small businesses -- basically giving the money back to ordinary Americans. But even that would be far from an easy solution, because most Americans (and most small businesses) would logically respond to such an action by simply using the windfall to pay off more debt.

That idea is a pipe dream anyway, of course. The Keynesian hammer-wielders rarely (if ever) want to give money back to ordinary Americans. Instead they want the stimulus dollars to be spent by wise philosopher kings, presumably like Harry Reid and Nancy Pelosi, who of course know what's best in terms of how to get America back on track again.

Bad for Retail, Great for Gold Stocks

How is this playing out in the markets?

Well, as mentioned earlier, a wildly spraying firehose of government directed stimulus is meaningless news for the real economy, but good news for the likes of gold and gold stocks, which benefit from flight to safety measures as investors seek debasement-proof alternatives.

(Gold and gold stocks also have a strong record in deflationary periods for much the same reason. When all fiat currencies are being debased as a deflationary fire-fighting measure, gold becomes the only neutral currency alternative not subject to a printing press.)

In my trading advisory service, Macro Trader, we have been exploiting both of these
themes -- long gold stocks, short retail -- with strong results.

(Taipan Daily, too, has not been shy in beating the drum: On August 20th we noted that "Retail Stocks Are At Risk of Being Crushed," and my colleague Zach Scheidt gave gold stocks an excellent treatment in "Bringing a Howitzer to the Global Cash War."

As the macroeconomic environment tilts toward gold stocks and away from retail, you can see the performance disparity in the chart above, which contrasts the 90 day performances of the Market Vectors Gold Miners ETF (GDX:NYSE) and the Retail Holders ETF (RTH:NYSE).

For a number of weeks Macro Trader has been long GDX and short RTH via liquid options positions. As the chart shows, GDX is up 10% over a 90-day span, while RTH is down nearly 18% in the same time frame. These trends are likely to continue, for reasons as cited in today's note.

The hyperinflation discussion is still coming by the way. We'll dig into that on Friday...

Not a lot, mind you; in fact, not even as much as it was this morning, when traders sieved through the week's ever-so-ugly facts and figures, and grabbed hold of one odd stat as an excuse to run up shares for an hour or so.

I must admit, even I -- the most bearish of bears -- was taken aback when I first read this item. I am speaking of the Institute of Supply Management's surprising notice that its factory purchasing managers index had risen to 56.3 in August, when most all had expected a decline to 52.3.

"Take That, You Bears!"

Like so many of these oscillating readouts, any reading above 50 indicates economic expansion, so this little spike flies in the face of the more sober predictions we've been reading lately. Norbert Ore, who gins up this particular report for the ISM, was quick to pounce on us bears: "Certainly there are no signs of a double-dip in manufacturing."

Manufacturers Alliance/MAPI chief economist Daniel Meckstroth was also quick to elaborate on this odd showing of strength in the industrial sector, pointing out that while real gross domestic product increased at a 1.6% annual rate in the second quarter, manufacturing production expanded by 7.9%: "Manufacturing has consistently outperformed the pace of growth in the general economy during this recovery."

You know what? They almost had me there for a moment.

The Fly in the Pudding

I was actually starting to query the very foundations of my bearish stance, when my eye caught on that gap at the end: 1.6% real growth rate vs. 7.9% industrial growth rate.

Now I am an old businessman myself, and in my day, production build-out exceeding client demand simply had to end one of two ways: either with idle capacity or excess inventory.

With this niggling doubt in the forefront of my mind, I began to dig a bit, and lo and behold, I am not the only one doubting either the sanity of our factory managers -- or the predictive value of this report.

Thank Goodness for GS!

No, not Goldman Sachs (GS:NYSE)! I wouldn't give those guys a glass of water if their pants were on fire.

I am speaking of Gluskin Sheff (GS:TSX), the modest Canadian investment house that provided a base of operations for former Bank of America-Merrill Lynch Chief North American Economist David Rosenberg.

From his new perch up north as Gluskin Sheff's chief economist and strategist, Rosenberg puts out some fairly acute assessments of the situation on the ground down here in the big 50.

Normally, I am loath to pass on long quotes of other people's work. But David's nine-point analysis of the stench coming off the ISM report is a particular gem.

The View From Up North

STRANGE ISM NUMBER... DOESN'T PASS "SNIFF TEST" Here's why:

1. Most of the regional reports were very poor in August. Either they are collectively all wrong or the ISM is.

2. The share of respondents saying the experienced "growth" was 61%, the exact same as a year ago when the ISM was sitting at 52.8.

3. The ISM gain was led by employment (58.6 to 60.4 -- best since December 1983) in the same month that ADP manufacturing fell 6,000 (second decline in a row -- it was  -11k in July when ISM employment was 58.6, so clearly the latter is proving to be, at least for now, an unreliable labour market barometer). Production also ticked up to 59.9 from 57.0 and inventories rose to 51.4 from 50.2. These are all coincident indicators, as an aside (but an important aside).

4. According to the ISM, 76% of the manufacturers surveyed said that their customer inventory levels were either "too high" or "about right." At the turn of the year, just ahead of the big inventory swing that bolstered the GDP data, this metric was sitting at 60%. As a result, it would be folly to assume that the inventory and production categories will contribute to further ISM increases in the near- and intermediate-term. Norbert Ore, who presides over the ISM survey, had this to say about inventories: "If the inventory build isn't voluntary then we have a huge issue on our hands."

5. Meanwhile, the more forward-looking components dropped, though were hardly a disaster. But orders slipped for the third month in a row, to 53.1 from 53.5 in July, 58.5 in June and 65.7 in both April and May. That is still a sharp squeeze in the growth rate of capital goods-related order books. At 53.1, ISM orders index is down to levels last seen in June 2009 (but when they were rising in "green shooty" fashion).

6. Backlogs were down as well, to 51.5 from 54.5 in July, 57.0 in June and 59.5 in May (and peaked in February at 61.0). At 51.5, order backlogs stand at their low-water mark of the year.

7. Supplier deliveries (measure of production bottlenecks) eased for the fifth month in a row -- to 56.6 from 58.3 in July and well off the March peak of 64.9.

8. Looking at five decades worth of data, the share of the time in which we see orders, backlogs and vendor deliveries all decline in tandem, and the headline ISM index rise, is the grand total of 1%. No wonder equities rallied so much -- we just witnessed a 1-in-100 event! Bring your camera.

9. Export orders dipped to 55.5 from 56.5 -- the lowest they have been since last December. If the overseas economy is rocking and rolling, then why onearth would this component be declining? Not only that, but it looks as though yet again, a good part of the inventory boost we still seem to be getting is being filled by imports -- that sub-index jumped four points in August and does not bode well for the trade deficit, which subtracted 3.4 percentage points from headline GDP growth in Q2.

5/2 Split Spells Doom

Mr. Rosenberg's report to his clients goes quite a bit further, noting that this summing ISM report is at complete odds with the regional surveys out of Philadelphia, New York, Milwaukee, Richmond and Kansas City, five out of seven of which were down.

He observes that: "In the past, when we had a 5-to-2 ratio to the downside, the share of the time ISM managed to eke out an advance was 4%." Even more important, he warns that the real nugget of truth in this report can be found in the ISM orders/inventories ratio, which has fallen from 1.441x in May to 1.033x come this August: "In the past 30 years, with eleven observations, ISM dropped to 47x in the three months after such a decline in the orders/inventory ratio to such a low level as is the case today."

The gist of both David's and my own argument? The ISM's top-line figure is either wrong, unique or doomed.

Even the Bulls Don't Buy This "1/100" Story

On the one hand, most every analyst and economist -- including most of Washington and Wall Street's in-pocket bulls -- is dead wrong about what's coming down the pike. Rather than squalid flat growth for the next two years (the most common upside story being trotted out these days) or a continuation of the worst contraction since the Great Depression, we are about to see a veritable "golden swan," a remarkable one-chance-out-of-a-hundred turnaround that will see our houses return to their pre-crash values, and our stock shares skyrocket to stellar new highs.

Or the guys at the factories are trying to kick the evidence of a massive strategic error under the rug, hoping against hope that someone in Washington will come along and patch things up before they get fired.

Both Mr. Rosenberg and I are inclined toward the latter.

Has your humble correspondent finally gone stark raving mad?

