The editorial page in the May 19, 2003 issue of U.S. News & World Report is entitled, “Dealing with the D Word.” This article points out how our current Texas President is taking the U.S. one step beyond Lyndon Johnson's “Guns & Butter” plan that nearly bankrupted the nation. Learn what the D word is and how this dire warning affects our investments now.
This article points out that over the next decade the U.S. deficit (the D Word) will more than double to $4 trillion. This is after allowing for the robbing of the Social Security “lockbox”. The article shows that had Social Security not already been robbed the deficit would already be $6.7 trillion. This also means that over the next decade we will have a $10 trillion negative swing in the federal budget. The reason for this is that the current administration has moved beyond Guns and Butter. It has added tax cuts to this disastrous formula.
Warren Buffet adds to these ominous warnings when he cautions that the administration is talking nonsense when it promises to create a million jobs with the TAX cuts. Buffet said, “The idea that it (the tax plan) creates all kinds of jobs and everything else, that's sort of what turns me off. That's like a manager saying 'we're going to grow our earnings 20% a year'. They don't have the faintest idea in my view of how many jobs this is going to create. How could they? Economics is not that precise.”
The upcoming election (especially if Gephart becomes the Democratic candidate) will focus on the economy and especially on the importance of increasing government subsidized health care. This is the hardest expense of all to control and the potential costs are astronomical.
War, subsidized health care and tax cuts all carry risks to the already soaring budget. This can push the dollar down, drive foreign investors from Wall Street and balloon an already exploding balance of payments problem. This will drive the dollar even lower which increases inflation as all the foreign goodies we consume rise in value.
In such a scenario your investments must be chosen with care. Equities should be of an international mix (out of the U.S. dollar and based on value. Our eclub advisor Michael Keppler rates markets based on good value and his current ratings show the following markets now offer the best value:
Major Market Buy Candidates Major Market Sell CandidatesBelgium CanadaDenmark JapanGermany SingaporeHong Kong SwitzerlandNorway USA Emerging Market Buy Candidates Emerging Market Sell CandidatesBrazil Hungary Czech Republic IndiaEgypt IsraelKorea PakistanPhilippines PeruRussia South Africa Taiwan Thailand Turkey.
For more information on how Keppler rates his markets and on the performance of funds that follow Keppler's advice please email KAMNewYork@aol.com
Until next message, may the D Word mean Dollars instead of deficits for you.