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  • Social Security Insecurity

    As the federal budget continues to be a concern for every American taxpayer, I have noticed recently that there seems to be a lot of confusion regarding the effect of Social Security on the budget process. We know that Social Security and Medicare were set up to be self-funded from payroll taxes, but some of the recent budget debate has centered around the payment of Social Security benefits.

    For example, is the Social Security system currently running a deficit or a surplus? I have seen articles claiming that each is true. I have also read accounts of how paying benefits will increase the deficit, and even that redeeming bonds from the trust fund will increase the total national debt. In this week's E-Letter, I'm going to try to answer some of these questions as well as clue you in on how to read references to these budgetary items.

    On the subject of Social Security and retirement in general, I'm also going to discuss AARP's apparent reversal of its long-held stand against cutting Social Security benefits, and why AARP is now in full damage control mode. Finally, I'll bring you up to speed regarding new proposals to tax and/or confiscate your retirement account assets. In an effort to plug the deficit holes, Congress seems to be willing to make a bad situation even worse.

  • America May be in Its Own "Lost Decade"

    When most people hear the term “Lost Decade,” they immediately think of Japan during the 1990s after it incurred its own financial crisis.Now, however, there are legitimate concerns that the US may be facing its own Lost Decade. In fact, we're already halfway through it. From the 1Q of 2006 to the 1Q of 2011, the US economic growth rate (GDP) averaged less than 1% a year. As I discuss below, we may be looking at a slow economy and continued high unemployment for several more years as consumers continue to pay down debt and curtail spending.

    Clients and readers regularly ask me what it's going to take to get this economy moving once again. Normally the economy is growing at 5-6% by this point after a recession. But there are several dynamics that are different this time, most notably the fact that many of the 10 million US jobs that have been lost over the last few years are never coming back. There are numerous reasons for this, and I will point them out as we go along.

    We will also revisit the issue of the debt ceiling. While the politicians working on this issue say they're making progress on an agreement, there's no hard evidence that the two sides are remotely close to making a deal before the deadline of August 2. While interest rates have been falling due to the slowdown in the economy, things could get quite wild in the financial markets in the weeks just ahead if the debt ceiling is not raised in time. Stay tuned.

  • Debt Ceiling Battle’s Predictable Outcome

    A political battle is looming over raising the federal debt ceiling limit which we will hit over the coming weeks. The media warns that we could face a massive government shutdown if an agreement is not reached to raise the debt ceiling. This is nothing new, and the truth is that the debt ceiling will be increased, as always, but probably not until the last minute.

    The Republicans are hoping to extract more federal spending cuts in order to agree to raising the debt ceiling, and I predict that they will get very little in the way of meaningful cuts. Some Democrats are calling for new tax increases before increasing the debt ceiling, but this is just a bargaining ploy. Truth is, it's all politics as usual on both sides and in the end, the debt ceiling will be increased - bank on it. I suggest not paying much attention as this plays out.

    The debt ceiling political fight that will play out over the coming weeks will once again miss the point. Our national debt is spiraling out of control, and raising the debt ceiling limit does nothing to correct this problem. It just kicks the can further down the road. Frankly, I wonder if it is possible to construct a viable plan to reverse our out-of-control spending at this point. Most of our leaders in Washington are drunk on increasing federal spending.

    At some point, unfortunately, the bond market will put a violent end to this. I have written about this before, but this week, I put this discussion into a more detailed perspective. The bond market may well send interest rates soaring once again when it become clear that our politicians refuse to cut the exploding size of government spending and deficits. Not a pleasant topic to consider, but we must keep focused on it.

  • Core Investments - What You Need to Know

    “Core" portfolio holdings are defined as being those steady performers that serve as the backbone of a diversified portfolio. However, they are among the most overlooked of all investments because they tend to be dull and boring. Unfortunately, this lack of attention has allowed mutual fund companies to define this category as predominantly large-cap blend and value funds. The problem is that these funds are far from steady performers since they are highly correlated to the ups and downs of unmanaged stock indexes.

    This week, I'm going to discuss the importance of core investment strategies and why they merit your close attention. I'll also point out the weaknesses of the mutual fund industry's conception of core investments, and then introduce you to an actively managed core investment alternative that may be a better option for you.

  • Will Spiking Oil Prices Tank the Economy?

    Our economic recovery was already fragile, to say the least, and now we have crude oil prices over $100 per barrel in less than two months. So what are the risks that the economy will head back into a double-dip recession? Today we look at the latest economic reports which hold mixed signals for the economy going forward, and what leading economists expect in light of $100+ oil prices.

    Following that, I will discuss the possible ramifications of the latest political turmoil in the Middle East. Thus far, the impact of political change has been marginal. But what happens if Saudi Arabia, the world's largest oil exporter, falls prey to a regime change? Could it really happen? Only time will tell, but if the Saudi government falls, expect all hell to break loose in terms of oil prices.

    And finally, I address once again the subject of whether "speculators" are the main cause of spiraling oil prices. Speculators are only an ancillary cause of rising oil prices, with marginal effects. The real cause of higher oil prices is the fact that political unrest in the Middle East and North Africa has escalated significantly over the last couple of months. No more, no less.

  • More on the Financial Literacy Crisis

    The Financial Industry Regulatory Authority (FINRA) Foundation recently released a state-by-state study showing how financial literacy varies by geographical region. Unfortunately, even the states that have the best scores that are disappointingly low. If this sounds familiar, the results mirror the findings of a study that I highlighted last summer showing that financial illiteracy is rampant in America, especially among young people.

    This week, I'm going to update you on the state of financial literacy in the US and also supply some resources for those who are not learning about financial matters in school. If you have adult children, grandchildren or other family members who may be lacking in financial knowledge, I urge you to send this E-Letter on to them and encourage them to take the test. Their financial future just might depend on it.

  • Impact of the 2010 Census


    1.  The Results of the 2010 Population Count

    2.  The 2010 Census: Winners and Losers

    3.  Low Tax States Big Winners in Census