An op/ed in the January 18, 2011 edition of Investors Business Daily stated that governments around the world and in particular in Africa promote famine. While it referenced corruptions amongst governments which sold their nation's grains and kept the profits for themselves, it raised the more controversial issue of African nations which have declined American food aid due to their policy of accepting food from the United States because our nation's food is genetically modified. In 2002, Zambia declined food aid from the U.S., mostly in the form of corn, deeming it "frankenfood", notwithstanding a famine that would affect nearly one-third of its population. In light of recent rebellions in Tunisia, Egypt, Bahrain, and Libya which have been sparked by food shortages and vastly escalating food prices, I was motivated to learn more about genetically modified food (GMF), and its potential impact on solving world hunger and perhaps more geopolitical revolutions.
The World's population is projected by the United States Census Bureau to grow from approximately 7 billion in 2012 to 8 billion by the year 2025. To put this into perspective, there were only 6 billion mouths to feed in the year 2000. Today, tragically, eighteen percent of the population of the developing world lacks sufficient food. In a nation like China where the need for food production is expected to increase sixty percent by the year 2030 to keep pace with population growth, boosting food production has always been a national priority. Africa has the highest population growth rate in the world, making it difficult to maintain adequate food supplies.
Compounding these problems are recent draughts, floods and fires and the diversion of food crops to produce bio-fuels as well as export bans imposed by nations in light of shortages. Some examples are the cost of wheat which has almost doubled in the last six months and oil prices which have surpassed $100 per barrel, putting more pressure on farmers to use corn for fuel production, rather than for food. On February 16, 2011, Josette Sheeran, the Executive Director of the United Nations World Food Programme, asserted that we are on "red alert". World Bank Managing Director, Ngozi Okonjo-Iweala, said, "I feel we have now entered a danger zone. National food security issues are becoming a global food security issue. This is a challenge for the world. Almost one billion people are going to bed hungry."
Biotechnology used for purposes of human food supply no doubt is unsettling for many. Terms like "genetically modified", particularly when this term relates to food is foreign and scary. I don't know what the alternative is, especially for hungry people. Farmers have been battling pests for centuries. Chemicals such as pesticides and herbicides are very common and widely-used. Because of environmental and health concerns, many of which have been raised by European scholars who are not surrounded by famine, development of new chemical treatments has been curtailed in recent years. Today, scientists are using the tools of advanced molecular technology to fortify plants with genes to help them resist pests. Although breeding practices have been used for years to grow crops with desirable traits, scientists can now identify genes from similar species or even from completely unrelated organisms, and transfer those genes into crops.
Sharon Bomer Lauritsen, Executive Vice President, Food and Agriculture for the Biotechnology Industry Organization, states, "biotech crops help to provide for more sustainable agricultural production. The benefits include a reduction in the environmental impacts of agriculture, increased production on the same amount of acreage, improved food quality, and increased farmer incomes."
The reality is that much of the controversial science involved in agriculture is used and is more widely accepted globally when it comes to pharmaceuticals or many other industrial products. With staggering world population growth, radical weather events, famine, and political upheavals, food and the efficacies of food production will surely continue to be a major economic theme and investment opportunity over the course of the decade and beyond. I will do my best to keep you informed.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
Past performance is no guarantee of future results.
Wednesday, March 9, 2011
Monday, January 31, 2011
Interesting Tidbits About Today's Investors
1) USA Today polled adults "How will you save enough in 2011?"
The results are as follows:
Saving portion of income-51%
Cutting back on luxuries-25%
Winning the lottery-22%
Saving tax refund-17%
Selling items-17%
2) Could you come up with $2000 in 30 days for a major car repair?
This was the question asked by The TNS Finance Personal Risk Assessment and Risk Literacy Survey. In the United States only 46% of those polled could raise these funds through savings, borrowing, friends or family. Those in the UK and Germany scored similarly. However, in Mexico, only 42% of the population polled could raise these funds.
3) Yahoo Finance and Bankrate.com featured a story on lifelong investing, which highlighted the financial view of retirement for a Florida resident by the name of Leonard McCracken, who is presently 107 years old. Leonard has been retired since 1969, when he left a sales position with a now-defunct steel company in Ohio. For the last 41 years, he has been living on savings, Social Security, and a lifetime annuity purchased prior to retirement. His 73 year old son said, "Dad never made more than $10,000 a year in his life." At 107, and 41 years without a paycheck, Leonard is still paying his own bills and living off his own resources.
What most caught my attention about this story is that Leonard always avoided the stock market, preferring CDs and bonds instead. In addition to CDs and bonds, he consistently bought and sold real estate during his working career. In fact, he had bought and sold 35 houses during his life. He had very little debt, worked even when jobs were hard to find, saved religiously and made it a point to remain healthy.
Leonard is a man who has been completely self-sufficient for more than twice the average length of retirement. He did this by living within his means, and minimizing risks with his investments. How many people believe that they have to shoot for the stars in terms of investment performance to make up for the huge losses they have incurred in the stock market?
At Gann Partnership, LLC, we are all about growth but with strategies to minimize risk. We are about balancing offense and defense. We are about preserving principal and protecting gains. Leonard's son, Bob said, "when the economy tanked, he made a lot of us look real silly." Because of our defensive strategies, we might be missing some of the tremendous and unsustainable surge in today's stock market, but I am confident that we will endure and we will never look "real silly".
No one person has a monopoly on all the good ideas and strategies. Connect with us if you would like non-sales oriented, objective feedback or a second opinion.
Also, I encourage you to pass this along to anyone else who might appreciate these perspectives.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
Past performance is no guarantee of future results.
The results are as follows:
Saving portion of income-51%
Cutting back on luxuries-25%
Winning the lottery-22%
Saving tax refund-17%
Selling items-17%
2) Could you come up with $2000 in 30 days for a major car repair?
This was the question asked by The TNS Finance Personal Risk Assessment and Risk Literacy Survey. In the United States only 46% of those polled could raise these funds through savings, borrowing, friends or family. Those in the UK and Germany scored similarly. However, in Mexico, only 42% of the population polled could raise these funds.