Has this summer's endless series of "mixed" (read as "mostly fabricated") economic reportage, bifurcated technical set-ups and volatile 100-point market swings that only yield flat share prices destroyed my ability to make sense of the markets?

Possibly, but if so, I'm not alone.

Wall Street's Growing Gap Between Hype...

A recent Bloomberg compilation of some 159,919 current ratings of stocks found that analysts are thoroughly convinced that corporate profits ought rise some 36% over the next quarter or so.

This is the highest such guesstimate since 1988!

Another report on my desk notes that these growth estimates have pushed that most venerable of leading value indicators, price versus forward earnings, to a 12-year low at 11.7.

One might easily imagine that these fellows are suggesting that we grab shares like they are going out of style. And one might easily be wrong.

...And Action

Those same analysts under Bloomberg's microscope who are lauding the profitability of Wall Street's "Fire Everyone" business model, are voting 2-to-1 against buying shares of same.

Indeed, for the first time since at least 1997, the report tells us, fewer than 29% of rated stocks are considered "buys." Another 54% are slated as "neutral," a status usually reserved companies that analysts privately hate, but don't care to trash out loud.

Like I said earlier, if I've gone mad, I certainly have lots of company.

21st-Century Schizoid Men?

If you were to ask Standard & Poor's senior index analyst, Howard Silverblatt, he would tell you that while all-time high projecting earnings would be nice, he "wouldn't bet on it."

ING's head of asset allocation, Paul Zemsky, tells us that when he chats with his team, they look at all those potential profits and that veritable mountain of cash on hand, and all they do is quibble about double-dip recessions.

Stifel Nicolaus' Meyer Shields goes even further. He simultaneously predicts that Warren Buffett's own Berkshire Hathaway's earnings will increase the most since the boom days of 2006 -- and is warning investors to sell shares because of the weakening economy.

There is a rather cynical reason for this 7-10 split between expectations and recommendations. Simply put, no one actually believes those "expectations of profits" will actually come to pass, but they don't particularly care to call their friends on Wall Street liars to their faces.

According to an April study out of McKinsey and Co. over the past 25 years, analysts estimates of profits by large come roughly double reality. And indeed, when you press most of these guys in private, they will tell you that all of Wall Street's probable profits depend entirely on economic presumptions that are increasingly proving false.

We're Certainly Spending...

Indeed, just last week we learned that the supposed GDP growth of the past few quarters might be nothing more than hope and a rounding error or two. In point of fact, the country may have never have actually recovered from the recession that began in December of 2007.

But all this is rather generalized talk, and I began today's column suggesting that you sell a specific category, retail stocks. And I made this suggestion in the face of an ostensible improvement in the sector's affairs.

According to the Commerce Department, Americans are spending at the fastest pace in some four months. If this headline were backed up by facts (as against mere statistics), it would certainly make me look mad indeed.

...But Are We Buying?

However, once again, it pays to view such figures in a realistic context. Yes, consumer spending "may" have grown 0.4% in July.

I put may in quotations like that because these reports have been sooo prone to downward revision once everyone's attention is elsewhere. But even if we take the gain at face value, it comes after April's loss of 0.1%, May's 0.1% gain and June's absolutely flat performance. In other words, the bar for "growth" has been set pretty damn low.

What's more, this gain in spending might not even represent an actual gain in folks' purchasing power, or maybe even in actual purchasing!

Theoretical Deflation -- Factual Inflation

Wages and salaries are supposed to have increased 0.3% in July. So right up front, we have a 0.1% shortfall. Factor in inflation, and the gap between income and spending is actually somewhat larger than that.

Despite all the talk these days of deflation, there was actually a 1% increase compared to June 2010 and a 1.5% increase in the cost of common items all in (including fuel and food) compared to July 2009. Factor that inflation into the picture, and the aforementioned "purchasing bump" is cut in half to a mere 0.2%.

And just to complete the picture, this shortfall is coming out of personal savings, which fell from 6.2% in June to 5.9% in July.

Golden Days for the Rich...

Very long story short: There is no nascent consumer boom happening here. Rather what we are seeing is yet another "bifurcation," a split in the country between those who really don't give a rat's patootie about such things as inflation or unemployment, and those who are getting increasingly concerned about "GD-II," aka the Great Depression of the 21st century.

I have two reports on my desk that typify the former side of this divide. One is from The New York Times, and frets that Volkswagen's buyout of Porsche will somehow rob the venerable sports-car maker of its exclusive cachet.

The second is out of The Wall Street Journal, and notes that 18.5% of homeowners who refinanced between January 2010 and June 2010 chose to increase their monthly outlay by as much as 50% so as to pay off their mortgages in 15 years rather than 30, garnering tens of thousands of dollars in long-term savings.

And Long Dark Nights for the Rest

On the other side of the divide, the Administrative Office of the U.S. Courts informs us that the 9% increase in filings between the first and second quarters of 2010 has pushed the U.S. bankruptcy rate to its highest point since 2005. Compare the 12 months ending June 30, 2010, to the previous 12 months, and you find that consumer bankruptcies are up a staggering 21%.

If you are looking for a more prosaic metric, you might care to compare the latest quarterly reports coming out of rival grocery chains, Whole Foods (WFMI:NASDAQ-GS) and Safeway (SWY:NYSE). The former brags of same-store sales gains of 8.8% while the latter is forced to admit to a 4.2% loss. As Safeway CEO Steven Burd puts it when he regards two plus years of economic troubles: "There are some people that still feel challenged and there are others that don't."

Unfortunately (or perhaps fortunately, depending on what side of that divide you are on), the retail world as a whole is far more dependent on Safeway's customers than Whole Foods. And as we have seen both demonstrated both historically and again in today's statistics, when those customers are "challenged," they take steps that cut deep into both sales and profits.

The Payoff

"All this," as Rex Stout was fond of writing, "is mere phenomena." When I look to such amalgamations of grocery joints as Standard & Poors' Consumer Staples SPDR (XLP:NYSE), I see the very same wise guys who are telling us of profits for quarters to come preparing to abandon shares willy-nilly.

A glance at the XLP's technical situation reveals the exact same set of sell signals that preceded their fall in September of 2008, including such ugly forms as a death cross on the upper chart, with both price and the 50-day average sitting below the 200-day average, and complete collapses on multiple lower chart corollary oscillators.

I say that this is "fortunate" for those with trading capital, because I see the opportunity to short the index to the tune of some 25% over the next few months. Option traders could of course quadruple that gain with properly selected put option contracts.

Another part of the reason I focus on these types of posts is that there’s a dearth of information for US investors on international stocks and their valuations.  Since I keep up on analysis of the Canadian equities markets, I’m happy to share with you what I’ve learned.  I’m not a financial advisor, however, so keep that in mind and use these as suggestions for further research only.

When I say “best,” I mean some mixture of both the largest, the companies with the most lucrative oil patch locations, and the stocks that are most often recommended by Canadian analysts specializing in this sector.   Also note that all of these are mature oil producers and they all pay dividends.  I’ve listed them here according to market cap.

Best Oil Stocks To Buy For 2011: Suncor (TSX: SU)

One analyst called this the “#2 go-to name” for foreign investors.  Suncor is another solid management team with steady, if not spectacular, growth prospects projected ahead.  They recently acquired Canada’s #2 gasoline company, Petro-Canada, which owned a large number of gas stations throughout the country. Market Cap: $55.3 billion.  Yield: 1.1%

Suncor Energy Inc. is a growing, integrated energy company, strategically focused on developing one of the world’s largest petroleum resource basins – Canada’s Athabasca oil sands.

In 1967, Suncor made history by tapping the oil sands to produce the first commercial barrel of synthetic crude oil. Since then, Suncor has grown to four major businesses with more than 5,000 employees.

• Near Fort McMurray, Alberta, Canada, Suncor extracts and upgrades oil sands into high-quality refinery feedstock and diesel fuel.

• In Western Canada, Suncor explores for, develops and produces natural gas.

• In Ontario, Suncor refines crude oil and markets a range of petroleum and petrochemical products, primarily under the Sunoco brand.

• In Colorado, Suncor’s downstream assets include a Commerce City-based refinery, crude oil pipeline systems and 43 retail stations branded as Phillips 66.

While we work to responsibly develop hydrocarbon resources, Suncor is also investing in clean, renewable energy sources. By 2008, Suncor plans to have four projects in operation with a total capacity of 147 megawatts of renewable energy as an alternative to hydrocarbon-fuelled generation. These projects are expected to offset the equivalent of approximately 270,000 tonnes of carbon dioxide annually. In Ontario, Suncor expects to complete construction in 2006 on a plant that will supply ethanol – a renewable energy source – for lower-emission blended fuels.

