When President-elect Barack Obama was Candidate Obama on the campaign trail, there was talk of raising the tax level on long term capital gains from the current 15% to as high as 29% but soon became 25%. It has not been that high for quite some time.

Obama was challenged by this throughout the campaign and it was one of the questions he faced in the presidential debates. He had to answer a direct question as to why he would raise this particular tax in light of evidence that the reduced rate had benefited the government coffers and investors. He replied that he was interested in balancing the budget and fairness in the system, but that he would be weighing all of the issues under discussion and he might temper his opinion.

Well, as I recall, toward the end of the campaign he tempered his opinion all the way down to 20%.

Now what brings this to mind as we close out the year is that I have been reviewing 2008 with my accountant and making projections for the purpose of last minute adjustments I might need to consider. As we were discussing capital gains for 2008 we, like many of you reading this, discovered there would not be any. The losses outweighed the gains.

Then I started thinking about Obama wanting to raise the tax and realized he could raise the tax to 100% because this year and next many people may not be paying any due to their accumulated losses. As a matter of fact, in extreme cases some folks may not be paying any capital gains even if he is in office eight years.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

Regulators did not just drop the ball in the Bernard Madoff scandal. They never held it in the first place.

According to the Wall Street Journal, the SEC discovered in 2006 that Madoff had misled the agency about how he managed customers' money. Moreover, investor Henry Markopolos spent the past decade trying to convince the agency that Madoff's returns were too good to be true. Markopolos and his friends tried to replicate his returns using complex mathematical models and could not.

Barron's reported that no one understood how Madoff made money and that the investors were pressured to never reveal that they had money with him. Ever hear of an asset manager who did not want rich people to brag about how well they did with them? But people did not need to try that hard to figure out that Madoff is a crook. All they needed was common sense.

Anyone who promises investors consistent double-digit returns is either a crook or a fool. The stock market does not work that way. It never has. The one aspect of this scandal that baffles me is how Madoff was able to convince sophisticated people at banks, charities and some of the nation's wealthiest families that the reality of the market did not apply to them.

Most Americans like Barack Obama even though they don't think he will do them much good.

According to a Bloomberg/Los Angeles Times poll, more than half of respondents say that the president-elect will not be able to help their personal finances. Almost seven in 10 expect Obama to accomplish only a few of his campaign goals.

Perhaps their cynicism is justified. All of the available data indicates that the economy is going to get worse. Retail sales are expected to be dismal this holiday season. Housing probably will not bottom until next year at the earliest.

Interestingly, people are willing to give Obama the benefit of the doubt. People who responded to the poll say Obama makes them feel "hopeful," "optimistic" and "proud," which is incredible. People know the economy is bad, so bad that they believe a man with limited experience in Washington can do a better job than the president who has lead the country for the past eight years.

"Outside of the economy, Americans rate the Iraq War, followed by health care, as the most pressing issues, with energy and tax cuts trailing," Bloomberg says. "And more than two-thirds trust the president-elect on national security, even though he was criticized for his lack of experience in that area during the campaign."

We are living in interesting times.

Police today arrested Illinois Gov. Rod Blagojevich and his chief of staff on federal corruption charges that both touch the Tribune bankruptcy and the incoming administration of his fellow Illinois Democrat Barack Obama.

According to the Chicago Tribune, the governor and his Chief of Staff John Harris allegedly demanded the firing of Chicago Tribune editorial board members responsible for editorials critical of Blagojevich in exchange for state help with the sale of Wrigley Field, the Chicago Cubs baseball stadium owned by Tribune Co. That takes pettiness to a new level.

Finding a new owner for the ivy-covered baseball temple is in the best interest of all taxpayers. I can't understand why any political leader with an ounce of integrity would want to hinder the sale, even to the extraordinarily obnoxious Mark Cuban. Then I read a little further.

The Tribune reports Blagojevich and Harris have been accused in a "wide-ranging criminal conspiracy" to gain financial benefits for the governor, members of his family and his campaign fund in exchange for state appointments, state jobs and state contracts.

President-elect Barack Obama plans to offer a $900 billion infrastructure investment plan, according to an economic adviser. Three companies are among the beneficiaries of that plan. And it might be worth looking at them as investments.

