We recently read this cover story in Barron’s magazine, and we want to pass it on to you, our readers, as well:
“In his State of the Union speech last Tuesday, President Obama concluded that “the State of our Union is stronger.” The big question is: stronger than what?
Federal debt is a record $12.2 trillion, or 76% of the nation’s annual output of goods and services. While that’s still well below Greece’s 153%, we’re headed steadily in the wrong direction.
According to estimates by the Congressional Budget Office, adjusted by Barron’s to account for recent tax increases and other factors, if the U.S. doesn’t raise taxes further and cut spending dramatically, the national debt could easily reach 153% of economic output by 2035.
These are not just numbers. If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession — very likely a depression — sometime in the next two to three decades. The unemployment rate could easily surge to 20%.”
If you’d like to find out more about how we can help you and your money face upcoming challenges, act now by listening to the Monday Morning Market Outlook podcast, and then by giving us a call at 800-391-1118.
Your financial success depends on knowledge. Calculate your net worth and write down specific goals to move forward in your financial plans. There are many ways to grow your net worth: you can pay down debt, save more or earn more, but before you embark on any of these steps, we need good information about your portfolio. Before we get too far into 2013, we encourage you to take the time to look at your assets, debts, investments and accounts.
You also need to be prepared for higher taxes, higher health insurance costs and medical expenses this year. Remember that even though taxes and costs are going up, the national deficit is not being affected. This means that politicians will be back for more tax revenue and we need to be prepared for that as we enter this new year.
Key to success in investing in 2013: write it down
Make reasonable goals and think about how you can make those come to pass. Decide what your strategy is and write down the steps you’ll need to take in order to succeed.
This is important, because so many investors fool themselves into believing that they are being cautious, when really they are giving into worry and are paralyzed by fear. It’s one thing to have a temporary holding place for your money while you wait for opportunities, but simply sitting on your money in worry and fear is not a plan and will likely lead to missed opportunities and unmet goals.
Many people are worried about their money, and they delay investment decisions because of this. There are trillions of dollars sitting on the sideline because of this. Worry is a negative emotion – nothing positive comes from it. Worry can cause bad decisions.
So, what are you worried about? Is it causing you to not invest?
Whatever your goal is, you have to write it down. Develop the idea, flesh out your thoughts and set it down on paper.
Don’t get consumed or overwhelmed by bad news. Instead, read your goals every morning and use the facts at your disposal and a positive attitude to achieve those goals.
We also recommend these two great books as resources for our listeners in 2013:
Obviously, the fiscal cliff deal was a bit complicated and will have to be revisited (there will be more debt ceiling talks in Washington by March 1, 2013) but so far, these are the highlights for investors:
Income tax rates go up on individuals earning more than $400,000, or couples making more than $450,000
Estate taxes at 40%, first $5 million exempt for individual, and $10 million for family estates
Capital gains and dividends only change for individuals earning more than $400,000, or couples making more than $450,000
Social security payroll tax cut went away (we think this is a good thing, despite it being a tax increase, since Social Security has to be paid for)
No spending cuts in this deal, and it looks like those spending negotiations are delayed until March 1, 2013. This means there will be another battle in Washington in the near future.
Unfortunately, despite a favorable reaction in the financial markets, we still have out-of-control spending on the federal level, and it seems that politicians are unable to handle these issues in a positive way. Right now, the U.S. is borrowing 40 cents of every dollar we spend, which is obviously unsustainable, and the biggest risk of 2013.
What do you want to hear? We have received 20 or so emails so far, and we would love to get more. We want to improve, to be helpful to you and your portfolio, and to answer your needs through our podcast and blog. If you have questions, comments or suggestions, please send them to askdoug(at)dougfabian(dot)com, and let us know what you think!