3) Yahoo Finance and Bankrate.com featured a story on lifelong investing, which highlighted the financial view of retirement for a Florida resident by the name of Leonard McCracken, who is presently 107 years old. Leonard has been retired since 1969, when he left a sales position with a now-defunct steel company in Ohio. For the last 41 years, he has been living on savings, Social Security, and a lifetime annuity purchased prior to retirement. His 73 year old son said, "Dad never made more than $10,000 a year in his life." At 107, and 41 years without a paycheck, Leonard is still paying his own bills and living off his own resources.
What most caught my attention about this story is that Leonard always avoided the stock market, preferring CDs and bonds instead. In addition to CDs and bonds, he consistently bought and sold real estate during his working career. In fact, he had bought and sold 35 houses during his life. He had very little debt, worked even when jobs were hard to find, saved religiously and made it a point to remain healthy.
Leonard is a man who has been completely self-sufficient for more than twice the average length of retirement. He did this by living within his means, and minimizing risks with his investments. How many people believe that they have to shoot for the stars in terms of investment performance to make up for the huge losses they have incurred in the stock market?
At Gann Partnership, LLC, we are all about growth but with strategies to minimize risk. We are about balancing offense and defense. We are about preserving principal and protecting gains. Leonard's son, Bob said, "when the economy tanked, he made a lot of us look real silly." Because of our defensive strategies, we might be missing some of the tremendous and unsustainable surge in today's stock market, but I am confident that we will endure and we will never look "real silly".
No one person has a monopoly on all the good ideas and strategies. Connect with us if you would like non-sales oriented, objective feedback or a second opinion.
Also, I encourage you to pass this along to anyone else who might appreciate these perspectives.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
Past performance is no guarantee of future results.
Friday, January 7, 2011
2010: The Year in Retrospect
A) 2010 was a year characterized by two "seasons". In the first half of the year from January through June, the S&P 500 was negative 7.87%. From July through December, the S&P 500 was positive 22.41%.
B) The month of December saw the S&P 500 gain 4.28%. This is equivalent to an annualized return of 51.36%.
C) From March 6, 2009 to December 31, 2010, the S&P 500 rallied 84.03%.
D) Putting these returns in context, it is important to appreciate that from March 31, 2000 (almost eleven years ago) to December 31, 2010, the S&P's performance is negative 16.08%, and that is after including all the above referenced rallies.
E) Another sobering fact is that the S&P 500 last made a high on October 5, 2007, and from this date through December 31, 2010, the index is negative 19.26%.
F) Over the last fifty years, the S&P 500 has been up 53% of all days and down the other 47%, as documented by BTN Research.
G) Domestically, small cap stocks were the leaders for the year over every other major asset class. Alternative energy and solar in particular was one of the worst performing sectors.
H) In addition to commodities, the real winners in 2010 were emerging markets. In particular, Peru, Thailand, Chile, Philippines, Indonesia, Malaysia and South Africa showed the greatest strength in descending order per Dorsey Wright's January 4, 2011 report.
I) With respect to currencies, 2010 was again a year of two halves. The first half witnessed a rise in the U.S. Dollar, but in the second half it fell, erasing most of its prior gains. The Australian Dollar and the Japanese Yen were the strongest currencies for the year. In contrast, the Euro and the British Pound were the weakest currencies per Dorsey Wright's January 4, 2011 report.
Short Term Risks Heading Into 2011
A) Currency wars present unusual risks that are not easily calculated. There is sort of a tug and a pull when it comes to manipulating currencies. To stimulate exports, countries seek to weaken their currencies. However, when currencies become too weak, that can undermine investment into the economy. Chile represents this dilemma perfectly today. According to Siobhan Morden, a Latin American strategist at RBS Securities, Inc., Chile has practically no debt and no fiscal deficit. Chile is the world's largest copper producer, and the surge in copper prices has resulted in a much stronger Chilean Peso. Just recently countries such as Chile are selling their home currencies on the open market, and using the proceeds to buy US Dollars, so as to puff up the relative value of the greenback. Considering that most commodities and other global products are priced in US dollars, this type of currency manipulation could result in dramatic and quick reversals from emerging markets which have been on a tear in the last year.
B) The impetus for the market's second half year surge is the Federal Reserve's commitment to buying back government bonds. With improved statistics and optimism, it is more likely that future economic stimuli will be halted. In fact, there is a risk that the US might move closer to European austerity measures if it is perceived that the storm is over. Also food prices are at inflation adjusted all-time highs, and gas prices are steadily increasing, both of which can cause a drag on the economy.
C) Warren Buffett advises to be greedy when the majority is fearful, and to be fearful when most are greedy. At the start of 2011, 63% of retail investors are bullish, as reported by the American Association of Individual Investors. And the most recent survey by Investors Intelligence shows that advisors are now more bullish than at any other time since the peak in October, 2007. These are very bearish indicators. The best time to buy stocks is when no one else wants them.
D) The weakness in the economy resulted in unprecedented strategies to grow the economy. These have not been normal times. In fact, a new term has been coined for this period as the "new normal". Believing that companies were too big to fail, governments around the world have been changing the standard rules. There has been anything but certainty in the last two years. We have kicked the can down the road by borrowing. The analogy that comes to mind is the festive holiday shopper who overspends in December by putting more and more on his credit cards. There is exuberance at the holidays, but reality sets in in January when all the bills arrive. The problems which created the great financial meltdown were brewing for a long time before they were recognized, much less erupted. As comforting as it may feel to convince ourselves that everything is now behind us, we still need to face the music about how to unravel the mass of global debt. I am sorry to say that it will not all be pretty. This is still a market that requires 'rowing" strategies, notwithstanding the fact that the majority believes it is time for clear sailing. I have both my oars and sails on board. Stay tuned.
The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
International and emerging market investing involves special risks such as currency fluctuation and
political instability and may not be suitable for all investors.
The prices of small cap stocks are generally more volatile than large cap stocks.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
Past performance is no guarantee of future results.
B) The month of December saw the S&P 500 gain 4.28%. This is equivalent to an annualized return of 51.36%.
C) From March 6, 2009 to December 31, 2010, the S&P 500 rallied 84.03%.
D) Putting these returns in context, it is important to appreciate that from March 31, 2000 (almost eleven years ago) to December 31, 2010, the S&P's performance is negative 16.08%, and that is after including all the above referenced rallies.
