Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investors Greater Rewards From Investing Abroading

Stock-Markets / Investing 2010 Feb 04, 2010 - 03:17 PM GMT

By: John_Browne

Stock-Markets

Best Financial Markets Analysis ArticlePresident Obama's State of the Union message only serves to reinforce my forecast that investors will continue to find better returns in markets outside America and in currencies other than the U.S. dollar. Indeed, the reward gap may well increase.



Nothing in the President's speech indicated willingness to do the hard work of cutting spending. Rather, he reiterated his commitment to a costly new healthcare entitlement and more spending on make-work programs. Only days later, his budget acknowledged that, even before factoring in the cost of his proposals, the federal government is unlikely to be in surplus for the foreseeable future. In response, Moody's has issued a warning that the United States' triple-A credit rating is not unassailable. In short, the trend set some ten years ago will continue.

Since 1999, those who invested in U.S. stocks, as measured by the S&P Index, have lost about half of their wealth, in real terms.[i] On the other hand, those who invested abroad, measured by the Morgan Stanley Emerging Market Index,[ii] [iii] have doubled their investments in real terms. This is because capitalism is flourishing abroad, while being curtailed progressively in so-called advanced economies, where the projected aggregate growth rate for 2010 is now only some 2.5 percent. Somewhat optimistically, this assumes no double dip recession. [iv]

Most of the emerging economies are far less leveraged than those of the advanced countries and are relatively well insulated from the massive dollar deleveraging that began in 2007. Crucially, their government spending is geared largely to infrastructure and far less to expensive government bureaucracy and wealth-depleting entitlements. Most importantly, even formerly communist governments, like that of China, have embraced free-market capitalism, while many in the advanced governments are flirting with socialism.

As the most leveraged of the major economies, America in particular faces great problems with regard to regenerating consumer demand. Looking at the future of U.S. stock markets, the following five bearish observations stand out.

First, it appears that the ruling Democratic Party is out of touch with the realities of economics. Paying little apparent heed to their sensational defeat in Massachusetts, President Obama and his Democrat Congress are making no realistic attempt to rein in, let alone cut, runaway government spending. Yet, the current path leads to spiking debt costs, huge tax increases, and unprecedented U.S. dollar debasement. In addition, because many Congressional Democrats were elected by disaffected conservatives during the Bush years, the party cannot agree to terms on reform legislation. This leaves businesses fraught with uncertainty as to how they will be impacted.

Because of the focus on new spending, we have only seen empty gestures with regard to tax-cutting. This is the ultimate form of "stimulus," but one that must be earned through reduced spending. While President Obama has talked tax cuts, his actions indicate only a redistributionist impulse to set up federal programs for which business and the productive classes must pay. Whether or not that satisfies his ideological goals, it is a recipe for economic disaster.

Second, while the Fed has signaled that it will hold interest rates down for the foreseeable future, it is likely that in the medium and long end of the yield curve the market will soon force rates higher. This will lead U.S. bond and equity markets to better reflect their real values, and end the nominal recovery we have seen thus far.

Third, despite increased government hiring in wealth-consuming jobs, total employment, and especially private, wealth-creating employment, continues to fall. [v] Those jobs are moving abroad. Last year, the U.S. witnessed the steepest drop in demand for H1B visas in recent history. [vi] This indicates that America is losing its appeal as the place for the world's enterprising young minds to strike it rich.

Fourth, the Dow has risen at a historically fast rate over the past nine months, while volume has thinned. [vii] In other words, the rally is being pushed by speculative traders, not long-term investors. It is, therefore, highly vulnerable to collapse.

Finally, political uncertainty, rising unemployment, and an outlook for increased taxes are destroying any looming consumer confidence. Fourth-quarter GDP grew an annualized 5.7 percent on inventory restocking, but no one is in the mood to spend. [viii] Consequently, those stockpiles will drag on GDP growth for several quarters.

With this somber picture at home, it was not naïve to have hoped the President would shift to a common sense agenda in the State of the Union. Unfortunately, this Administration may not have the fortitude to implement an austerity program. One way or another, the U.S. is going to have to face the economic reality; the longer we wait, the bigger head-start we give to our competitors in the developing world.

[i] 2009/02/08. "Two S&P 500 Charts: Rolling 10-Year Returns, Inflation Adjusted Performance". J.D. Steinhilber @ Seeking Alpha.

[ii] 1999/01/01-2009/01/01. MSCI Barra. [www.mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html]

[iii] 2010/02/04. U.S. Dollar Inflation Calculator. [www.usinflationcalculator.com/inflation/current-inflation-rates/]

[iv] 2009/11. Summary data tables. OECD Economic Outlook No. 86.

[v] 2010/02/04. "Service Sector Remains in a Rut, While Job Losses Slow" by Sara Murray and Kathleen Madigan. Wall Street Journal.

[vi] 2009/05/09. "Demand Down for Foreign Worker Visas". CNN Money.

[vii] 2009/02/04 - 2010/02/04. Symbol Lookup: ^DJI. Yahoo! Finance.

[viii] 2010/02/01. "Sickly Recovery" by Martin Hutchinson. Business Standard.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in