This week we survey the economic landscape that the new president will inherit. It is a polite understatement to say that he will be getting a serious mess. In reality, the US goes to the polls this next Tuesday to elect a Janitor-in-Chief. He will face a task that rivals that of Hercules in cleaning out the Stygian stables (legendary huge stables that had not been mucked out for ten years). However, there are no convenient rivers at hand for a probable President Obama to redirect that will quickly be able to clean out the mess left in the stables of our economy. This will indeed be an Herculean task and one that will take most of the first term of the next administration. So, let's look at what will face the next president. It should make for an interesting, even if not optimistic, letter.

But first, a quick commercial. My friend Steve Blumenthal at CMG wanted me to remind you that there are money managers who have been able to create value in these markets. If you are wondering where to turn to in this rather difficult environment (to say the least!), I suggest you go to his website, register, and then let them show you what a blend of active managers that are on his platform would have done over the past few months and years. These are primarily managers who will trade a managed account (using various proprietary styles) in your name and are quite liquid. And if you are an advisor or broker and would like to see the managers on his platform and how you can access them for you clients, sign up and let Steve and his team know you are in the business. The link is http://www.cmgfunds.net/public/mauldin_questionnaire.asp.

CMG is the firm to which I refer investors who typically have a net worth of less than $2 million. If you are an accredited investor with a higher net worth and would like to see what a portfolio of alternative investments, including hedge funds and actively managed commodity funds, has done this year, I suggest you go to www.accreditedinvestor.ws and my partners at Altegris Investments in the US (and Absolute Return Partners in London and Europe) will be glad to talk with you. And if you are a registered investment advisor or broker in the US, you should seriously consider signing up and talking with the team at Altegris. Some of the solutions they have might be ideal for your clients. (In this regard, I am president and a registered representative of Millennium Wave Securities, LLC, member FINRA. Please note that past performance is not indicative of future results and pay special attention to all the risk disclosures at the websites and at the end of this letter.) And now to the letter.

The official number for employment suggested a loss of 63,000 jobs. But could it have been more like 200,000? And I will make a case for 2,000,000 lost jobs last month. This week we will take a look at the confusing labor-market picture in the US. We will also look at the debate over the money supply. Is the Fed increasing the money supply at a reckless rate, fueling inflation fears down the road? All this and a lot more as we look at how the recession in affecting everyone and everything, from individuals to large businesses. (The letter will print a little long, but there are a lot of charts.)

This week's letter is triggered by an amusing (but very flattering) note from a reader. Matt M. wrote:

"John, you have been my rock for the last few years. Will this decline be equal to the 1970's, the 1930's or the 1900's when we had a similar wealth disparity? I must use a line from Star Wars, 'Help me Obi-John, you're my only hope.'"

I am in South Africa as this week's letter is being sent out; so it is with some irony that the letter is focused on a topic that generally concerns only US-based investors, although what the SEC does has an effect on regulatory bodies abroad. This is a letter you may want to forward to your friends and associates.

The Securities and Exchange Commission (SEC) has posted a new proposed rule that would raise the minimum net-worth requirement needed to invest in private funds from $1,000,000 total net worth to $2.5 million liquid net worth. This is a major change, and it means that some 7% of American households will no longer be able to invest in private offerings. In my opinion, it is likely to become law in the not too distant future unless there is significant public comment. This week we look at the proposed rule and some of its consequences, as well as a very interesting proposal by SEC commissioner Roel Campos.

Let's start with some background. The current definition of an accredited investor was adopted in 1982 and was set at $1,000,000 total net worth, including your home and other assets. At the time, according to the SEC, some 1.87% of all US households were qualified to invest in hedge funds and other private equity offerings. Due to inflation and the growth in all sorts of assets, including homes, today about 8.5% of US households are eligible. The original rule was proposed to keep supposedly unsophisticated investors from getting involved in investments like hedge funds, which were considered riskier than mutual funds.