Suncor Energy (SU:TSX) is one of Canada's premier integrated energy companies. Suncor's operations include oil sands development and upgrading, conventional and offshore oil and gas production, petroleum refining and product marketing under the Petro-Canada brand (Annual Report 2009). Suncor's common shares are listed on the Toronto and New York Stock Exchanges.

Currently Suncor's stock price is trading close to its mid-point in the 52 week time range. It's last closing price was recorded at $34.32. It's 52 week low price was $27.44 and it's 52 week high price was $40.79.

Suncor Fundamental Valuation Metrics

All of Suncor's financial ratios other than the Return on Equity and Gross Profit Margin are lower than the industry average. Its operating performance measures are on par/better than some of its closest peers.

However, its relative valuation measures are higher than the industry average as illustrated below:

Suncor Valuation

Is the valuation justified?

Suncor has a strong recoverable resource base of 27 billion barrels of oil equivalent.

Suncor also has in place a debt retirement plan and is now in the process of divesting assets it inherited in the merger with Petro-Canada that do not support its core operations. The company expects to close most sales by the end of the year. The proceeds from these sales are expected to be around CAD $ billion 2 to 4 and are expected to be used in reducing the company's debt. Along these lines, Suncor recently announced that it has entered into an agreement to sell certain natural gas-heavy assets in west-central Alberta for C$235 million ($230 million) in cash.

With 84% of the value in Suncor coming from oil, rising oil prices are Suncor's strongest catalyst for growth. For the near future, the US Energy Information Administration forecasts oil price to average USD 80.06 in 2010 and USD 83.50 in 2011.

Best Oil Stocks To Buy For 2011: Encana (TSX: ECA)

Encana has been described as one of the “bluest of the blue-chips.”  Its focus is unconventional oil and gas with strengths in clean energy production, although it is weighted to natural gas.  However, it has the second-largest market cap of any Canadian oil company.  Market Cap: $45.4 billion.  Yield: 2.8%

EnCana is a leading oil and gas producer in North America, where the company's primary focus is on the development of resource plays and the in-situ recovery of oilsands bitumen.

Christina Lake In-situ oilsands, northeast Alberta, EnCana's largest potential oilsands project

Located in northeast Alberta about 120 kilometers south of Fort McMurray, Christina Lake has the potential to be EnCana's largest oilsands project. Pilot project work over the past five years has taken steam-assisted gravity drainage production, from six well pairs drilled into the McMurray formation, to a level that is expected to average 6,000 barrels of bitumen per day in 2006. A current expansion is expected to take production to about 18,000 barrels per day in 2008 and the project is targeted to grow to more than 250,000 barrels per day over the next decade.

With a reservoir thickness of up to 150 feet of oil-bearing sands, Christina Lake is estimated by EnCana to have an unbooked resource potential of about 1.8 billion barrels of oil. Foster Creek In-situ oilsands, northeast Alberta, commenced commercial operations in 2001. Foster Creek is the quintessential resource play — a high-quality, unconventional resource with large potential and scalable, repeatable operations that enable the company to incorporate technical advances.

Foster Creek produces from the McMurray formation of the Athabasca oilsands, and features a technology called steam-assisted gravity drainage (SAGD). We conducted a multi-year pilot project prior to starting commercial operations in 2001. In SAGD, horizontal wells are drilled in pairs — running parallel above one another about 17 feet apart. Steam is injected in the upper well to warm the bitumen and make it less viscous so it can drain to the lower production well bore. A critical SAGD thermal efficiency measure is the ratio between the quantity of steam injected and the quantity of oil produced. Our steam-oil ratio of 2.5 times is industry leading. With a high-quality reservoir and leading thermal efficiency, Foster Creek delivers excellent returns. Oil production averaged 29,019 bbls/d in 2005. In the fourth quarter of 2005, we completed the first stage of an expansion which added an additional 10,000 bbls/d of capacity. The second stage of the expansion, which is expected to add an additional 20,000 bbls/d of capacity, is expected to be completed around year-end 2006. In November of 2005, we announced that EnCana is developing plans to significantly expand production from its estimated 5 billion to 10 billion barrels of recoverable oilsands resources - assets that have the potential to reach a production rate of 500,000 bbls/d of oil per day in the next 10 years.

Imperial Oil Limited was incorporated under the laws of Canada in 1880. It is an integrated oil company. It is active in all phases of the petroleum industry in Canada, including the exploration for, and production and sale of, crude oil and natural gas. The Company's operations are conducted in three main segments: Upstream, Downstream and Chemical. Upstream operations include the exploration for, and production of, conventional crude oil, natural gas, upgraded crude oil and heavy oil. Downstream operations consist of the transportation, refining and blending of crude oil and refined products and the distribution and marketing thereof. The Chemical operations consist of the manufacturing and marketing of various petrochemicals. The Company owns and operates four refineries. Two of these, the Sarnia refinery and the Strathcona refinery, have lubricating oil production facilities. The Strathcona refinery processes Canadian crude oil, and the Dartmouth, Sarnia and Nanticoke refineries process a combination of Canadian and foreign crude oil. In addition to crude oil, the Company purchases finished products to supplement its refinery production. Crude oil from foreign sources is purchased by the Company at market prices mainly through Exxon Mobil Corporation. It owns and operates crude oil, natural gas liquids and products pipelines in Alberta, Manitoba and Ontario. Its known brand names are notably Esso and Mobil. The Company's Chemical operations manufacture and market ethylene, benzene, aromatic and aliphatic solvents, plasticizer intermediates and polyethylene resin. Its major petrochemical and polyethylene manufacturing operations are located in Sarnia, Ontario, adjacent to the Company's petroleum refinery. The Company's competitors include major integrated oil and gas companies and numerous other independent oil and gas companies. All phases of the Upstream, Downstream and Chemical businesses are subject to environmental regulation pursuant to a variety of Canadian federal, provincial and municipal laws and regulations, as well as international conventions.

IMO.TSX Revenue

As a value investing shop, we are interested in seeing how IMO.TSX's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 1.67x and the low end of the range at 1.09x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for IMO.TSX of 1.49x is somewhat above its historical average. As such, the current Price to Sales ratio suggests a neutral share price forecast. In order for us to become more positive about IMO.TSX we would need to see a drop in the Price to Sales ratio of 7% given current sales per share levels in order to return to its historical weighted average.

IMO.TSX Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. IMO.TSX is significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for IMO.TSX, the current level of Cash Earnings compared to its historical levels helps identify where IMO.TSX is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 17.13 and a historical low Cash Earnings per share ratio of 11.35, an investor can relate where value becomes optimal.

Just recall that when a stock's price, as in the cases of IMO.TSX, is significantly elevated to the level of Cash Earnings being generated, the market has already priced in much of that value. For example, the historical average for IMO.TSX's Price to Cash Earnings ratio is 35% below the current ratio of 19.28. That is not an insignificant amount, and diminishes our overall outlook on IMO.TSX. However, you need to review several areas of a company's potential, and as management would point out, one metric is not the end-all-be-all of any analysis.

IMO.TSX Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In IMO.TSX’s case, the estimated annual dividend is 0.40 resulting in a current dividend yield of 1.00%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from IMO.TSX against the historic high and low levels over the past 10 years. The highest dividend yield from IMO.TSX over this period was 2.47% while the lowest dividend yield was 0.61% With that range in mind, IMO.TSX’s current dividend yield is a full 35.24% below its median dividend yield historically. This is a negative from our perspective.

Best Oil Stocks To Buy For 2011:  Talisman Energy (TSX: TLM)

An independent company since 1992, Talisman is headquartered in Calgary, Alberta.  It has subsidiaries operating in the UK, Norway, Southeast Asia, and North Africa.  Talisman is another reputable big-cap, oil-weighted stock with gas exposure.  It’s also more likely to be a buyer rather than a target of a takeover.  Market Cap: $18.6 billion.  Yield: 1.2%

Talisman Energy Incis considered to operate in the Energy sector. They specifically operate in the Independent Oil & Gas business segment contained within the Oil & Gas - E&P industry.

