The Department of Justice today announced that it was investigating Fannie Mae, on the basis of the OFHEO findings, specifically that earnings had been manipulated to benefit executive bonuses.

It appears that a previous investigation of Freddie Mac will not result in indictments. Probably the same will happen this time, Mr. Potato Head is a card-carrying member of the Washington elite and therefore immune from prosecution. But one can dream.

The liability problem is fixed for Alberta trusts. If you didn’t know about the problem, now you don’t need to. Income Trusts Liability Act

Too many hedge funds out there told their customers “We will make money for you regardless of whether the market goes up or down”. Unfortunately, they forgot to mention the part where the market does neither. As a result of the hedgie crowd’s relentless scalping for a quarter point here and there, volatility has been driven out of the market. VIX and VXO are extremely low. VXO is 12.69 as I write. Today’s low of 12.63 is a new low for the year. Too many hedgies doing the same thing as a herd means none of them are making any money. The S&P Hedge Fund Index is essentially flat at +0.37% for the year.

But, as Bernie Schaeffer points out: “A swing from premium selling as the driver of option trades to premium buying will almost certainly have negative implications for the stock market. And the lower the level of the VXO when this swing begins, the greater will be the risk of an explosive downside market move.”

Burt Rutan’s SpaceShipOne made it to space, albeit with a scary corkscrew. Looked like a bottle rocket. But good news, anyway. First leg of the X-Prize. Better get that roll fixed before putting any passengers on that puppy, though. You’d have to pay me $200K to ride, not the other way around. (Richard Branson announced on Monday that he would invest $25 million in a new space venture, to be called Virgin Galactic. The project will license Scaled Composite’s SpaceShipOne technology for commercial suborbital flights starting at about $200,000. He expects it could fly 3,000 people within five years.)

“No I cannot sit quietly on this one, nor as I’ve mentioned, have other notables in the past few years. The CPI as calculated may not be a conspiracy but it’s definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn’t created any jobs over the past four years. High productivity? Nonsense, in part – statistical, hedonically created nonsense. My sense is that the CPI is really 1% higher than official figures and that real GDP is 1% less.” Bill Gross