Big Trouble Ahead (2004 article)
Hi.
Thank you for visiting my new site.
I’ve started a new site to promote my work in teaching and public speaking. This site will include my first personal blog along with my professional work. For the last 30 years I’ve been writing exclusively on investing, economic trends and important political issues of our time.
On this site, I intend to write on more personal matters as well. For now, I’m sharing a post from my business blog from 10 years ago. So much has changed, but so much has remained the same. Below is my view from 10 years past. I promise a fresh, more personal post by 11/12/2014. Please come back to check it out then. – Ray
August 13, 2004 – Big Trouble Ahead. The economic and trade reports released today were absolutely awful. They showed:
1. Record levels of imports,
2. Slowing of US exports, and
3. A more cautious US consumer.
Today, investors ignored these numbers; the market closed slightly higher. Investors are in as much denial about the troubled state of the US economy as are politicians. Oil is a problem but it is NOT our biggest problem. The US has a trade deficit with nearly every country on earth. Here is a sampling of US trade deficits as at June 2004:
China: $14.2b
Japan: $6.3b
Europe: $7.9b
Mexico: $4.9b
Canada: $6.6b
Japan: $6.3b
Europe: $7.9b
Mexico: $4.9b
Canada: $6.6b
Today’s economic and trade numbers suggest grave risk to most investors. Below are 25 questions you must answer, before you select an investment strategy:
- How long can the US consume more than it produces?
- Will American companies soon become winning international competitors?
- Will the trade deficit soon be reversed?
- When?
- How?
- Will the US budget be balanced by raising taxes?
- Will the US budget be balanced by cutting spending?
- Will Kerry or Bush balance the federal budget by raising taxes?
- Will Kerry or Bush balance the federal budget by cutting federal spending?
- How will they balance the budget? When?
- Will federal and state governments raise corporate or personal tax rates?
- How will that impact corporate profits?
- How will that impact share prices?
- When will foreign nations stop loaning the US $300 – $500 billion annually?
- What rate will they charge us in the future?
- What will prevent them from demanding much higher interest rates?
- Do the companies you own produce honest financial statements?
- Will the future incomes of most American’s rise at 15% per year to catch up with the rising cost of housing?
- How will your children buy a house?
- Will middle-eastern nations supply all the oil that that the US and China require?
- At what price?
- Do the companies in the mutual funds in your retirement plan produce a consistent and reliable 4% return on your investment?
- Oh really, how do you know? Who told you – a broker/planner or a politician?
- Will inflation heat up?
- Will prices for goods and services fall, with falling consumer demand?
No one knows the future with certainty. However, we have answers to these questions.