Talisman Energy Inc. is a global, diversified, upstream oil and gas company, headquartered in Canada. Talisman's three main operating areas are North America, the North Sea and Southeast Asia. The Company also has a portfolio of international exploration opportunities. It is a Canadian-based independent oil and gas producers. Talisman's main business activities include exploration, development, production, transportation and marketing of crude oil, natural gas and natural gas liquids. It has a diversified, global portfolio of oil and gas assets. The Company believes this portfolio would provide growth from shale gas development in North America, project developments in Southeast Asia, and its international exploration portfolio. Talisman investigates strategic acquisitions, dispositions and other business opportunities on an ongoing basis, some of which may be material. The Company's activities are conducted in five geographic segments: North America, UK, Scandinavia, Southeast Asia, and Other. The North America segment includes operations in Canada and the United States. The Southeast Asia segment includes exploration and operations in Indonesia, Malaysia, Vietnam and Australia and exploration activities in Papua New Guinea. The Other segment includes operations in Algeria and exploration activities in Peru, Colombia and the Kurdistan region of northern Iraq.

TLM.TSX Revenue

Cash earnings is the most important factor in our analysis, but it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, TLM.TSX the high and low end of the Price to Sales per share ratios are 2.55x and 1.43x respectively.

Notice that TLM.TSX's current Price to Sales per share ratio is 2.55x, which is high enough compared with historical norms of TLM.TSX to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 28% merely to return TLM.TSX to its historical average.

TLM.TSX Cash Earnings

Looking at TLM.TSX specifically in their Cash Earnings capabilities, Ockham views TLM.TSX as significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for TLM.TSX, the current level of Cash Earnings compared to its historical levels helps identify where TLM.TSX is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 16.60 and a historical low Cash Earnings per share ratio of 9.93, an investor can relate where value becomes optimal.

Just recall that when a stock's price, as in the cases of TLM.TSX, is significantly elevated to the level of Cash Earnings being generated, the market has already priced in much of that value. For example, the historical average for TLM.TSX's Price to Cash Earnings ratio is 204% below the current ratio of 40.37. That is not an insignificant amount, and diminishes our overall outlook on TLM.TSX. However, you need to review several areas of a company's potential, and as management would point out, one metric is not the end-all-be-all of any analysis.

TLM.TSX Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from TLM.TSX against the historic high and low levels over an available data range. Because TLM.TSX has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In TLM.TSX’s case, the estimated annual dividend is 0.24 producing a current dividend yield of 1.35%. The highest dividend yield from TLM.TSX in recent history was 2.42% while the lowest dividend yield was 0.54%. TLM.TSX is not making us feel all that confident when their current dividend yield is below the historical median by 9.08%.

Best Oil Stocks To Buy For 2011: Crescent Point Energy (TSX: CPG)

This is by far the hot Canadian oil stock right now, but for good reason.  Not only does it seem to have the best growth and production prospects over the next ten years, but it has the best location of reserves in both southwest and southeast Saskatchewan.  I have yet to see an analyst have anything negative to say about this company.  Take that for what it’s worth, but I’m just saying.  One factor to consider is its small market cap relative to others in the sector.  It also has an unusually high yield, perhaps owing to its recent conversion from income trust status. Market Cap: $5.7 billion.  Yield: 7.8%

Crescent Point Energy Corporationis considered to operate in the Energy sector. They specifically operate in the Independent Oil & Gas business segment contained within the Oil & Gas - E&P industry. Through Crescent Point Resources Ltd. and other subsidiaries, explores for, develops and produces oil and gas in western Canada.

CPG Revenue

As a value investing shop, we are interested in seeing how CPG's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 8 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 5.94x and the low end of the range at 3.30x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for CPG of 8.54x is well above its historical average. This means that CPG looks relatively expensive compared to its historical Price to Sales average, and thus it is more difficult to believe that there is significant price appreciation potential. In order for the stock to become more attractive, we would like to see a decline in the Price to Sales ratio of 84% just to return CPG to its historical average.

CPG Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. CPG is significantly above its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 8 years of cash earnings levels for CPG to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 18.82 and a 11.99 low over the same period.

Therefore, at the current price of 37.83 and a Price to Cash Earnings ratio of 4,770.83, CPG is significantly overvalued. This diminishes the attractiveness of CPG until we see either a significant increase in cash earnings or a decline in price. A decline of the Price to Cash Earnings ratio of 30869% is needed just to return to the historical cash earnings multiple.

CPG Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from CPG against the historic high and low levels over an available data range. Because CPG has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In CPG’s case, the estimated annual dividend is 2.76 producing a current dividend yield of 7.30%. The highest dividend yield from CPG in recent history was 14.40% while the lowest dividend yield was 0.00%. Therefore, the current dividend yield of CPG is above the historical median by 1.36%. This is definitely a positive in our view.

Best Oil Stocks To Buy For 2011: Canadian Natural Resources (TSX: CNQ)

Canadian Natural Resources, Ltd.is considered to operate in the Energy sector. They specifically operate in the Independent Oil & Gas business segment contained within the Oil & Gas - E&P industry.

Canadian Natural Resources Limited was incorporated under the laws of the Province of British Columbia on November 7, 1973 as AEX Minerals Corporation (N.P.L.) and on December 5, 1975 changed its name to Canadian Natural Resources Limited. It is a Canadian based senior independent energy company engaged in the acquisition, exploration, development, production, marketing and sale of crude oil, NGLs, and natural gas production. The Company's main core regions of operations are western Canada, the United Kingdom sector of the North Sea and Offshore West Africa. It initiates, operates and maintains a large working interest in a majority of the prospects in which it participates. It focuses on exploiting its core properties and actively maintaining cost controls. The Company's business approach is to maintain large project inventories and production diversification among each of the commodities it produces namely: natural gas, light/medium crude oil and NGLs, Pelican Lake crude oil (14-17º API oil, which receives medium quality crude netbacks due to lower production costs and lower royalty rates), primary heavy crude oil, thermal heavy crude oil and SCO. Its operations are centered on balanced product offerings, which together provide complementary infrastructure and balance throughout the business cycle. Virtually all of the Company's natural gas and NGLs production is located in the Canadian provinces of Alberta, British Columbia and Saskatchewan and is marketed in Canada and the United States.

CNQ Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at CNQ through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 3.07x and 1.31x respectively.

Utilizing this range we can see that CNQ’s current Price to Sales per share ratio of 2.83x is high enough compared with historical norms of CNQ to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 28% merely to return CNQ to its historical average.

CNQ Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of CNQ, Ockham views their current Cash Earnings as significantly above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for CNQ, the current level of Cash Earnings compared to its historical levels helps identify where CNQ is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 17.05 and a historical low Cash Earnings per share ratio of 7.30, an investor can relate where value becomes optimal.

So what does this tell us about CNQ in particular? Basically, we would value the current level of Cash Earnings per share (which is at 14.25) as significantly overvalued. Just by looking at the last closing price of CNQ, which was 32.47, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded CNQ with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that CNQ may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

CNQ Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from CNQ against the historic high and low levels over an available data range. Because CNQ has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In CNQ’s case, the estimated annual dividend is 0.23 producing a current dividend yield of 0.67%. The highest dividend yield from CNQ in recent history was 2.15% while the lowest dividend yield was 0.37%. With that range in mind, CNQ’s current dividend yield is a full 46.57% below its median dividend yield historically. This is a negative from our perspective.

Over in the developed West on the other hand, resignation and capitulation have not yet caught on. People still rage against the dying light of the Bubble Epoque and count on quantitative easing to get it going again.

In the US, half a million Americans filed for jobless benefits last week - the highest number in 9 months. At this point in a typical recovery, job growth should be strong. Instead, it is shockingly weak. As for house sales, the drop in July was the greatest one-month decrease since 1968. Again, the direction is all wrong. Housing led the US out of 7 of the last 8 recessions. Now, it is holding it back! One out of every 7 mortgages is delinquent or in foreclosure. The nation is on target to foreclose on more than a million houses this year - a new record.

So let us take up a serious question. If an economy cannot trot out of recession, what becomes of it? To Japan or not to Japan? There are so many economists voicing an opinion on the subject that if you spent 5 minutes listening to each one you would have to be an idiot. There are those who think Europe and America will follow in Japan's footsteps. And those who think it will not. Taking no chances, our Daily Reckoning has firmly held both opinions at one time or another.

