Straight talk on mutual funds, bonds, real estate, and annuities
Techniques for avoiding financial disasters
Tools to help readers track their debt and create a plan for staying out of it
Road maps to buying a home and saving for college and retirement
Order your copy today!
Today's Commentary: 11.08.04
Show Me the Money, Mr. President
Now that you have been elected by 59 million plus voters for what appears to be your family values, it is a little surprising that the first thing you offer the country in the way of a second term mandate involves economic issues, many of which should have alienated voters instead of garnishing them with faith. But I still wonder how you plan on financing this plan for the next four years.
The economic lead boot that Iraq has become is still dragging billions of dollars from circulation but has oddly been pushed to the background. While you celebrate your victory at Camp David the war rages on with little but costly results in lives and dollars. This war was and continues to be financed by those generous, dollar hungry neighbors on the Pacific Rim. But that could be changing Mr. Bush and it may be your own economic policy that has wrought this misfortune.
For quite some time, the Treasury has been encouraging China to stabilize its run away economy. Sucking up raw materials and dominating the export trade of cheap goods through cheap loans to their own businesses has found the US unable to keep pace. The more we seem to buy, ballooning our trade deficit even further, the more they seem to produce. That is about to change.
At your behest, they are beginning to rein in that expansion and that will drive the dollar down. Although the Treasury Department has never admitted that was the policy, a weaker dollar would, in their opinion make the world a better place for American businesses. But that might not be the way it works out.
China's changes of policy will not slow their rapid growth. It will make it more stable as it continues to push forward much like our economy did during the Reagan years. During his second term, our economy began to expand much as China's is doing now. We were a market ripe for investing with low valuations and a double digit returns on those offerings secured by the good faith and credit of our government. But those days of our expansion are over.
Markets, no matter what Tout TV (terminology borrowed from wordsmith Alan Abelson of Barron's), are grossly over valued now and are not the investment they once were. Expansion of US markets depends on the worth of money and with its current drop against other currencies and economies should worry you more than you let on.
Saying that you plan on reforming two very expensive programs - taxes are not really a program in the sense that Social Security is, but they act as one - without any visible means to pay for it would have as much meaning to your red state voters as a pronouncement that the trade deficit was important.
Let's list the problems facing your second term that seem of so little interest and at the same moment, line-up the laundry list of topics that will probably pre-occupy this column for the coming months, if not for the next four years.
Inflation is about to run away. Not go away, but project itself on a still relatively underemployed economy. Those folks whose jobs have been eliminated or are employed but at a much lesser wage take little heart in the jobs numbers on Friday - or the revisions from the previous two months. Those folks know that $49 a barrel oil may be the final straw. The approaching winter months will magnify this increased cost for fuel and however volatile the number may be, it is affecting the other banned inflationary additive, food. The interaction of these two vitally important part of every person's life have jumped dramatically over the last twelve months, sometimes in anticipation of darker more expensive times ahead, sometimes because they have arrived.
There is, I would suppose, a new-Chairman-in-training at the Federal Reserve. Mr. Greenspan should not apply for another term nor should he accept the invitation. If one is extended, it will be out of politeness not need. He should take whatever legacy he has and retire to the lecture circuit and pre-Fed announcement guest appearances on TV. But is there an inflation hawk that would agree with your policies?
The stock market and fixed income markets reacted to the election in different ways that should have caused you some concern Mr. Bush. Ebullience is nice in equities but a measured reaction from bonds has these two houses of finance suggesting you temper your plans.
Those pesky deficits will not come down as planned in any noticeable way. The gaining of four additional seats to the Republicans will create further entitlements to industries that are hurting because of poor global enthusiasm for American goods and now dollars. That will cost big money and Mr. Bush has never met, to date, a spending measure he didn't like. Supply side economics need a steady source of supply. Growth will not be enough to replace the costs of the debt you have created, which at last look, is costing us 6% of GDP.
Congratulations are in order for a well-executed campaign that avoided the truth about issues and focused on values. Unfortunately, those voters should have taken that word to its next lexiconic level: valuations. Those might have been enough to sway the voter from voting with their heart when they should have been voting their future wealth.
The Blue Money Report
Financial Commentary covering a wide range of topics concerning money, investing, and how it effects the average investor and their financial health.
It is the World of Money and Investing Explained.
Our Publication
If you are interested in providing your readers with our syndicated column, you can request it here