We also wanted to highlight some of the feedback we’ve already gotten. One thing that we keep hearing is this:
People want to hear more about ETFs. It seems obvious that our readers and listeners want us to talk about exchange traded funds, explain what they are and how they work, and so we will endeavor to do a better job of that as we continue in our podcast and blog efforts. We will also continue to share watch lists and advice, but, despite the requests, we are not going to give specific buy and sell lists here on the blog or the podcast, as that would not be fair to our paid subscribers. However, if you’d like to sign up for one of our paid services, check our newsletters out here, or give our offices a call and talk to one of our advisers at 888-300-3684
Another concern we heard a lot of was this:
Many people feel that we have been too political on the blog and podcast. We’d like to explain why – because politics affects your investments. We think that the level of deficit spending in Washington is worrisome, and that it is the fault of both political parties. We think it’s obvious that government spending and entitlement spending are out of control, and that politicians in general have not been honest with the American people.
For every dollar that we spend at the federal level, we are borrowing 46 cents of that dollar, which is a dangerous path that could easily be the end of our country as we know it. As a nation, we need to get our act together and our financial house in order. Unfortunately, that’s just a reality of the times we live in – we know it’s not always fun to talk about, but we will do our best to give nonpartisan, common sense analysis, and we’ll continue to talk about it, because it will impact your financial life.
Again, please send us your thoughts, comments, questions and suggestions to askdoug(at)dougfabian(dot)com. We are looking forward to hearing from you and continuing to improve our blog and podcast.
This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective. Plus, if you haven’t already, please take some time this week to check out our recent teleseminar for in-depth information on post-election investing and our outlook on the markets.
2013 is just around the corner, so we are looking forward already to a new year and new challenges here at Fabian Wealth Strategies. If you’re a regular reader of this blog or listener to the podcast, we have a favor to ask of you – let us know how we can improve! What should we be covering, what topics would you like to hear more about, or what concerns, interests or questions do you have that we could address better? Leave a comment on this post or send an email to askdoug(at)dougfabian(dot)com to let us know your thoughts, and thank you for being a part of our audience every week.
Now for the economic news: again, we’re not going to try to predict the outcome of the fiscal cliff, but right now we’re in a stalemate. Treasury Secretary Geithner was on all the Sunday shows this weekend, telling the American people that House Republicans need to agree to tax increases in order to avoid the fiscal cliff. Meanwhile, the Republicans in Congress continue to push back, insisting on less spending before tax increases. Either way, it’s going to be an interesting few weeks as this all shakes out, and we are watching this news closely and will keep you informed on what happens and how it’s likely to affect your portfolio.
Tomorrow, we’re going to update you on Central Bank action and what the Federal Reserve is up to. In the meantime, we’d like to point you to a great resource, John Hilsenrath at the Wall Street Journal, who often has the inside story on Fed action and strategy. His articles are a valuable asset as you navigate your investments and the unusual central bank action of the last couple of years.
As far as general economic news is concerned, on the positive side: housing numbers are improving, U.S. GDP is at 2% growth. On the negative side: manufacturing is contracting, there are still concerns about the economic affects of the damage from Sandy, and we expect a new statement from the Fed on December 12, so we will be watching the news closely until then.
Bonds are continuing to do very well. The chances of high interest rates or inflation (which of which would hurt bond prices) are very slim, and we encourage investors to not panic about your bond allocation, but stay secure, knowing that this is still a strong place for your money.
However, as we have stressed all year, we urge investors to be cautious – this is not a time to add a lot of equity exposure to your portfolio. There is uncertainty in the markets right now, but we are committed to helping you make the best possible decision for your money. If you have questions or concerns, please email them to us at askdoug(at)dougfabian(dot)com.
This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective. Plus, if you haven’t already, please take some time this week to check out our recent teleseminar for in-depth information on post-election investing and our outlook on the markets.