The US is not Japan, say many. Japan's 20-year slump was made possible by three unique circumstances: deflation imported from China, falling commodity prices and a current account surplus. The US is confronted with the opposite situation: commodities prices are strong, its current account is in deficit, and China is raising prices. These differences will bring on a crisis Japan never had to face. Interest rates will rise. The dollar will fall. Unable to finance its deficits at low rates, the US will unable to stay on the road to Tokyo. Instead, it will soon be detoured to Buenos Aires. Or Harare. The resulting panic will have nothing in common with Japan's orderly ruination.

Those who think the US and Europe are following on Japan's heels have at least the flow of current news to support them. Japan fell into a slump. Rather than let its markets clear, its government supported zombie banks and businesses with money borrowed from the public. This effectively transferred the burden of debt from the private sector to the public sector, while holding the economy in a state of suspended animation for two decades. Meanwhile, Japan's people were getting older...more cautious...and more resigned to slippage.

This seems to be what is happening in America too. The private sector is de-leveraging. The latest report shows credit card debt at an 8-year low. Mortgage debt is dropping sharply too - thanks to defaults and foreclosures. Banks and private companies are stockpiling cash in anticipation of a cold winter. Households are playing it cool too.

Ben Bernanke must have gotten the message sometime between the 4th of July and the Assumption of the Virgin. On the 11th of August, the Fed announced another round of quantitative easing designed to fight against the decline. Of course, Japan tried quantitative easing too. It failed, just as monetary and fiscal stimulus had failed.

But who knows? Maybe the Japanese are just losers. They are the only people on earth to have atomic weapons dropped on them. Then again, that only seemed to encourage them. After 1945, the Japanese and the Germans picked themselves up and went from absolute ruin to become the world's most admired economies. Let us hope the authorities don't draw the obvious lesson: on the evidence, nuking may pack more stimulus punch than quantitative easing.

The government is about to confirm what many people have felt for some time: The economy barely has a pulse.

The Commerce Department on Friday will revise its estimate for economic growth in the April-to-June period and Wall Street economists forecast it will be cut almost in half, to a 1.4 percent annual rate from 2.4 percent.

That's a sharp slowdown from the first quarter, when the economy grew at a 3.7 percent annual rate, and economists say it's a taste of the weakness to come. The current quarter isn't expected to be much better, with many economists forecasting growth of only 1.7 percent.

Such slow growth won't feel much like an economic recovery and won't lead to much hiring. The unemployment rate, now at 9.5 percent, could even rise by the end of the year.

"The economy is going to limp along for the next few months," said Gus Faucher, an economist at Moody's Analytics. There's even a one in three chance it could slip back into recession, he said.

In addition, the impact of the government's $862 billion fiscal stimulus program is lessening.

That leaves the private sector to pick up the slack. But businesses are cutting back on their spending on machines, computers and software, according to a government report earlier this week. And the housing sector is slumping again after a popular homebuyer's tax credit expired in April.

"What we're seeing is that the hand-off to the private sector is not looking as robust as we had previously hoped," said Ben Herzon, an economist at Macroeconomic Advisors.

A handoff? What an imagination!

As if the private and public sectors were running a relay...cooperating to make our lives richer and better...based on a game plan developed by the coaches at the Federal Reserve!

We have news: it doesn't work that way.

"Okay, Mr. Smarty Pants, how does it work?"

Glad you asked.

In the real world, the economy is always making mistakes...and always correcting them. Making mistakes...and correcting them.

And markets are always discovering what things are worth. They figure out what one thing is worth, conditions change...and they change their minds.

There are times when the economy makes a big mistake - especially when it is given the wrong signals from the Fed. And there are times when markets change their minds dramatically.

Investors don't like it much when the economy and the markets turn down. It makes them look like morons...which they usually are. Businessmen don't like it much either. Falling sales or failing businesses make them look incompetent and reduce their compensation. The average person doesn't like it because he loses his job...and sometimes his savings. And the politicians don't like it because they pretend to have everything under control; when things seem to go wrong, voters blame them.

So, the politicians - with their lackey bureaucrats and stooge economists - take action. They do something! Newspaper columnists and TV commentators argue about whether they do the right thing or the wrong thing...too much or too little...too soon or too late. But actually, anything they do will be wrong - unless it is merely removing some previous "improvement."

"Wait a minute... Are you saying that all these recovery programs...and raising and lowering interest rates...and providing support for key industries...and help for people who are unemployed... Are you saying all that is a waste of money?"

Oh no, we're not saying that. We're saying it is worse than a waste of money. It makes people doubly poorer - first because of the actual cost of the recovery programs themselves...and second because the programs interfere with the economy's efforts to correct its mistakes and find proper prices.

Even the most apparently benign - and some would say, humanitarian - government interference is far more harmful and costly than people realize. Take jobless benefits, for example. At least they don't do any harm, right?

Wrong! Jobless benefits rob Peter to pay Paul because Peter has a job and Paul doesn't. Why do that? Paul might take his time finding a new job.

There are no new jobs, you say? Don't be ridiculous. There are always things that need to be done. Jobs are like anything else; you just have to find the market clearing price. If wage rates were low enough everybody would have two jobs. But who wants to work for substantially lower wages? No one. Most people will only do so if they have to. As long as he is getting unemployment compensation, Paul doesn't have to.

"Whoa...this is radical...sounds almost subversive. You're saying government shouldn't be involved at all."

"Oh no... We don't give advice here at The Daily Reckoning. We're just saying that if people want to be poorer they should invite as much government meddling as possible.... Get government to make lots of rules and then change them often... Put everyone on the government payroll; turn them all into zombies..."

You could be collecting as much as $3,750 a month in extra income.

And you could start tomorrow.

My strategy works for any one, at any income level.

What's more, you don't need to be a hedge fund manager or any other kind of financial expert to use it.

I'll share the details of how this moneymaking strategy works in just a minute, but for now let me tell you how I came across this accounting glitch.

I Couldn't Believe They Were This Stupid...

Our government is always making mistakes, especially when it comes to technology.

It's so bad even they know it.

Like when a Senate subcommittee report into the over $170 billion worth of federal technology blunders declared, "the government is just as inept at buying computers as it is in using them for accounting."

Yet year after year, they continue to tax you to pay for their incompetence and waste.

Now, you can finally use the government's incompetence against them for a significant, personal gain.

And you can do it over and over again... to the tune of as much as $3,750 in extra income every month.

I discovered this 39-year-old glitch in the federal accounting system while working as a trader for one of the world's largest hedge funds.

I couldn't believe they were this stupid... to leave a costly error like this uncorrected.

Don't worry, I assure you it's perfectly legal... even though it's so simple to make this extra cash every month that it will feel like stealing.

There are no forms to fill out, lengthy background checks or anything like that required to claim your money.

In fact, it will only take you five minutes a week to start collecting as much as $3,750 every month. Yes, I said $3,750 every month.

(Of course, how much you make depends on how much you invest, but you could easily make this kind of money with just a small initial investment of $5,000.)

All thanks to this 39-year-old glitch in the federal accounting office.

Before I explain how it works, I have to warn you...

For a Limited Time Only?

President Obama, bogged down by sagging ratings, has recently stepped up his mission to streamline government, eliminate waste and close costly loopholes.

"We need to insist on the same sense of responsibility in Washington that so many of you strive to uphold in your own lives," President Obama said.

It makes sense. If there were a glitch in your personal bank account that was leaking money every month, you'd be sure to do something about it... and quick.

But the vast, sprawling federal government is another matter altogether. They don't even realize they have the problem, let alone know how they can fix it.

Still, even though this accounting mistake has been around for 39
years - there's always a chance it could be discovered any time - and closed, thanks to the current fervor in D.C.

I just want to warn you this "loophole" may not last forever.

A solution could come later this year. Or it might never be fixed.

Either way, you could be collecting as much as $3,750 a month - for as long as this "loophole" goes undetected. Which is why there's no time to waste.

But in order to understand how simple and financially effective this strategy is, you have to understand how the accounting glitch works.

Can You Believe It?!No One Thought to Update the Accountants...

Everyone knows our government is in the habit lately of printing money hand over fist.

But would you believe that while they're printing all that new cash...

They haven't updated their way of counting it for 39 years!

In fact, the U.S. government is still using the same method for counting money as they did when we were on the gold standard.

Except the dollar hasn't been backed by gold since 1971.

That's when Richard Nixon signed the Bretton Woods agreement. This groundbreaking restructuring of the world's financial system removed the dollar from the gold standard...