The advisor, James Galbraith, recommends spending of more than $900 billion to rewire classrooms and libraries for high-speed Internet service and repair bridges and highways. And the companies that would benefit from this spending are high tech: General Electric (NYSE: GE) -- thanks to its Ecomagination program, Cisco Systems (NASDAQ: CSCO) which makes communication infrastructure gear and Emcor Group (NYSE: EME) which makes systems for voice and data, electrical power and lighting.

GE could get orders for its green products. It spends $1.4 billion a year to develop energy-efficient products such as locomotives, jet engines and power-plant equipment, including wind turbines and solar power. It might also benefit from water treatment, lighting efficiency, "smart grid" electrical distribution and health-care information systems. Cisco stock rose 8.2% on the Nasdaq yesterday -- more than twice the average increase -- due to the perception that it will benefit from this infrastructure plan.

Let's hope Obama's infrastructure plan meets the high expectations built into these stock price increases.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns GE stock and has no financial interest in the other securities mentioned.

There are 200 workers sitting-in at a Chicago factory that they claim has stiffed them. And President-elect Obama supports their goals. This raises many questions: Is the sit-in illegal? If so, is Obama supporting an illegal action? More importantly, is Obama inadvertently encouraging workers around the country to pursue similar tactics?

At issue here is Republic Windows and Doors, a Chicago manufacturer that laid off its 200 workers last week and has failed to assure them that it will pay them the severance and vacation money they earned. The workers have responded by sitting-in on the factory floor. Obama said, "The workers who are asking for the benefits and payments that they have earned, I think they're absolutely right and understand that what's happening to them is reflective of what's happening across this economy," according to AP.

I have no legal training, however, it looks to me like a sit-in is a form of trespassing -- assuming that the workers are no longer employees of the company. (A VP of the worker's union said "We expected to go to jail.") My reading of Obama's comment suggests that he supports the workers' goals -- which is to get the money to which they're legally entitled -- while taking no position on the legality of their sit-in. The question is whether other aggrieved workers will miss this subtlety and view Obama's statement as an implicit endorsement of the workers' tactics.

If there was any doubt left that P. Diddy has one of the crassest, most tasteless -- and brilliant -- minds in the history of marketing, this latest stunt should put it to rest.

Next month, Diddy's new men's cologne "I am King" will hit stores, and the hip-hop mogul is hoping that it will resonate with the same people who voted for Barack Obama. "When you see Barack Obama, you see a strong, elegant black man and when people see my ad, it's almost like that's the trend," he told (subscription required) The Wall Street Journal. The paper adds that Diddy plans to promote the fragrance in a lunch he will hold in Los Angeles and on TV talk shows and link his new fragrance and Obama.

How wonderful. Diddy is hoping to capitalize on one of the most historic events in the history of this country to sell people 1.7 ounces of scented water for $100. Ads for the cologne feature a tuxedo-clad Diddy on the French Riviera aboard a yacht, on jet skis and on helicopters.

The commercial success of this cologne would speak volumes about the intelligence of the American consumer.

On Monday I told a TV interviewer that General Motors (NYSE: GM) would probably not last the week. It is looking more like that prediction will come true. With $16.2 billion in cash, GM needs $10 billion to pay its bills. But it will go through that by the end of 2008 since it is probably in default on $6 billion worth of credit agreements which would require GM to pay back those loans immediately. And GM has already been bankrupt in an accounting sense for years -- its liabilities exceed its assets by $58 billion ($12 billion more than in 2007). This raises many questions: Why is GM in this condition? What are its options? Should the U.S. government step in? Does it matter? Where do the bailouts end?

GM's basic problem is that it spent decades making excuses for why it could not give customers superior value rather than building better vehicles. With 2.5 million jobs on the line, Chapter 7 -- a complete liquidation of its assets -- could throw all these people out of work. Who are these people? Auto companies are big buyers of manufactured steel, aluminum, iron, copper, plastics, rubber and electronics -- and their dealers are people too. One study estimates that the workers in these companies could lose $125 billion in income.

