April 2011 - Forecasts & Trends

Forecasts & Trends is much more than just investment blog posts. You need to know the "big picture;" you need to have a "world view," especially in the post-911 world; and you need more information than ever before to be successful in meeting your financial goals. Gary intends to help you do just that.

Forecasts & Trends

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    • Will Obama Tax the Middle Class? YES!

      Despite all of the rhetoric coming from Washington, the middle class should be gearing up for a major tax increase to fund Obama's vision of American entitlement. How do I know this? Because the "rich" that President Obama talks so much about simply don't have incomes large enough to fund all of the future deficits, even if you had marginal tax rates of 100%!

      That's why many liberal studies switch from talking about income to talking about wealth, since this results in a larger number. However, as we all know, income taxes are based on income, not wealth, so any evaluation of tax revenues in relation to wealth is at best misleading and at worst, a deliberate lie.

      This week, I'm going to review the latest available income tax information to see exactly who is paying income tax and who isn't. I'll then show you how that "soaking the rich" simply wouldn't result in enough money to materially affect our mounting deficits and national debt. I'll finish by talking about Standard & Poor's recent shocking announcement about the US debt rating, and the likelihood of anyone actually getting the message in Washington. It's not a pretty story, but it's one you definitely need to know about.

    • Smoke, Mirrors & Almost No Budget Cuts

      Yesterday's big announcement from Standard & Poor's regarding the increased chances of a downgrade of the US Government's AAA debt rating came as a surprise to many, but not my readers. I have been saying all along that the bond market will not allow our elected leaders to ignore continued trillion-dollar deficits as far as the eye can see. We've now witnessed the market's first step.

      There are two important aspects of the S&P announcement: First, we now have a time window. The S&P said that unless something changes, the US could lose it's top debt rating within two years. Congress, you are forewarned! But that leads us to my second point. The S&P announcement expressed little confidence in the ability of the White House and Congress to reach an agreement on deficit reduction before the 2012 elections. In fact, S&P doesn't expect any meaningful deficit reduction until after 2014 which, incidentally, is after their two-year time window. This means that S&P doesn't expect our elected officials to do anything about deficits until after the US government loses its AAA debt rating and their backs are against the wall.

      Perhaps S&P's pessimism is a result of the recent 2011 budget cuts that we now know were mostly smoke and mirrors. This week, I'm going to detail the irresponsible budgetary tricks still being used by both parties in Congress while the real fiscal crisis just continues to get worse. I'll also discuss and compare various budget alternatives for 2012, but don't hold your breath waiting for any meaningful change to be enacted.

    • Baby Boomers Not Prepared for Retirement

      One of the more common questions we get at my firm is "How can I get active management strategies in my 401(k) plan?" It's a good question since many participant-directed plans such as 401(k)s, 403(b)s and 457 plans are sold by brokerage and mutual fund companies who have no interest in providing strategies that can go to cash to protect retirement assets during market downturns.

      Fortunately, we now have two ways that 401(k) participants can access active management strategies, depending upon the structure of their plans. This week, I'm going to highlight each of these alternatives, one of which virtually anyone can use to put the power of active management in their corner.

      First, however, I'm going to talk about why fresh strategies are needed in many 401(k) plans. Recent surveys have shown that Baby Boomers are woefully unprepared for retirement. While this is nothing new, it may shock you to know that about 25% of Boomers say that they don't think they can retire...EVER! This week's E-Letter is a must-read for anyone with significant 401(k) balances.

    • Why the Economic Recovery Isn’t Stronger

      We are told that the recession ended in the 1Q of 2009, but for most of us it sure doesn't feel like it ended at all. The official unemployment rate is still near 9% (near 16% if you count everyone), and the economy is struggling just to eek-out 3% GDP growth. In the past, the economy soared by 5-6% GDP or even better following severe recessions. So why isn't this economic recovery stronger?

      As I will discuss today, consumer confidence took a surprise dive in March. The latest figures on the housing market were simply dreadful across the board. Bank lending remains in the tank. And private investment in the US, especially by foreigners, has fallen off a cliff as a result of the recession and the falling US dollar. These are all reasons why the recovery is so sluggish, and they are not likely to change soon.

      The US equity markets have been on tear to the upside, despite the disappointing news on the economy. It seems that virtually everyone is convinced that stocks can only go higher, but that's usually a sign to look out below. Whatever happens, this is a very uncertain time in the markets!