We went from a metallic-based system to a fiat money system, in which every dollar does not have anything backing it but the government who printed it.

The federal accounting office, however, has continued to use a formula, better suited to the gold standard era, to determine the supply of money out in the world.

They still use this flawed system today.

It's hard to believe but it's true.

I've spent the last 15 years perfecting a formula to more accurately calculate these numbers...

Why?

It's like playing a blindfolded opponent in a simple card game. If I know what cards you're holding and you don't... I can beat you every time.

It'd be so easy to win it wouldn't be fair.

Like in late December 2001, my radar lit up. An opportunity to make a lot of money quickly was imminent...

Sure enough, if you had acted on this indication, you could've more than doubled your money... in just three days.

That's why my $150 billion hedge fund manager friend was willing to pay any price to keep this strategy so private. It's that valuable.

If used correctly, $3,750 a month is just the tip of the iceberg of how much money you could be making.

In fact, five figures a month is certainly possible. How can you use this strategy to make that kind of money?

The Most Lucrative Market in the World

When Nixon signed the Bretton Woods agreement, little did he know he'd be opening the doors for investors and traders to make bets against our government 1-on-1... without fear of punishment... and for a large profit.

In fact, you could place a bet for or against how any country's government in the world handled their money supply.

In essence, a niche investment market was created that's become the largest trading market in the world. It's open 24 hours almost every day of the year.

This market has made some people billionaires....

Like Bruce Kovner, who started out with just $3,000 on his MasterCard account and ended up raking in $500 million in 1983 alone just from trading on this market.

As a 16-year-old in Phoenix, Arizona, Chris Weber took $650 he saved as a paperboy and invested in this market. He's a now a multimillionaire living in Monte Carlo. He's never had a regular job.

George Soros, infamous for his political activism, actually made his fortune in this market. In fact, he made almost $2 billion on one trade in 1992.

It's the same market I've been trading successfully for over 15 years.

I'm talking about the currency or Foreign Exchange market, Forex for short.

The strategy I've created accurately detects major moves in the Forex market ahead of time...

Giving you the chance to get in early, and reap the benefits.

My New "Fiat Heat Map" Accurately Predicts FOREX Moves...Weeks in Advance

You may have never traded currencies before...

Maybe it seemed too complicated. Too risky. Too hard to know when to get in and out.

That's exactly why I created my proprietary strategy I call the "Fiat Heat Map."

I call it the "Fiat Heat Map" because it uses an accounting formula better suited for a 100% fiat money economy.

Fiat money simply means printed money with nothing backing it but the full faith and credit of the issuing government.

My formula corrects the government's accounting mistake and paints a more accurate picture of the future of the Forex market.

I input the right information and then just wait for it to produce a hot - or cold - spot .

When it does, we pounce... and book our gains as quickly as possible.

Yes, the most savvy veterans can use the Fiat Heat Map to successfully guide their trades...

But I created it for the novice... the person who may not have traded currencies before, but doesn't wanna miss out on the lucrative opportunities that are only available in the Forex market.

I'm talking about five-figure gain potential every month. The sky's really the limit when you have the Fiat Heat Map.

Movements in the Forex market happen every day. And even the slightest moves can make you thousands of dollars - if you knew they were going to happen ahead of time.

In the Land of the Blind,the One-Eyed Man Is King

It's not just the U.S. government using this outdated accounting formula...

Every government in the world uses the same faulty system. Same with the so-called currency experts. All of their numbers are skewed.

Those faulty numbers are what helped lead to the massive credit bubble of 2008. And they still haven't learned their lesson. They don't even realize they have the wrong numbers.

But not me. My numbers are pure.

You see, it's very simple.

The Fiat Heat Map is the rare currency trading strategy that's armed with the correct supply and demand numbers, allowing it to accurately predict where the market's going... before it goes there.

As a result, you can make a ton of money... and avoid following the herd to painful losses.

Like in 1999, when most of the experts were predicting the rise of a strong euro and the weakening of the dollar.

The Christian Science Monitor called it "euro-phoria."

Fred Bergsten, director of the Institute for International Economics, said it wasn't a matter of whether or not the dollar would be overtaken by the euro, but how long...

"Some people say three years, some say 10 years, but there is no doubt that it will happen."

But, the Fiat Heat Map wasn't backing the expert's statements.

The Fiat Heat Map signaled a strong move downward for the euro versus the U.S. dollar in April 2000.

By July the EUR/USD had dropped from 1.0470 to 0.9649. By October it was down to 0.8296.

If you had traded on the Heat Map's signal, you could've turned $5,000 into $17,392 in just six months.

The same thing happened in late 2004.

The euro was surging, reaching new highs over $1.30 against the dollar. The experts were bullish on the euro.

In Nov. 2004, Mansoor Mohi-uddin, chief currency strategist at UBS in London predicted the euro would hit $1.40 within 12 months.

Later that month, The Wall Street Journal said investing in the euro "looks like an attractive way to protect value."

But the Heat Map said something totally different. It was signaling an impending move downward in the euro.

While all the experts were making bets on the euro reaching new highs, the Heat Map was right, as usual.

In less than three months in 2005, the EUR/USD trade dropped from 1.3086 to 1.1922. You could have made an 86% gain.

Here's the thing: The Fiat Heat Map works for every major currency, around the globe.

I know because I've traded every currency in almost every market there is. And I've seen the Heat Map work in all kinds of different situations and climates.

Who am I?

Veteran International Forex Trader,Patent Pending Inventor...Creator of the Fiat Heat Map

My name is Michael Sankowski.

I've spent over 15 years trading currencies for some of the largest firms in the world.

I've traded in Chicago, New York and London. And I've successfully traded every currency... from the dollar to the euro to the yen.

But I'll never forget the first day I walked onto the floor of the Chicago futures' market as a runner for one of the largest volume traders in the Midwest.

I was fresh out of college armed with all sorts of mathematical and trading knowledge.

This was my first time on the floor though, and I'll never forget looking up and seeing all those numbers scrolling on the big boards. I thought about how many people were affected by those numbers.

And it was as a runner, learning the ropes, that I realized how even the slightest movement in those currency numbers could make someone a fortune - even the average investor.

As I rose to become the chief products manager for the Chicago Futures market, I never forgot about the amazing impact those numbers could have on the wealth of the average American - if only there was a way for them to exploit those gaps in the system. To know what I know.

I've spent my whole career trying to simplify the currency trading process...

I even have a United States' patent pending on a Futures product I invented to make trading the spot currency market easier for regular options traders.

I'm always searching for the best way to help average investors make a lot of money...

I consider myself part accountant, part economist, part inventor and all trader. It's all of these aspects that helped me create the Fiat Heat Map.

Now I'm looking to share this information with people who want to stop breaking even every month and start making five figures trading currencies.

I'm hoping that's you.

The Fiat Heat Map helped me avoid the best stock market meltdown of 2007-08. Instead, I prospered.

But I know a lot of folks weren't so lucky. The best stock market in 2010 has cost people a lot of money. And I felt guilty keeping this information to myself.

I want to help them get it back. And I truly believe using the Heat Map to trade currencies is the best way to do it.

A purely fiat economic system is naturally volatile... that means there are lots of chances every month to collect a quick profit from the Forex market.

Like in January 2006...

Just before the new year, the Heat Map signaled a move up for the euro against the U.S. dollar.

In four days, you could've made over 50%!

And if you stayed in the trade, like the Heat Map suggested, you could've turned $10,000 into $17,264 in just over four months. Where can you make a gain like that outside of the Forex market?

That's the best part about the Fiat Heat Map. You don't have to know a thing about currency trading to make this kind of money.

The Heat Map tells you everything you need to know...

• Which currencies are poised to go up or down in the next week, month, year...

• How big the move is likely to be...

• And when you should execute your no-brainer trades to collect the most money possible!

So how can you get access to the Fiat Heat Map?

I'm in the process of releasing that information to subscribers of my monthly newsletter, Currency Profits Trader, only.

To get access to this unique strategy - and the potentially moneymaking predictions it spits out - you must be a subscriber.

To make it easy, I'm currently extending a special offer just for Taipan readers...

I'll tell you how to take advantage of that offer in a minute, but first let me assure you:

The Fiat Heat Map accurately predicts the moves of all the world's major currencies, not just the dollar, giving you more opportunities to make money off small moves in the market.