E) Another sobering fact is that the S&P 500 last made a high on October 5, 2007, and from this date through December 31, 2010, the index is negative 19.26%.
F) Over the last fifty years, the S&P 500 has been up 53% of all days and down the other 47%, as documented by BTN Research.
G) Domestically, small cap stocks were the leaders for the year over every other major asset class. Alternative energy and solar in particular was one of the worst performing sectors.
H) In addition to commodities, the real winners in 2010 were emerging markets. In particular, Peru, Thailand, Chile, Philippines, Indonesia, Malaysia and South Africa showed the greatest strength in descending order per Dorsey Wright's January 4, 2011 report.
I) With respect to currencies, 2010 was again a year of two halves. The first half witnessed a rise in the U.S. Dollar, but in the second half it fell, erasing most of its prior gains. The Australian Dollar and the Japanese Yen were the strongest currencies for the year. In contrast, the Euro and the British Pound were the weakest currencies per Dorsey Wright's January 4, 2011 report.
Short Term Risks Heading Into 2011
A) Currency wars present unusual risks that are not easily calculated. There is sort of a tug and a pull when it comes to manipulating currencies. To stimulate exports, countries seek to weaken their currencies. However, when currencies become too weak, that can undermine investment into the economy. Chile represents this dilemma perfectly today. According to Siobhan Morden, a Latin American strategist at RBS Securities, Inc., Chile has practically no debt and no fiscal deficit. Chile is the world's largest copper producer, and the surge in copper prices has resulted in a much stronger Chilean Peso. Just recently countries such as Chile are selling their home currencies on the open market, and using the proceeds to buy US Dollars, so as to puff up the relative value of the greenback. Considering that most commodities and other global products are priced in US dollars, this type of currency manipulation could result in dramatic and quick reversals from emerging markets which have been on a tear in the last year.
B) The impetus for the market's second half year surge is the Federal Reserve's commitment to buying back government bonds. With improved statistics and optimism, it is more likely that future economic stimuli will be halted. In fact, there is a risk that the US might move closer to European austerity measures if it is perceived that the storm is over. Also food prices are at inflation adjusted all-time highs, and gas prices are steadily increasing, both of which can cause a drag on the economy.
C) Warren Buffett advises to be greedy when the majority is fearful, and to be fearful when most are greedy. At the start of 2011, 63% of retail investors are bullish, as reported by the American Association of Individual Investors. And the most recent survey by Investors Intelligence shows that advisors are now more bullish than at any other time since the peak in October, 2007. These are very bearish indicators. The best time to buy stocks is when no one else wants them.
D) The weakness in the economy resulted in unprecedented strategies to grow the economy. These have not been normal times. In fact, a new term has been coined for this period as the "new normal". Believing that companies were too big to fail, governments around the world have been changing the standard rules. There has been anything but certainty in the last two years. We have kicked the can down the road by borrowing. The analogy that comes to mind is the festive holiday shopper who overspends in December by putting more and more on his credit cards. There is exuberance at the holidays, but reality sets in in January when all the bills arrive. The problems which created the great financial meltdown were brewing for a long time before they were recognized, much less erupted. As comforting as it may feel to convince ourselves that everything is now behind us, we still need to face the music about how to unravel the mass of global debt. I am sorry to say that it will not all be pretty. This is still a market that requires 'rowing" strategies, notwithstanding the fact that the majority believes it is time for clear sailing. I have both my oars and sails on board. Stay tuned.
The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
International and emerging market investing involves special risks such as currency fluctuation and
political instability and may not be suitable for all investors.
The prices of small cap stocks are generally more volatile than large cap stocks.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
Past performance is no guarantee of future results.
Thursday, December 23, 2010
Red, Green, or Yellow? ( I think yellow)
John Hussman, Ph.D. is a well-regarded institutional investment manager. He holds a Ph.D. from Stanford University, and was formerly a professor of economics and international finance at the University of Michigan. He has also published the Hussman Econometrics newsletter since 1988. In his December 13, 2010 newsletter, he cites significant parallels between today's market environment and others during which outcomes were not pleasant.
First, allow me to present some context. From September 1, 2010 to December 16, 2010, the S&P 500 index has soared nearly 18.5%. Yes, that's eighteen and a half percent.
Dr. Hussman identifies five criteria which identify a market characterized as overvalued, overbought, and overly bullish. He further goes on to say that past instances have been associated with such uniformly negative outcomes that the current situation has to be accompanied by the word "warning". These criteria are as follows:
1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller Price/Earnings Ratio greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27% (Investor's Intelligence)
He further provides the historical instances corresponding with these conditions as follows:
December 1972 - January 1973 (followed by a 48% collapse over the next 21 months)
August - September 1987 (followed by a 34% plunge over the following 3 months)
July 1998 (followed abruptly by an 18% loss over the following 3 months)
July 1999 (followed by a 12% market loss over the next 3 months)
January 2000 (followed by a spike 10% loss over the next 6 weeks)
March 2000 (followed by a spike loss of 12% over 3 weeks, and a 49% loss into 2002)
July 2007 (followed by a 57% market plunge over the following 21 months)
January 2010 (followed by a 7% "air pocket" loss over the next 4 weeks)
April 2010 (followed by a 17% market loss over the following 3 months)
December 2010
Whether history repeats itself again remains to be seen. Often a signal that the market may be near or at a "top" is when retail investors take the plunge and buy stocks. Throughout the market rally from the March 2009 lows, notwithstanding impressive gains in stocks, the vast majority of funds invested by retail investors since this time period has been to bonds; not stocks according to the Wall Street Journal and Investors Business Daily. Within the last two to three weeks, the flow of funds invested by non-institutional investors has shifted out of bonds and into stocks. Defense is out, and risk is in. When sentiment changes and soars, and prices rise feeding the sentiment change, it is often a huge warning sign.
