Enough is Enough!

If you're like me, you're probably starting to feel like an ATM for every screw-up individual and company who blew it financially during the last few years. The numbers coming out of Washington daily to "fix" this are staggering and, frankly, Wall Street isn't buying what the folks in the White House and on Capitol Hill are trying to sell us.

It's time for action, but not the kind they're talking about in Washington. It's time to start making the hard decisions. Check out today's rant to read my solution to this crisis and how we can survive in the meantime.

Toby

Spending Trillions is the Easy Part

As our government leaders firmed up plans to spend trillions more, the Dow plunged. Boy, what a shocker. And the worst isn't over. We're headed for another round of a little game I call "The Incredible Shrinking Dow": 14,000 … 12,000 … 10,000 … 8,000 … 6,000. But my subscribers have been profiting -- doubling their money over and over again -- every step of the way. Find out how.

Stop the Bailouts! Let Nature Take Its Course

We are short the "savior economy" and you should be, too!

I have argued for some time now that, based on the economic data and our proprietary ChangeWave Alliance research, the economic recession has accelerated into a depression.

Our latest consumer spending data from the ChangeWave Alliance show that 61% of U.S. respondents said they'll spend less money during the next 90 days, which is four points worse than we saw in our early January survey.

Just 12% said they'll spend more money -- one point worse than the previous survey.

What's especially troubling are the reasons consumers are giving for spending less money.

The No. 1 reason cited was reduced income, which has surged 21 points since August 2008, and jumped six points since January alone.

This astonishing jump in such a short time highlights the seriousness of the impact the financial crisis is having on consumers.

Generally speaking, a depression is a 10%-plus contraction in economic activity.

From the looks of our proprietary research, and taking into account lower federal and state tax collections, a drop in manufacturing, a contraction in exports, etc., it's not too hard to see how we'll get there.

And please don't kid yourself -- government stimulus spending creates zero aggregate increase in demand. It simply takes water out of the deep end of the economic pool and pours it into the shallow end -- the pool still has the same amount of water.

Why does this distinction between recession and depression matter?

If we are in a cyclical recession, it's about time to buy stocks.

If, however, we are in a secular or long-term recession (aka a depression), stocks will get significantly cheaper, and fall to single-digit or low double-digit earnings multiples. With our 2009 earnings model around $48, that means 600-660 on the S&P 500 (SPX).

Buying stocks here would also imply that we see a strong recovery in 2010. And, so far, the decision-making from Washington is not making such a miracle seem likely.

We Can't Save Everyone

Gov. Mark Sanford (R - South Carolina) recently warned that, "We're moving precipitously close to what I would call a savior-based economy."

As a country and a government, we have chosen to create and sustain a "savior economy" where we rush in ad-hoc and throw borrowed money at every problem.

We all love a good medical drama, so let's try this analogy on for size.

Think of the economy as a group of sick patients. The government is acting like an emergency room doctor who spares no expense or energy working on a few dying patients -- no matter how futile the situation.

What we need to make the economy healthy again is to adopt a battlefield or "MASH" approach, in which we make horrific-but-life-saving decisions to ensure that as many patients as possible survive.

What the country needs now is a "battlefield economic strategy."

ER doctors may try a number of heroic-but-ineffective treatments before they ultimately amputate. A battlefield doctor amputates first, not as a last resort.

We need to eliminate the existing gangrene from our economic system via amputation. This means closing insolvent banks and handing deposits to the survivors. It also means refinancing viable home mortgages, but foreclosing on those that are not, so the homes can go to new owners who can afford them.

While these are no doubt tough decisions to make, it's no different than a battlefield doctor deciding to forgo a blood transfusion for a patient with a bullet wound that is too big too close.

How can we justify throwing billions of dollars at profligate, overspending states so they can maintain their extravagant spending rather than treating the core disease by closing the unsustainable spending "hole"?

Wouldn't the economy be better served if the government invested trillions of dollars in 21st-century infrastructure that would pay for itself in energy cost savings? It's time we learned to let those who are too far gone go in peace for the greater good.

Our inability to make the hard-but-necessary decisions is killing our economy.

We have become the "savior-based economy," spending borrowed dollars in an effort to try to save all the victims of economic disease -- cost and resources be damned.

So far the decisions made have been to avoid amputation. The government is borrowing money and spending it on the dying parts of the economy to prolong their lives.

The lack of that hard-but-necessary decision-making means a long, slow death march.

Whether we show the courage to make the necessary, tough decisions now or we waste our resources trying to save terminally ill patients, we ultimately get to the same place.

The terminal patient always dies.

The gangrenous parts of our economy are going to perish anyway; the only question that remains is whether they die a death of economic normalcy or economic disaster.

Putting the sickest parts of our economy on life support as we are doing now will only prolong this depression. That is why my ChangeWave Investing subscribers are short this "savior economy" until the government comes to its senses and makes the tough decisions -- or nature takes its course.

And while I hate to say it, based on actions taken (or not taken) so far, my bet is on nature.

Toby

P.S. Nature will eventually prevail, and the weak and diseased parts of our economy will perish. But with the government pumping in expensive-but-futile life support, who knows how long that will take. In the meantime, you need a survival strategy -- and that's exactly what we offer at ChangeWave Investing. Start your 90-day, risk-free trial today.

Money-Doublers on Sale for Peanuts

If you trade options, or if you've ever wanted to, a $99 investment can earn you tens of thousands of dollars in extra profits. Get details here.

Watch 'Bulls & Bears' on Fox News

Be sure to tune in to Fox News Channel this weekend and join Toby and the crew on "Bulls & Bears" for their weekly market roundtable as they kick off the Fox News Channel business block on Saturday, Feb. 21, at 10 a.m. Eastern. ("Bulls & Bears" replays at 4 p.m. Eastern, Sunday, Feb. 22, and 4 a.m. Eastern, Monday, Feb. 23.) Or you can catch the show Saturday evenings at 6 p.m. Eastern on the Fox Business Network.

Check your local cable listings or satellite guide to find the Fox News Channel location and times for your area. NOTE: These shows are NOT on your local Fox network station. They are on Fox News Channel on your cable or satellite system (Channel 360 on DirecTV, Channel 205 on Dish Network). Keep in mind that these schedules are subject to change, and the Fox News Channel business block and other programming may be pre-empted for breaking news events.

Your Recovery Plan: FREE WEBINAR

Crossroads for the market and you right now. Join Richard Band in this urgent, live webinar, Thursday, Feb. 26, at 4:30 p.m. Eastern. Yours FREE here.

Wine Find: Twice the Flavor for the Price

My favorite value wine is Girard from Napa Valley. Every one of their wines has twice the flavor compared to their competitors.

The Petit Syrah is a great example. It has the classic structure of deep fruit and a long finish. Blueberries, black currants, loganberries, plums, cherries, dark, unsweetened chocolate, leather, coffee and violets -- they all come together in this winner.

This wine pairs beautifully with winter foods -- braised meats, stews, etc.

To share your favorite wine or food experience, e-mail me through the form at www.changewave.com.