President Obama has a big job ahead of him in this second term. Most of these challenges are fiscal and economic in nature, so we want to comment for our listeners and readers. Some of the pressing issues we see ahead for him (and our other leaders and elected officials) are:
Deficit
Debt
Taxes
U.S. Dollar (inflation or deflation)
Unfunded public employee benefits
Entitlements
International unrest
European debt crisis
Of course, we will be watching these items and more as we move forward into the next four years – and we will be here on the blog and podcast every week, giving analysis on these concerns and anything else affecting your capital and investment potential.
This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective. Plus, if you haven’t already, please take some time this week to check out our recent teleseminar for in-depth information on post-election investing and our outlook on the markets.
The U.S. stock market is still being supported by the idea that the Federal Reserve won’t allow for any significant corrections or falls. Since the implementation of QE3 there has been little change in the market, but the real test will be how the stock market holds up in the face of the third quarter earnings report and the slowing economy.
The International Monetary Fund has cut its global forecast for every country in light of the global slowdown. This comes on the heels of a decent third quarter showing for the stock markets worldwide, including Europe. We think the current trend: printing money and continuing to borrow in order to prop up the markets, is a risky move for long-term growth.
So the question is, where in the world is there a place to grow your money? There are three areas we like for investments going into the next year. These are emerging markets, energy and agriculture. In regards to the vast category of emerging markets we are looking in particular at Asia and China. China is in a pretty good spot since in addition to already experiencing a bear market they don’t have the debt and deficit load that Europe and the United States have. This gives them the ability to borrow and invest to create growth. Check out our podcast to learn more about what is going on in China.
Right now on our website you can download the third quarter Exchange Trade Funds report, located in the special reports section. This has comprehensive coverage of all 1200 ETFs including the three areas discussed before that are high on our radar, and we encourage you to print that out. As always please call 800-391-1118 or email askdoug(at)dougfabian(dot)com with any questions.
Markets around the world tend to move in tandem, but “decoupling” is when a region gets to spring free from that movement. Over the last two years, China has been decoupling from the U.S., and we think there is a a good chance that we could see China outperforming the U.S. for the forseeable future. Here is what’s affecting both economies.
Challenges for the U.S.:
tax policy uncertainty
huge deficits (8% of GDP)
huge debt ($16 trillion)
entitlements
growth at 1%
By contrast,
Economic News from China:
small foreign debt ($750 billion)
small deficit (1.5% of GDP)
no entitlement problems
command and control economy (no political challenges)
growth at 7%
middle class emerging
Now, don’t misunderstand – we don’t believe that China is risk-free for investors. However, we are putting together game plans for allocations of investments in China, because we see a lot of positive things in China, and we are prepared to take advantage of that.
In the ETF report, there are over 30 ETFs that give exposure to china. One of the reasons we love ETFs rather than mutual funds is that you can target specific areas in this way, and we think this gives a great opportunity to take advantage of growth in that area of the world.
If you have questions about this topic or how these tips can work for your portfolio, call us at 800-391-1118, or email us your questions or comments at askdoug(at)dougfabian(dot)com
(If you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on this topic, and please share this information with others who might benefit from our perspective.)
Certainly the election matters to your ideology, but we’re here today to discuss its effect on our investment portfolios instead. Incumbents generally have the edge in elections, but neither candidate has laid out a plan for handling entitlements, debt and deficit, and we believe that’s what matters for investors.
Here are a few of the important items that we think are even more crucial for investors than the election uncertainty:
Bush tax cuts expiring in January 2013
Sequester (automatic spending cuts)
Payroll taxes returning
Obamacare taxes kicking in (affecting capital gains, real estate, etc.)
Deficit (annual amount of money we’re spending in excess of tax revenue) which is currently 8% of GDP
We think these issues are critical, and that investors should be focused on these issues rather than worrying about the effect of the election on their portfolios. If we have a close election, there will have to be a lot of negotiations in Washington D.C., since these issues require political clout and are not easily solved.
We expect to see higher volatility in the markets as we go through this political season, and we advise all investors to watch these issues closely and stay conservative with your allocations to equities.
(This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective.)