This is not to say that I believe we are about to repeat the precipitous decline of 2008. And, I am truly not a pessimist. It is just that mathematical and universal laws dictate a reversion to the mean. For every action, there is an equal and opposite reaction. When things go up or down too quickly, caution must be imposed. When sentiments rise and values soar, it is very scintillating to want to hop aboard for fear of missing out on the "big one". We have some market exposure today, but the exposure has safeguards strategically incorporated. The bottom line is that the issues which created the great world-wide great recession are not all corrected. Debt is a looming problem that will continue to rear its head. Revenue estimates are being revised upwards, which can lead to disappointments. I believe that we are in a sideways market. By this I mean that we will have big upturns followed by dramatic, quick reversals. The Euro is still an experiment. No one knows for sure how it will unfold. I have difficulty understanding how Germany who is meticulous, disciplined, restrained and has been fiscally responsible can share a currency with others on the continent such as the Italians and the Spanish whose cultures are completely different. Is it really fair that all these nationalities have their single currency adjusted uniformly? If the debt has to be unwound and reallocated to different currencies, how will values be determined? In short, we are acting nimbly, making sure we have offense as well as defensive strategies in place. Particularly when retail investors are accepting more risk and are more euphoric, it is essential that we tighten our hedges.
After all, we're in a yellow zone, so we're proceeding with caution.
The opinoions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Past performance is no guarantee of future results.
First, allow me to present some context. From September 1, 2010 to December 16, 2010, the S&P 500 index has soared nearly 18.5%. Yes, that's eighteen and a half percent.
Dr. Hussman identifies five criteria which identify a market characterized as overvalued, overbought, and overly bullish. He further goes on to say that past instances have been associated with such uniformly negative outcomes that the current situation has to be accompanied by the word "warning". These criteria are as follows:
1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller Price/Earnings Ratio greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27% (Investor's Intelligence)
He further provides the historical instances corresponding with these conditions as follows:
December 1972 - January 1973 (followed by a 48% collapse over the next 21 months)
August - September 1987 (followed by a 34% plunge over the following 3 months)
July 1998 (followed abruptly by an 18% loss over the following 3 months)
July 1999 (followed by a 12% market loss over the next 3 months)
January 2000 (followed by a spike 10% loss over the next 6 weeks)
March 2000 (followed by a spike loss of 12% over 3 weeks, and a 49% loss into 2002)
July 2007 (followed by a 57% market plunge over the following 21 months)
January 2010 (followed by a 7% "air pocket" loss over the next 4 weeks)
April 2010 (followed by a 17% market loss over the following 3 months)
December 2010
Whether history repeats itself again remains to be seen. Often a signal that the market may be near or at a "top" is when retail investors take the plunge and buy stocks. Throughout the market rally from the March 2009 lows, notwithstanding impressive gains in stocks, the vast majority of funds invested by retail investors since this time period has been to bonds; not stocks according to the Wall Street Journal and Investors Business Daily. Within the last two to three weeks, the flow of funds invested by non-institutional investors has shifted out of bonds and into stocks. Defense is out, and risk is in. When sentiment changes and soars, and prices rise feeding the sentiment change, it is often a huge warning sign.
This is not to say that I believe we are about to repeat the precipitous decline of 2008. And, I am truly not a pessimist. It is just that mathematical and universal laws dictate a reversion to the mean. For every action, there is an equal and opposite reaction. When things go up or down too quickly, caution must be imposed. When sentiments rise and values soar, it is very scintillating to want to hop aboard for fear of missing out on the "big one". We have some market exposure today, but the exposure has safeguards strategically incorporated. The bottom line is that the issues which created the great world-wide great recession are not all corrected. Debt is a looming problem that will continue to rear its head. Revenue estimates are being revised upwards, which can lead to disappointments. I believe that we are in a sideways market. By this I mean that we will have big upturns followed by dramatic, quick reversals. The Euro is still an experiment. No one knows for sure how it will unfold. I have difficulty understanding how Germany who is meticulous, disciplined, restrained and has been fiscally responsible can share a currency with others on the continent such as the Italians and the Spanish whose cultures are completely different. Is it really fair that all these nationalities have their single currency adjusted uniformly? If the debt has to be unwound and reallocated to different currencies, how will values be determined? In short, we are acting nimbly, making sure we have offense as well as defensive strategies in place. Particularly when retail investors are accepting more risk and are more euphoric, it is essential that we tighten our hedges.
After all, we're in a yellow zone, so we're proceeding with caution.
The opinoions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Past performance is no guarantee of future results.
Monday, November 1, 2010
Tuesday, October 19, 2010
Alzheimer's: Care, Costs and a Cure
by Lora Gann
Last year my mother passed away after a relatively short battle with Alzheimer's disease. I say that it was relatively short, because in the grand scheme of things from diagnosis to death it was four years. The first two years we dealt with the slowing down of her mind and body, but she still remained the person whom we knew. There were many moments of frustration and fear, but for the most part we were able to deal with living with her new "normal" and enjoy each other.
Then, it got to the point when there was no more hiding. The family was in a constant state of high alert and crisis. We were helping to manage her care and trying to keep her in the house for as long as possible. A big concern was making sure that my father remained healthy, too. A new vocabulary replaced our old one: care givers, elder-care lawyers, shower seats, chair-lifts, ramps, long term care insurance, in-home visits, day care, companions, cognitive assessments, rehab, physical therapy, drug therapy, and more.
This disease is tragic and robs you of your dignity. My mother was a very proud woman who never wanted to live in an incapacitated way. She never wanted to burden her family and she wanted the end of her life to be as she lived - full of spirit, generosity, love and laughter. Unfortunately, that was not to be the case. It was a very sad end to her very vibrant life.
Ours was a very private battle. But, today, this disease affects 35 million people around the world and by the year 2050 it is predicted that 115 million people will have Alzheimer's, making this disease an enormous, world-wide public crisis. According to the World Alzheimer Report 2010* that was just published in September, the costs of caring for people affected by dementia have risen at an alarming rate and have impacted every health and social system in the world. This has dramatically affected the global economy; the total estimated worldwide costs of dementia are $604 billion in 2010 - 1% of world's gross domestic product.
Here are a few findings from this report and other recent research:
The likelihood of developing Alzheimer's doubles about every 5 years after age 65.
About 1 out of every 2 people over the age of 85 has Alzheimer's.
About 70% of the costs occur in Western Europe and North America.
In North America it is estimated that the annual cost of care per person is $48,605. And, in places in Latin America costs are estimated to be around $5,500 per person and in South Asia it is $903.
