Investing
Everyone watched as the markets reacted to the news that the President had won the election. The euphoria may, however, be short-lived. Many of the companies that benefited from overspending such as military related industries will not see much of a change but instead will not see any noticeable increases either.

Its no secret that the White House has favored big business. That focus on industry will trickle down to your portfolio in the form of dividends. Even with the break in taxes on these gains, one would have to believe that growth will stem directly from the plan to make the United States an ownership society. With as much as 60% of working adults involved in some way in the investment markets, it would, on the surface seem like a good idea. The truth is simple. An ownership society as the President envisions it would be greatly distorted and suffers from some misrepresentation and obvious imbalances.

The imbalances facing investors stem from lack of control. While tax reformers cite the Reagan administration as the beginning of this change in investment thinking, it would be prudent to note that during his tenure, only 25% of the adult workers were involved in the market and with good reason. The investment climate was in a shambles and the average America was wise to avoid it. Changes in pension law as well as the advent of the self directed pension plan changed a good deal of that thinking with mixed results.

One simple fact has remained though: three-fourths of the investments and two-thirds of the cash are still controlled by 10% of the country. This is conveniently overlooked when the President talks about transforming Social Security. Offering more participation on this type of playing field by those who have little to do with market changes or moves is almost a mote point. The average investor, much as they are now, is along for the ride.

Another note of interest is the difference between those two administrations and the markets they worked with. Mr. Reagan's America was in terrible shape and tax increases were the only option. Overseas investors realized this at the time and saw opportunity in the disastrous shape of the US markets and ultimately began a wave of investing that was the beginning of the bull market.

Mr. Bush's America on the other hand is overvalued with little attraction for overseas buyers. Economists and fixed income investors alike would like to see the spending reigned in and quickly. This will not happen as long as we continue to be involved in a war on a foreign soil, plans and promises of further cuts in taxes, Social Security and ultimately Medicare reform. each one of these carries a price tag on over a trillion dollars. Relying on overseas investors to see the value of his plans will prove foolhardy.

The bottom line: Within eighteen months, the market will be struggling to stay in the black. While dividend stocks will continue to pay, those large corporations will be struggling with inflation and higher interest rates which will impede growth. Those two factors will also slow consumer spending, which up until now has been fueled by the net worth of the homes these folks live in. One piece of information that should be noted when speaking about growth that will prove me right is the disproportionate amount of homeowners whose mortgages are tied to an adjustable rate. For now, these folks can probably hold their own. BUt with the economy showing the beginning and purely outward signs of growth, that will change the amount of disposable income in the pipeline.

For the long term investor using mutual funds for retirement, they can expect many long years of buying on the dip. A steady trading range will re-emerge after this current rally and will not increase appreciably afterwards. That will make the technique of dollar cost averaging a solid game plan for long term growth. Good luck to those who believe they can pick a sector to outperform. Broad based investing, in other words, diversification will benefit the average investor more than trying to strategize the markets.

Taxes
There isn't a taxpaying American alive that doesn't think that some reform is in order. The problem lies in the execution. Can it be done without shifting the burden?

There are several sacred cows that cannot be fiddled with by any party that wants to remain in control. First among them is the housing deduction. This is the largest special interest group among many. The reasoning that if deductions are good in some instances, they will be good in other situations as well. You can bet that Congress will find many special interest groups that want their own special breaks. That could be the biggest problem of all. Many of these breaks do nothing for the economy or growth. Therein lies the basic problem with the code. Too many lobbyists with well bankrolled clients want to busy themselves with breaks and it will be a struggle to see whether the reformation can withstand the change and who is left footing the bill.

A flat tax is back in the conversation as well as a value added tax - this is vernacular for a consumption tax. The later type of tax would place the burden of the bill squarely on the shoulders of those that consume the most. Middle income wage earners on down will pay the most as statistics show they consume the largest amount of taxable goods. Fully 93% of what this group spends its money on will be taxable. The group paying the least in terms of percentage to income is - you guessed it - the top 10% with just slightly over 24% of their spending able to be taxed.

Businesses are lining up with suggestions - based on election year contributions - on how they would like to see the code restructured. During the Reagan years, this was controlled for the most part. If you believe that removing the tax burden from business would further stimulate the economy, you would only be half right.

Without any sign that there will be a curtailment in spending there is little chance these changes will be affordable. With Congress likely to approve another $80 billion for the war in Iraq in January, tax incentives and corporate breaks coupled with lesser overall business regulation, this administration will not be able to control the deficit nor will they be able to successfully pay for the all of the plans on the table.

But that didn't stop Mr. Bush before and there is little hope it will now.