So the U.S. government could provide a financial guarantee and some money to encourage financial institutions to give debtor-in-possession (DIP) financing which would allow GM to operate in Chapter 11. As a condition of the deal, its top executives ranks should be replaced with strategists who can decide which parts of GM to close or sell, and which can operate profitably. A better solution would be a pre-packaged bankruptcy where new contracts with creditors would be negotiated before the filling -- but GM is probably too complex to accomplish this ahead of time.

Today, the President-elect is meeting at the White House with the current President. No President in U.S. history has left his successor with two long wars with no end and an economic depression. That is until the current one. But George W. Bush has more trouble in store for his successor. And he's piling on the problems in his usual secretive manner -- hoping nobody will notice.

How so? First, the Treasury Department this morning announced that it would increase the size of the bailout of American International Group (NYSE: AIG) from $143.7 billion to $150 billion and it would do so from funds in the $810 billion bank bailout bill. Second, he snuck a $140 billion bank tax break into that same bailout bill that would encourage bank mergers by allowing profitable banks to pay less tax by using the losses from unprofitable ones they buy to offset their taxable income.

Each of these moves is complex but the bottom line is that more of your money is going to bail out the mistakes of a handful of executives without any input from taxpayer representatives. The new AIG bailout swaps a program that gave it $143.7 billion of taxpayer money -- the original $85 billion loan for warrants to buy 79.9% stake; plus $37.8 billion more to cover losses from AIG's money-losing securities lending unit; plus another $20.9 billion worth of Commercial Paper -- for a new deal.

Now that Senator Barack Obama has turned into President-elect Barack Obama, I feel that the retail sector needs to be looked at. And one of the better ideas out there just might be Best Buy (NYSE: BBY).

Here's my thinking. Obama seems to be a Democrat who, whether he wants to promote this or not, is into wealth redistribution. I believe he will do what he can to increase the taxes on wealthy individuals and lower them on not-so-wealthy individuals. Furthermore, I anticipate more stimulus checks under his administration. I don't think that the economy is going to get better overnight once he takes office in January, and I would imagine that he'll want to send more money to the masses to see if our consumer culture might be able to save the country from its current financial mess by spending freely. Since Wall Street fat cats have been reaping huge bonuses, I think an Obama administration will see fit to spread wealth to those who don't live in mansions built on the failed promise (and premise for that matter) of mortgage-backed securities.

Yesterday's election marks the end of a string of economy-destroying ideas that stretch back to 1980. America rejected the idea that it's right to run a government of the rich for the rich. It figured out that when you cut taxes for the top 1%, run record deficits, double the national debt, and eliminate regulation, you don't get trickle down, you get meltdown. Barack Obama's election means that these ideas are history.

What will replace them? Obama has already discussed economic stimulus, middle class tax cuts, mortgage modification, a moratorium on foreclosures, infrastructure spending, wider health care coverage, and investment in alternative energy.

But the 43rd president left Obama with a challenge -- to figure out the underlying problems with the current financial system and rebuild it in a way that will work in the short and longer term. Obama must come up with new ideas on which to rebuild the crumbling ruins he's inheriting.

To do that, he will create a team of experts from both parties. That team should analyze the sources of the problems that beset the economy and financial system. And it must agree on principles which can be used to craft legislation that will rebuild the financial system. As I've posted, I believe what they'll find is the need to create a system that ends securitization. limits leverage, delivers transparency, ties compensation not to deal size but to long-term profitability, and builds firewalls between markets around the world.

Barack Obama has been elected 44th president of the United States and he's not to take office until January 20, 2009. Yet the economy is in a bad shape now and needs immediate action -- even if President-elect Obama and sitting President Bush may not see eye to eye when it comes to the steps needed to heal the economy. That may put Obama in an awkward position for a while, but I hope he won't be deterred.

Obama has two months to name a cabinet and surround himself with experts. He also has enough time to figure out which of the issues on his economic agenda will be tackled first. Most will require government spending at a time the country already runs unprecedented deficits. Is it the $25 billion State Growth Fund, or the $25 billion in a Jobs and Growth Fund? Is it the $500-$1000 tax credit and shifting the burden of taxes back to the rich (which would cost $115-175 billion)? Is it the $150 billion investment in clean energy to create jobs? Other than these issues, he also said he would work on undoing some of the deregulation that brought the U.S. to this messy state.