As population ages and life expectancy increases, we can expect these costs to rise sharply.
Costs include:
1. care giving by family and friends -- time family spend caring and helping with eating, dressing, bathing, toileting and grooming and shopping, preparing food, transporting and managing the household including finances
2. support provided by community care professionals - formal services provided outside the medical care system, including community services such as home care, food supply and transport and residential or nursing care
3. medical care - hospital care, medication and clinical care
Low and middle income countries are expected to have the sharpest increases. By 2050 2/3 of the people who have Alzheimer's will be from low and middle income countries.
In some high income countries between 1/3 and 1/2 of all people with dementia live in residential or nursing care facilities.
The report urges the international community to coordinate research and cost-effective approaches in order to manage these escalating costs, the societal burden and medical advances.
The risk factors of developing Alzheimer's disease are detailed as follows:
Advancing age.
Family history. People who have a parent or sibling that have developed Alzheimer's are 2-3 times more likely to develop Alzheimer's. Risk factor increases if more than one close relative has been affected.
Tobacco usage, poor diet, lack of exercise, alcohol consumption and social isolation all contribute.
High blood pressure, heart disease, stroke, diabetes and high cholesterol.
Head-injury.
Research shows that there is a connection between heart health and brain health. Jean Carper's new book, "100 Simple Things You Can Do To Prevent Alzheimer's" offers the reader a comprehensive "to-do" list backed by medical studies. It is written with a tone that is both helpful and optimistic. She is an active 78 year old writer who, being at higher risk for Alzheimer's because she carries the gene,
ApoE4, decided to teach us all that the cure for Alzheimer's is prevention.
Much of what she reports is common sense and advice we have heard over and over again by our medical practitioners: Don't eat processed foods, cut back on saturated fats, exercise, eat brightly colored fruits and vegetables, watch your sugar in-take, and eat fish a couple of times a week.
But some of what she tells us may be surprising. Among them are: Being lonely can escalate Alzheimer's. Eating a lot of red meat can cause inflammation which can cause Alzheimer's. Lifting weights and strength training can limit loss of muscle mass which can in turn increase cognitive functions. A compound found in olive oil which contains antioxidants can help prevent the destruction of brain cells. Limit your usage of pesticides. Caffeine may actually help reverse some of the damage done by Alzheimer's. Cutting down your calorie intake can reduce factors that promote the disease. By keeping your brain busy your whole life, neuroscientists say your brain can actually ignore the symptoms of Alzheimer's, even though the pathology shows you should have the disease.
She sites research studies and doctors for each item on her list. It is a very interesting and easy read. Incorporating much of what she advises will not only help our mental health, but it will help us fight numerous other diseases as well.
Since some people live up to 15 years after diagnosis with this disease, we can see how families can become financially and emotionally devastated. So, what should we do? We know we can't hide from the threat of this disease, it is all around us. But, we can try to strengthen our heart health and mind health. We can make sure that our resources are protected by having a sound financial plan and long term care insurance. And, we should have very candid and open discussions with our loved ones about our wishes.
Though medical advances are being discovered all the time, it is time to take matters in our own hands and act on the idea that prevention can be a cure.
* World Alzheimer Report 2010, The Global impact of Dementia. Published by Alzheimer's Disease International, September 2010
The opinoions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Last year my mother passed away after a relatively short battle with Alzheimer's disease. I say that it was relatively short, because in the grand scheme of things from diagnosis to death it was four years. The first two years we dealt with the slowing down of her mind and body, but she still remained the person whom we knew. There were many moments of frustration and fear, but for the most part we were able to deal with living with her new "normal" and enjoy each other.
Then, it got to the point when there was no more hiding. The family was in a constant state of high alert and crisis. We were helping to manage her care and trying to keep her in the house for as long as possible. A big concern was making sure that my father remained healthy, too. A new vocabulary replaced our old one: care givers, elder-care lawyers, shower seats, chair-lifts, ramps, long term care insurance, in-home visits, day care, companions, cognitive assessments, rehab, physical therapy, drug therapy, and more.
This disease is tragic and robs you of your dignity. My mother was a very proud woman who never wanted to live in an incapacitated way. She never wanted to burden her family and she wanted the end of her life to be as she lived - full of spirit, generosity, love and laughter. Unfortunately, that was not to be the case. It was a very sad end to her very vibrant life.
Ours was a very private battle. But, today, this disease affects 35 million people around the world and by the year 2050 it is predicted that 115 million people will have Alzheimer's, making this disease an enormous, world-wide public crisis. According to the World Alzheimer Report 2010* that was just published in September, the costs of caring for people affected by dementia have risen at an alarming rate and have impacted every health and social system in the world. This has dramatically affected the global economy; the total estimated worldwide costs of dementia are $604 billion in 2010 - 1% of world's gross domestic product.
Here are a few findings from this report and other recent research:
The likelihood of developing Alzheimer's doubles about every 5 years after age 65.
About 1 out of every 2 people over the age of 85 has Alzheimer's.
About 70% of the costs occur in Western Europe and North America.
In North America it is estimated that the annual cost of care per person is $48,605. And, in places in Latin America costs are estimated to be around $5,500 per person and in South Asia it is $903.
As population ages and life expectancy increases, we can expect these costs to rise sharply.
Costs include:
1. care giving by family and friends -- time family spend caring and helping with eating, dressing, bathing, toileting and grooming and shopping, preparing food, transporting and managing the household including finances
2. support provided by community care professionals - formal services provided outside the medical care system, including community services such as home care, food supply and transport and residential or nursing care
3. medical care - hospital care, medication and clinical care
Low and middle income countries are expected to have the sharpest increases. By 2050 2/3 of the people who have Alzheimer's will be from low and middle income countries.
In some high income countries between 1/3 and 1/2 of all people with dementia live in residential or nursing care facilities.
The report urges the international community to coordinate research and cost-effective approaches in order to manage these escalating costs, the societal burden and medical advances.
The risk factors of developing Alzheimer's disease are detailed as follows:
Advancing age.
Family history. People who have a parent or sibling that have developed Alzheimer's are 2-3 times more likely to develop Alzheimer's. Risk factor increases if more than one close relative has been affected.
Tobacco usage, poor diet, lack of exercise, alcohol consumption and social isolation all contribute.
High blood pressure, heart disease, stroke, diabetes and high cholesterol.
Head-injury.
Research shows that there is a connection between heart health and brain health. Jean Carper's new book, "100 Simple Things You Can Do To Prevent Alzheimer's" offers the reader a comprehensive "to-do" list backed by medical studies. It is written with a tone that is both helpful and optimistic. She is an active 78 year old writer who, being at higher risk for Alzheimer's because she carries the gene,
ApoE4, decided to teach us all that the cure for Alzheimer's is prevention.
Much of what she reports is common sense and advice we have heard over and over again by our medical practitioners: Don't eat processed foods, cut back on saturated fats, exercise, eat brightly colored fruits and vegetables, watch your sugar in-take, and eat fish a couple of times a week.
But some of what she tells us may be surprising. Among them are: Being lonely can escalate Alzheimer's. Eating a lot of red meat can cause inflammation which can cause Alzheimer's. Lifting weights and strength training can limit loss of muscle mass which can in turn increase cognitive functions. A compound found in olive oil which contains antioxidants can help prevent the destruction of brain cells. Limit your usage of pesticides. Caffeine may actually help reverse some of the damage done by Alzheimer's. Cutting down your calorie intake can reduce factors that promote the disease. By keeping your brain busy your whole life, neuroscientists say your brain can actually ignore the symptoms of Alzheimer's, even though the pathology shows you should have the disease.
She sites research studies and doctors for each item on her list. It is a very interesting and easy read. Incorporating much of what she advises will not only help our mental health, but it will help us fight numerous other diseases as well.
Since some people live up to 15 years after diagnosis with this disease, we can see how families can become financially and emotionally devastated. So, what should we do? We know we can't hide from the threat of this disease, it is all around us. But, we can try to strengthen our heart health and mind health. We can make sure that our resources are protected by having a sound financial plan and long term care insurance. And, we should have very candid and open discussions with our loved ones about our wishes.
Though medical advances are being discovered all the time, it is time to take matters in our own hands and act on the idea that prevention can be a cure.
* World Alzheimer Report 2010, The Global impact of Dementia. Published by Alzheimer's Disease International, September 2010
The opinoions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Friday, October 15, 2010
Unsustainable
The word, "unsustainable" is defined as something that cannot be continued or maintained.
James Macdougald is the author of Unsustainable: How Big Government Taxes And Debt Are Wrecking America. It is easy to discredit the messenger, but the points raised in this book, which I will summarize below, are both mind-boggling and essential for all Americans to grasp.
Here are some of the essential details:
A) Facts and Conditions Which Have Created What Is Unsustainable:
There are 89,000 public sector entities employing 22 million people who are supported by taxes, fees and tolls. Macdougald argues that America currently has federal, state, and local governments which have redistributed so much income to themselves that tax revenues are no longer adequate to support the wages, pensions, and other benefits that they have promised themselves. The book points out that there are specific conditions which set the stage for growth and power of government. The first contributor is a serious economic crisis. The second condition is that the portion of the population either employed by or dependent on the government must be growing and vulnerable. Interestingly, approximately 47% of working American tax-filers pay zero income taxes today. That means 53% of working Americans have to fully support aid and services for all non-working citizens as well as all of the non-taxpaying citizens. The third condition is that scapegoats must be identified as the cause of the problems, motivating unification of the majority of voters.
B) Conflicts Between Public and Private Sectors:
Macdougald points out in blunt terms that the private sector is dying while the public sector is thriving. Within the ten years prior to 2009, the private sector lost 1.5 million jobs, and the public sector grew by 2 million within this same time period. While the private sector has been plagued with bankruptcies, lost wages, decreases in benefits and huge unemployment, the public sector has enjoyed job security, high pay, unparalleled health insurance and pensions that are payable as early as age 40, and routinely payable at age 50 or 55. The Bureau of Economic Analysis reported that in the first quarter of 2010, private sector workers earned $300 BILLION less than their counterparts did in the last quarter of 2007.
The private sector workers are squeezed because notwithstanding the fact that they are experiencing income deflation, they have to support the expenditure of a growing population and a growing government, whose benefits are richer than their own. This same Bureau conducted a study that showed that as of 2008, the average federal worker received $119,982 in compensation and benefits compared with the private sector average of $59,909. For public employees, the "benefits" component was $40,785, as opposed to the private wage earner whose benefits component only averaged $9881. With a total of 1.9 million federal workers, the difference in annual compensation was $114 Billion a year, and is supported by private sector businesses and their employees. Despite the impact of near record unemployment in the private sector in 2009, and massive increases in government debt, the government workers still received raises in terms of incomes and pensions for the year.
C) Uneven Accounting Standards:
Even more revealing is the fact that federal, state, and local governments and school districts are able to hide the actual costs of benefits that private citizens actually pay to them. For the private sector, the Federal Accounting Standards Board (FASB) recognized in the mid 1980's that corporations had pension plans that carried with them significant liabilities which were not shown on their balance sheets. The concern was that these future liabilities would impose financial strain on these corporations, a fact that was not readily discernable to investors. In reaction, the law was mandated requiring corporations to report these future liabilities on their balance sheets. This makes perfectly good sense to me. The problem and inconsistency is that the federal government is not subject to the FASB accounting and disclosure rules. The Government Accounting Standards Board (GASB) allows for off balance sheet accounting for government pension liabilities. This is a classic example of the golden rule. "He who has the gold rules".
D) Special Public Sector Retirement Goodies:
Many public sector pension plans permit the aggregation of unused sick pay or vacation pay or overtime to be paid during the final year before retirement. This policy known as spiking results in inflated earnings in the last years of employment, causing significantly larger pension payments throughout retirement. In Baltimore, the cost of paying pensions for firefighters and police could more than double in the year 2010 from the prior year. City officials predict an 11% increase in property taxes and cuts in services just to pay the pension bill.
E) The Social Security Crisis:
When Social Security was enacted in 1935, it was never perceived that life expectancy would extend from age 68 to age 80. As a result, it was never contemplated that the number of retirees would exceed the number of workers. In reaction to increased life expectancy and the diminishing population of workers to support the growing population of retirees, since 1983, the government has collected $2.5 trillion more in Social Security taxes than what was required to support current retirees. In essence, workers have paid social security taxes twice since 1983, once to provide benefits to existing retirees and a second time to pre-fund a significant portion of their own retirement benefits. Instead of putting our Social Security taxes in a trust which was to be spent only for future retirement benefits, the government spent the money elsewhere through massive government spending programs. It did this through depositing U.S. Treasuries, not real money, into the Social Security trust fund. Treasuries are IOU's. The government uses Treasuries to borrow from taxpayers and other governments. The government spent our social security savings knowing that there were only IOU's on the other side. This has resulted in the greatest Ponzi scheme of all time. Congress has "stolen" from the trust fund by issuing promises to repay though IOU's, and now after spending recklessly for decades, we learn that there is no money in the trust. Congress' proposed solution is to impose more taxes. Evidently twice was not enough. If these kinds of shenanigans occurred in the private sector, there would definitely be jail time.
F) Unions and the Public Sector:
Public sector employees, hired by taxpayers, have a monopoly on the services that they are paid to provide. Unions collect as dues about 1% of public sector's salaries. The unions use the income derived from these dues to provide financial support to politicians who support their agenda. This is a classic conflict of interest. As taxpayers, we are funding the salaries of public sector employees. And these public sector employees are using the income we paid to them to support their agendas which are in conflict to the interests of us the taxpayers, who are after all their employers. Public sector unions have tremendous clout because they operate in a non-competitive environment. We cannot buy police or fire protection elsewhere even if the costs that the unions negotiate is too high.
G) Unsustainable Realities:
I was so moved by his findings that I telephoned Jim MacDougald. We had a lengthy conversation. His basic position is, as taxpayers, we should know for what we are paying. There is no true accounting for the real unfunded pension liabilities. When we go to the polls and support programs, we don't know what our current expenses are, and therefore the true budgetary impact of legislating programs. I asked Jim about our military spending, and what percentage the military comprises of GDP. Jim informed me that no one really knows because there is no accounting or accountability for weapons or aircraft versus pension costs. Everything is lumped together, and there is very little transparency. What he did say is that the "best guess" is that the federal debt is $120 trillion. This equates to the average worker in the U.S. owing $1.2 million today. If the interest rate to service this debt were just 5%, it would cost each worker $60,000 just to cover interest costs without ever reducing principal. And this is utterly UNSUSTAINABLE.
H) My Takeaways:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was fostered by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices. As a nation, we are at a philosophical crossroads. It is too easy to pigeonhole Democrats as being for the little guy and the underprivileged, and Republicans as heartless and only caring about their wallets. However, I believe that today the debate has moved much deeper than these stereotypes. The real philosophical tug of war is whether we should look towards the government to make lives better, or whether private citizens should be most empowered. I believe that being Republican or a fiscal conservative and having a bleeding heart and caring for the underprivileged are not mutually exclusive. In fact, though I am really an Independent, I have come philosophically to abhor big government. I think its effect is to keep the underprivileged, well, underprivileged. When governments get too much power, historically bad results follow. This has been true for World War Two Germany, Russia, China, African nations, etc., etc., etc. I am not comparing the current U.S. government with any of these regimes. I am just saying that too much power and control, militarily and/or economically, scares me.
I believe in the genius of mankind manifested through true entrepreneurial spirit. Furthermore, our government gets a big "F" for energy policies, public schools, postal service, railway systems and ethics. Therefore, I want them out of healthcare and anywhere else they seek to exert and overextend themselves. This is far deeper and wider than a liberal or conservative sound bite. Governments hired by us have forgotten for whom they work. They have demonstrated absolutely no fiscal responsibility, and I have come to agree with MacDougald that big government has made our nation's optimism for a brighter tomorrow unsustainable.
I) Conclusion:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was created by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices.
I asked Jim if he would consider speaking to a group of our clients and friends. He said that he would. So, if you would be interested in getting more facts on these matters and being able to speak directly with the author, please let us know. These facts are crucial for all Americans to appreciate. Therefore, I encourage you to forward this letter to anyone who should also be in the know.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor
James Macdougald is the author of Unsustainable: How Big Government Taxes And Debt Are Wrecking America. It is easy to discredit the messenger, but the points raised in this book, which I will summarize below, are both mind-boggling and essential for all Americans to grasp.
Here are some of the essential details:
A) Facts and Conditions Which Have Created What Is Unsustainable:
There are 89,000 public sector entities employing 22 million people who are supported by taxes, fees and tolls. Macdougald argues that America currently has federal, state, and local governments which have redistributed so much income to themselves that tax revenues are no longer adequate to support the wages, pensions, and other benefits that they have promised themselves. The book points out that there are specific conditions which set the stage for growth and power of government. The first contributor is a serious economic crisis. The second condition is that the portion of the population either employed by or dependent on the government must be growing and vulnerable. Interestingly, approximately 47% of working American tax-filers pay zero income taxes today. That means 53% of working Americans have to fully support aid and services for all non-working citizens as well as all of the non-taxpaying citizens. The third condition is that scapegoats must be identified as the cause of the problems, motivating unification of the majority of voters.
B) Conflicts Between Public and Private Sectors:
Macdougald points out in blunt terms that the private sector is dying while the public sector is thriving. Within the ten years prior to 2009, the private sector lost 1.5 million jobs, and the public sector grew by 2 million within this same time period. While the private sector has been plagued with bankruptcies, lost wages, decreases in benefits and huge unemployment, the public sector has enjoyed job security, high pay, unparalleled health insurance and pensions that are payable as early as age 40, and routinely payable at age 50 or 55. The Bureau of Economic Analysis reported that in the first quarter of 2010, private sector workers earned $300 BILLION less than their counterparts did in the last quarter of 2007.
The private sector workers are squeezed because notwithstanding the fact that they are experiencing income deflation, they have to support the expenditure of a growing population and a growing government, whose benefits are richer than their own. This same Bureau conducted a study that showed that as of 2008, the average federal worker received $119,982 in compensation and benefits compared with the private sector average of $59,909. For public employees, the "benefits" component was $40,785, as opposed to the private wage earner whose benefits component only averaged $9881. With a total of 1.9 million federal workers, the difference in annual compensation was $114 Billion a year, and is supported by private sector businesses and their employees. Despite the impact of near record unemployment in the private sector in 2009, and massive increases in government debt, the government workers still received raises in terms of incomes and pensions for the year.