Take a look at some more examples of the money you could be making using the Fiat Heat Map.

In this case, even while the euro was moving up against the dollar, the Fiat Heat Map signaled a down signal.

Trading off this information could've made you an easy 54% in just over three weeks...

In early March 2009, the Heat Map signaled a strong move up for the Australian dollar against the U.S. dollar.

The average currency trader could've made 82% in one month on this trade... A $10,000 investment would have made $41,616 once the trade ran its course in November of the same year.

The Fiat Heat Map for the EUR/USD trade lit up in February 2002. Traders could've made a quick 28% gain in nine days.

Again in September 2003, the Heat Map called for a move up in the euro. And again the euro went up, giving savvy traders a chance to book a 158% gain in just over a month.

Here's another example of a trade on the pound, Great Britain's currency. This cold spot could've made you nearly three times your money in two months!

And another opportunity to double your money in two months on the Canadian dollar:

152% in two months on the EUR/USD trade in 2001:

The Heat Map predicted another drastic move up for the euro in August 2007... The profit for you could've been a tidy 138% in 42 days...

So how can you gain access to the Fiat Heat Map - and start collecting these kinds of returns every month, over and over again?

Access to the Fiat Heat Map comes with your subscription to Currency Profits Trader.

Subscribe today and I'll send you my instruction booklet, titled "The Fiat Heat Map: Spotting Trading Opportunities," FREE of charge.

Inside, I'll explain how the Heat Map works, why it's so effective... and how to interpret the signals in the Heat Map to help you make money.

But that's not all you'll get as a subscriber...

Protect Your Currency Profits

In Currency Profits Trader, I won't just give you a recommendation and leave you hanging.

I'll explain what the Heat Map is pointing to... and I'll give you clear trading recommendations, letting you know when to get in... and when to get out.

While the Heat Map can point you in the right direction, the key to collecting those gains is knowing when to buy and when to sell for maximum profits.

Aside from being a veteran Forex trader, I'm also a CFA charterholder.

As a CFA charterholder, I'm a member of an elite club dreamed up by legendary investor Benjamin Graham. (CFA stands for Chartered Financial Analyst.)

The Economist called the CFA program "the gold standard among investment analysis designations."

I'm also a Chartered Alternative Investment Analyst, which seeks to provide a standard for people involved in alternative investments - like hedge funds, private equity investments... and the currency market.

The most important thing this designation represents is that I'm accredited in risk management. Knowing when to get in and get out - and how to recommend you protect your profits.

I'll also keep you informed on the market in general. Moves in the Heat Map often signal major moves in the best stock market of 2010...

You'll know a whole lot more than 99% of the experts on CNBC or Fox Business.

Like on May 1, 2007, when the Heat Map helped me save my whole personal fortune.

On that date, the best stock market was reaching new highs...

The Dow Jones was over 13,000 and climbing.

Al Goldman, chief strategist for A.G. Edwards said that day, "On Wall Street, add 3 zeroes to a 13 and you have the land of milk and honey."

But, the Fiat Heat Map was screaming a signal of impending doom.

So on that very day, with the Dow trading at new highs, I sold my best stock portfolio.

Just over a year later, the best stock market plunged 36%. Whole retirement accounts, life's fortunes, were wiped out across America.

But not mine. I kept my wealth and then some... thanks to the Fiat Heat Map.

So how much will this valuable trading edge cost you?

Not as much as your average broker or mutual fund would. And those guys are using the wrong numbers.

But I will tell you this... Currency Profits Trader isn't cheap.

The information I'm selling is known to less than 1% of the population.

In order to make sure it stays that way I have to charge a high price - to keep this information in the hands of serious investors only...

People looking to make five figures or more every month.

Before you make your decision, let me tell you what the Fiat Heat Map is signaling right now...

One of the G7 countries' currency is set to make a quick run up.

You could reasonably expect to pick up an easy $3,750 by May 7 once this play has run its course.

An Effortless $3,750... In Just Over a Month?

There's only one currency in the world that tends to move up against the dollar in times of crisis.

My Fiat Heat Map is making a strong case for that currency right now.

In fact, I believe this G7 currency will make a strong run up against the dollar in the next 30 days.

There's a way to play this move to maximize your potential profits in a short period of time. "I'll tell you which currency I'm talking about in my special report: "How You Could Make an Effortless $3,750 by
May 7."

It's yours FREE when you take a risk-free trial subscription to Currency Profits Trader.

So what does risk-free mean?

Try Currency Profits Trader for 30 days. If you aren't happy with what you see, let us know and we'll give you a full refund.

You also get to keep both FREE reports, as our gift... even if you choose to cancel.

What does your risk-free subscription include?

• You'll get 12 months of Currency Profits Trader, a new email issue delivered each week straight to your inbox.

• Special Report #1: "The Fiat Heat Map: Spotting Trading Opportunities." This introduction to my proprietary Forex Heat Map walks you through how I create the Heat Map, how to read it and what those signals mean for your trades.

• Special Report #2: "How You Could Make An Effortless $3,750 by May 7." According to the Fiat Heat Map, one currency is set up to make a strong move against the dollar in the next month. If you get in now, you could easily collect as much as $3,750 in just over a month. My report will tell you exactly which currency I'm talking about and how to properly execute this recommendation to maximize your potential profits.

• Weekly Updates: Every week, I'll update you on what's happening with our model portfolio, what the Forex Heat Map is signaling and what you need to be doing to maximize your profits. I'll also update you on larger market issues and how you should be reacting to them.

• Free Subscription to Taipan Daily: Taipan Daily is our free daily e-letter read by over 230,000 people each morning. It's filled with investment research, commentary and market analysis from our panel of experts, plus topical essays and lots more moneymaking opportunities.

• Free Subscription to Taipan Insider: This exclusively circulated e-letter will keep you informed on special investment opportunities we uncover around the globe. Whether it's China, India, South America or Australia, we'll get you the inside scoop on global trends before they happen... so you can cash in.

• Access to the ALL back issues of Currency Profits Trader: You'll be able to go through all of my old issues, special reports and updates to find even more chances to make money RIGHT NOW.

So how much will all this cost you?

Normally a Forex trading service with this kind of proven accuracy would cost you $5,000, even $10,000 a year.

Right now, I'm extending a limited-time offer to Taipan readers only...

You Can Receive a One-Year Subscription to Currency Profits Trader for Just $795

And you'll have 30 days to test it out... Or your money back.

Or you can choose to enroll in our quarterly automatic renewal plan. It's simple and easy.

Here's how it works: Sign up today and pay $200. You give us your credit card (no debit cards please) and then every three months, we'll automatically charge your card $200.

If you choose to cancel at any time, just let us know and we'll remove the automatic charge from your card.

You'll still have 30 days to decide if this service is right for you.

But don't worry. Thirty days is not only enough time to try the Fiat Heat Map out... it's plenty of time to double or triple your money.

Like on the latest trade the Heat Map is signaling. Every day the signal gets stronger... the big move should start coming in the next couple of weeks.

But I have to warn you... the Heat Map's predictions move quickly. If you wait a week, you may miss out on a fantastic moneymaking opportunity.

For example, on January 23, 2008, the Heat Map signaled an immediate downward move in the Canadian dollar.

Eight days later, the move was over. If you didn't act right away, you would've missed the opportunity to pocket 47% gains... in just eight days.

Don't miss out on the Heat Map's latest signal... Try Currency Profits Trader out for yourself today. And see how you could make consistent monthly income trading currencies this year... including up to $3,750 in the next month.

In the current global cash war, many less-than-savvy investors are likely to see the true value of their hard-earned capital diminish. Unfortunately, most will never know the difference because the nominal value of their investment accounts may remain stable.

But in the end, the true value of a nest egg lies in the purchasing power of that capital. What if your investment account grows in dollars but fails to grow in value? Does your investment strategy include a plan to grow the real value of your retirement dollars even while the global cash war diminishes the purchasing power of paper currencies?

The Problem With Paper Currencies

If you've been following any of the commentary from our editors over the past several months, you know that a number of us are concerned with the prospects for paper currencies (including not only the U.S. dollar but a number of other global currencies as well).

It stands to reason that if governments can print additional currency -- and use that cash to spur short-term growth -- the temptation will be too much for most politicians to resist. Unfortunately, there are a few problems with this approach.