And of course, we've just scratched the surface. What about health care? What about the myriad of other issues Obama will face when taking office, including war.

For now, he can mostly just prepare himself. He may be able to pass a bill in Congress, but he should take this time to prepare and prioritize. Americans will expect him to stick to his agenda. He may appease interest groups on occasion to create unity, but let's hope he can do this and still jumpstart the economy so that the recession is as painless as possible and growth is sustainable for years to come.

People are not giving up on organic food even though they have abandoned Whole Food Market Inc. (NYSE: WFMI). Consider the case of Hain Celestial Group Inc. (NASDAQ: HAIN).

The maker of Celestial Seasonings tea, Soy Dreams soy milk and Earth's Best line of food for children yesterday reported good earning considering the state of the economy. The Melville, New York-based company earned
earned $7 million, or 17 cents per share. Excluding one-time items, profit was 28 cents. Revenue surged a better-than-expected 22 percent.

Hain is going to be a stock to watch in an Obama administration.

Democrats are eager to push for sustainable agriculture practices and will vigorously promote organic products. Healthy foods have made their way into the mainstream. I buy organic milk because it's healthier for my two-year-old son. Same thing for fruit.

Mind you, I am not a zealot. I will not buy everything with the organic label slapped on it. Some of the stuff is ungodly expensive. I swear that you can spend $2 for an apple at Whole Foods. That company's prices and its aggressive expansion plans are the source of its troubles.

Hain Celestial has many reasonably priced products that fit within my family's budget. That's why the company performed well and will continue to do so.

Looking for stocks that should benefit now that Senator Obama is officially President-Elect Obama? Many investors believe that liberals negatively impact stock markets in general and that the only companies to benefit from a liberal adminstration are those that stand to get tax breaks or incentives.

Personally, I don't believe that the market is going to go to hell in a handbasket just because Obama is now officially 'the man.' We have had some real rough times already and there are quite a few bargain stocks out there. An Obama victory looked more and more certain in the weeks approaching Election Day. There should not be a big negative reaction, because the markets will have already priced in the high likelihood of an Obama win. That being said, there should still be certain industries and stocks that are boosted more than others.

My pick for a strong industry under President Obama is the biotechnology sector, specifically those companies that work with stem cells. While not a major issue through the election cycle, Obama has generally favored the removal of federal stem cell restrictions, including research on embryonic stem cells. A few years ago, the Stem Cell Research Enhancement Act of 2005 was approved by both the House and Senate, but vetoed by President Bush. The House failed in its attempt to override the veto. Obama voted in favor of the measure in the Senate and it is not a stretch to think that in the next two years with a Democratically-controlled Congress that a similar measure would be brought up and passed without much opposition.

Osiris Therapeutics (NASDAQ: OSIR - option chain) is a leader in the stem cell industry, and currently uses cells harvested from adult bone marrow. OSIR has recently partnered with Genzyme (NASDAQ: GENZ- option chain) to sell two of its developing drugs internationally. OSIR retains the rights to these therapies in the US and in Canada. OSIR received $130M up front for these rights, but the agreement calls for more payments (up to $1.25B) depending on future sales.

Investors may not support Barack Obama, but they do expect him to be the next president of the United States. The smart ones do anyway.

If the polls are to be believed, Obama should easily defeat John McCain. Even the ultra-conservative talking heads on CNBC seem to have accepted this reality. Carl Quintinilla recently asked Pennyslvania Senator Bob Casey whether Obama will be "pulled to the left" if the Democrats win in a landslide. Why not ask Casey, who is pretty conservative as Democrats go, about Obama's five-year plan? I guess it's no surprise that the business network has Steve Forbes as a guest host on "Squawk Box." The Arizona senator needs all of the help he can get.

The market already -- wrongly in my view -- views Obama as a tax-and-spend liberal ready to suck away their capital gains and wrap America in bubble wrap to protect it from the ravages of world trade. The truth is more complex than these stereotypes. Obama plans to cut taxes for most Americans and favors fair trade policies. Markets, however, anticipate the future and people are scared. That explains why the Dow Jones industrial average is down more than 29%.