C) Uneven Accounting Standards:
Even more revealing is the fact that federal, state, and local governments and school districts are able to hide the actual costs of benefits that private citizens actually pay to them. For the private sector, the Federal Accounting Standards Board (FASB) recognized in the mid 1980's that corporations had pension plans that carried with them significant liabilities which were not shown on their balance sheets. The concern was that these future liabilities would impose financial strain on these corporations, a fact that was not readily discernable to investors. In reaction, the law was mandated requiring corporations to report these future liabilities on their balance sheets. This makes perfectly good sense to me. The problem and inconsistency is that the federal government is not subject to the FASB accounting and disclosure rules. The Government Accounting Standards Board (GASB) allows for off balance sheet accounting for government pension liabilities. This is a classic example of the golden rule. "He who has the gold rules".
D) Special Public Sector Retirement Goodies:
Many public sector pension plans permit the aggregation of unused sick pay or vacation pay or overtime to be paid during the final year before retirement. This policy known as spiking results in inflated earnings in the last years of employment, causing significantly larger pension payments throughout retirement. In Baltimore, the cost of paying pensions for firefighters and police could more than double in the year 2010 from the prior year. City officials predict an 11% increase in property taxes and cuts in services just to pay the pension bill.
E) The Social Security Crisis:
When Social Security was enacted in 1935, it was never perceived that life expectancy would extend from age 68 to age 80. As a result, it was never contemplated that the number of retirees would exceed the number of workers. In reaction to increased life expectancy and the diminishing population of workers to support the growing population of retirees, since 1983, the government has collected $2.5 trillion more in Social Security taxes than what was required to support current retirees. In essence, workers have paid social security taxes twice since 1983, once to provide benefits to existing retirees and a second time to pre-fund a significant portion of their own retirement benefits. Instead of putting our Social Security taxes in a trust which was to be spent only for future retirement benefits, the government spent the money elsewhere through massive government spending programs. It did this through depositing U.S. Treasuries, not real money, into the Social Security trust fund. Treasuries are IOU's. The government uses Treasuries to borrow from taxpayers and other governments. The government spent our social security savings knowing that there were only IOU's on the other side. This has resulted in the greatest Ponzi scheme of all time. Congress has "stolen" from the trust fund by issuing promises to repay though IOU's, and now after spending recklessly for decades, we learn that there is no money in the trust. Congress' proposed solution is to impose more taxes. Evidently twice was not enough. If these kinds of shenanigans occurred in the private sector, there would definitely be jail time.
F) Unions and the Public Sector:
Public sector employees, hired by taxpayers, have a monopoly on the services that they are paid to provide. Unions collect as dues about 1% of public sector's salaries. The unions use the income derived from these dues to provide financial support to politicians who support their agenda. This is a classic conflict of interest. As taxpayers, we are funding the salaries of public sector employees. And these public sector employees are using the income we paid to them to support their agendas which are in conflict to the interests of us the taxpayers, who are after all their employers. Public sector unions have tremendous clout because they operate in a non-competitive environment. We cannot buy police or fire protection elsewhere even if the costs that the unions negotiate is too high.
G) Unsustainable Realities:
I was so moved by his findings that I telephoned Jim MacDougald. We had a lengthy conversation. His basic position is, as taxpayers, we should know for what we are paying. There is no true accounting for the real unfunded pension liabilities. When we go to the polls and support programs, we don't know what our current expenses are, and therefore the true budgetary impact of legislating programs. I asked Jim about our military spending, and what percentage the military comprises of GDP. Jim informed me that no one really knows because there is no accounting or accountability for weapons or aircraft versus pension costs. Everything is lumped together, and there is very little transparency. What he did say is that the "best guess" is that the federal debt is $120 trillion. This equates to the average worker in the U.S. owing $1.2 million today. If the interest rate to service this debt were just 5%, it would cost each worker $60,000 just to cover interest costs without ever reducing principal. And this is utterly UNSUSTAINABLE.
H) My Takeaways:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was fostered by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices. As a nation, we are at a philosophical crossroads. It is too easy to pigeonhole Democrats as being for the little guy and the underprivileged, and Republicans as heartless and only caring about their wallets. However, I believe that today the debate has moved much deeper than these stereotypes. The real philosophical tug of war is whether we should look towards the government to make lives better, or whether private citizens should be most empowered. I believe that being Republican or a fiscal conservative and having a bleeding heart and caring for the underprivileged are not mutually exclusive. In fact, though I am really an Independent, I have come philosophically to abhor big government. I think its effect is to keep the underprivileged, well, underprivileged. When governments get too much power, historically bad results follow. This has been true for World War Two Germany, Russia, China, African nations, etc., etc., etc. I am not comparing the current U.S. government with any of these regimes. I am just saying that too much power and control, militarily and/or economically, scares me.
I believe in the genius of mankind manifested through true entrepreneurial spirit. Furthermore, our government gets a big "F" for energy policies, public schools, postal service, railway systems and ethics. Therefore, I want them out of healthcare and anywhere else they seek to exert and overextend themselves. This is far deeper and wider than a liberal or conservative sound bite. Governments hired by us have forgotten for whom they work. They have demonstrated absolutely no fiscal responsibility, and I have come to agree with MacDougald that big government has made our nation's optimism for a brighter tomorrow unsustainable.
I) Conclusion:
Last year Jim helped to found The Free Enterprise Nation to rectify these disparities. The organization has no political affiliation. The unsustainable situation was created by both Republicans and Democrats, and the solutions to the plight are education, advocacy, and cooperation of all Americans to end politics as usual and to accept compromises and sacrifices.
I asked Jim if he would consider speaking to a group of our clients and friends. He said that he would. So, if you would be interested in getting more facts on these matters and being able to speak directly with the author, please let us know. These facts are crucial for all Americans to appreciate. Therefore, I encourage you to forward this letter to anyone who should also be in the know.
The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor
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