1. At this point it's very debatable whether the additional capital forced into the market is actually spurring any growth. Wall Street bailouts have largely been funneled into the coffers of large banks and their patron investors... Infrastructure stimulus plans have done little to make a dent in the unemployment crisis... And other programs aimed at saving homeowners and adjusting mortgages have simply delayed the inevitable rise in foreclosures.

2. Additional cash in the system is like a ticking time bomb -- with an unknown amount of time left on the clock... All of the cash that the government has shoved into the system is sitting around on the balance sheets of banks and large corporations. The money isn't being spent because executives are afraid they will need the capital for a rainy day. But if all this capital does get spent, it could spark massive inflation with little or no warning.

3. Too much printing erodes value. It's been said over and over again, but it bears repeating... When you continue to create MORE of something, its value declines. That's true with commodities, retail inventory and, yes, currency. Politicians' eagerness to spend their way out of the economic mess has the potential to destroy the value of the U.S. dollar along with many other "developed" paper currencies.

Bringing a Knife to a Gunfight

Most investors are slowly waking up to the fact that there is increasing danger in holding cash. However, too many don't really know what to do about it. Of course there are traditional tools to protect against inflation -- but they only bring so much firepower to the battle...

If you call up your trusty broker at Morgan Stanley and tell him that you are worried about the potential for a decline in the value of the U.S. dollar, he will likely respond with the party line.

"Buy TIPS -- or Treasury Inflation Protected Securities... They increase in value when inflation picks up and are guaranteed by the full faith and credit of the United States government..."

To which I might respond -- "You mean the same government that is printing money faster than a newspaper company behind schedule?"

Of course TIPS have their place, but all they will ever do is help your money keep up with reported inflation. That doesn't actually increase the value of your holdings or help you build a true stockpile of wealth. And don't forget, the government has a vested interest in keeping reported inflation at a minimum. So you can bet that if they make a mistake, it's going to be in the direction of reporting less inflation -- which means your TIPS could appreciate at a much slower rate than the fall in the value of the U.S. dollar.

Another approach (one that I like a lot better) is to own commodities that will increase in nominal value if the purchasing power of paper currencies declines. Gold is of course the major commodity that comes to mind because of its reputation as a safe storage of value.

In the past few weeks we have seen the price of gold begin to trade higher once again as currency concerns re-emerge. Owning gold as well as exposure to agriculture commodities can be a good way to protect the real value of your investment account.

But I still think that these approaches are a bit like bringing a knife to a gunfight. They are sharp, somewhat aggressive, and if you're lucky they can get the job done. But when I show up to a fight, I'd much rather have an anti-tank gun at my disposal.

Gold Mining Stocks -- The Howitzer

Instead of buying physical gold, or the SPDR Gold Trust (GLD:NYSE) in my investment account, I would much rather have exposure to a series of investments that have the potential to generate much larger returns. The best opportunities that I have found so far are gold mining stocks -- companies that actually own the rights to underground gold reserves, and are actively producing new ounces of gold day after day.

For the best-managed companies in this area, today's opportunity is phenomenal. Each day that the price of gold ticks higher, the value of their underground reserves increases. And since most of these companies have relatively stable production expenses, the higher price of gold flows directly to the profit line for investors.

Investing in individual gold miners takes a good bit of research and expertise. Just a few of the key issues to consider are:

• What does it cost the company to produce (or mine) each ounce of gold?
• How much debt does the company have and when are key principal payments due?
• How many ounces of proven resources are still in the ground?
• What is the potential for additional yet-to-be-proven resources?
• Has management hedged the selling price of gold?
• What geopolitical issues could cause risk to the company's assets?
• How much of the company's total value is already incorporated in the stock price?

You can see that there are a lot of moving parts to be aware of, but if you are able to identify investments that score well with these and other key issues, you should be able to generate returns well over and above the amount necessary to simply protect the purchasing power of your account.

In the upcoming issue of New Growth Investor, I have identified a particular gold miner that is able to produce ounces of gold at a cost of less than $400 per ounce while selling to the market at a current price of well over $1,200 per ounce.

The company has an incredible source of profits that could increase dramatically as the price of gold continues to work higher.

Better yet, the company has huge underground resources in both gold and silver that don't appear to be included in Wall Street's valuation of the company. This opportunity to pick up an investment at a fraction of the value of the company's resources is likely to offer a significant boost to our portfolio's value over the next several months.

While long-term investments in gold mining companies have an intriguing appeal, I'm also excited about the opportunity to actively trade these names as well. Last week, my Velocity Trader service took a turbo-charged position in a security tracking prices of gold miners and turned a 35% profit in a matter of two trading days.

These high-velocity approaches involve more risk, but can generate impressive returns in a very short amount of time. Over the next several weeks, I expect to be actively trading options on gold miners and taking advantage of major price swings as Wall Street begins to realize the value of this often neglected sector.

Whether you invest in resources like physical gold and commodities, equity investments in companies that benefit from increasing commodity prices, or actively trade options on these securities, it's important to make sure you bring enough firepower to this war.

The destruction of paper currencies has important implications on each of our lives today and well into the future. I'll be working hard to protect the value of my investment dollars, and using some heavy artillery to make sure I'm successful. I hope you're ready to bring out the big guns!

To your investment success!

In other words, they lied so that the bonds they were selling would appear more attractive. It's classic balance sheet fraud, committed by senior state officials working for both democrat and republican governors. And the state's bond underwriters - JP Morgan, Citi, Morgan Stanley, Bank of America, Barclays, Merrill and (of course) Goldman Sachs - all probably lied too. At the very least, they all failed to conduct due diligence before vouching for the quality of the state bonds.

What's the penalty for this outright fraud? Nothing.

The State of New Jersey will pay the SEC precisely zero dollars. Not one state employee will pay a fine either, or go to jail...not even lose his job. In fact, the State didn't even have to admit wrongdoing. "New Jersey agreed to settle the case without admitting or denying the SEC's findings," calmly explains the SEC press release. Come again? Essentially, the only provision of the settlement is Jersey's promise that it won't do this in the future. That's it.

And Goldman Sachs, JP Morgan and all those other mega-banks? C'mon... They weren't even mentioned in the SEC's statement.

It's worth repeating: We're talking $26 billion in bonds sold under purposely false pretenses. This isn't some small-time phony IPO. Pretend a company like McDonald's, which has a market cap of roughly $77 billion (that's about the same value of New Jersey's pension fund system) sold $26 billion in bonds under similar guise. Heads would freaking roll. They'd be lucky to not go bankrupt.

Yet, here we are. New Jersey officials were so unfazed by the SEC settlement - the status quo was so unchanged - that they proceeded with a $2.2 billion bond sale on August 19, 2010. That's less than 24 hours after the SEC announced the results of their investigation. SEC investigators did a fine job forging into uncharted territory and exposing State fraud, but they offered literally the most toothless settlement possible.

That's not to say no lessons have been learned. The smart investor should already be leery of municipal bonds, with so many states struggling to close budget gaps while honoring swollen pension agreements. Now you have all but absolute proof that State administrators are not only unable to balance their books, but they're willing to cook 'em too. Plus, there is really no incentive for States to change their ways, aside from a gentle tap on the wrist from the SEC.

And this whole mess ought to (though it likely won't) highlight fundamental unfairness in the way we regulate the $3 trillion municipal bond market. Having the SEC patrol state funds is a hot mess of conflict of interest and political gamesmanship. At the end of the day, this is government policing government...an operation likely to be as inefficient as it is ineffective.

Of course municipalities need a regulator, as they have proven unable to regulate themselves. But once the SEC discovers such a fraud, why not - at the least - order the state to hire a team of private sector auditors that will report their findings to the government every year for the next five...or as long as it takes for the State to get its act together.

How's that for a stimulus plan? Auditing state pension programs would employ thousands of accountants for years. And those are real jobs, with a real purpose... Bean-counters could get back to work and bureaucrats would have to be just as responsible and forthright as the rest of us. While they're at it, those auditors can figure out exactly how long those struggling pension funds will last before running out of money. Wouldn't that be nice to know?

We'll be on the lookout for an e-mail from Mr. Obama, asking for more details on our stimulus plan. In the meantime, know what you're getting into when you buy muni-bonds. Only one state has ever defaulted on its bonds - Arkansas back in 1934. So the odds are still in your favor. But reason is not. Now ethics aren't, either.

An economic recovery doesn't look anything like this either: