Reasons for a Strong 2014

My Economic Outlook for 2014: 

The last 6 years, since 2008, has to be one of the most confusing and turbulent economic periods in history.  But this post is about looking forward.  Nonetheless, the past frames the future since it is the mindset most people operate from.  There is much doubt, skepticism, and fear on people's minds.  You might say that the last 6 years have been imprinted on the psyche of Americans, as well as Europeans, and others.

It is hard to imagine prosperity when so many people are still trying to recover from the dramatic losses they suffered in the Great Recession.  Many people's buying habits have changed, their risk tolerance has been adjusted, and they worry about their job security, as well as their financial security and ability to meet their personal future challenges such as college education for the children, their daughter's wedding, and their retirement.  The "equity" in their home, something they once thought of like money in the bank, is gone, for the foreseeable future.  How can one be upbeat?  Congress and our leaders in Government don't offer much hope, yet.  And the stock market rally, which most people missed, hasn't trickled down.  The wealthy are more wealthy, but what about America?  What's the outlook for 2014?  I'm writing to express my opinion. 

First of all, for those of you who remember my previous rants and posts to my blog, I have said before that I mostly write this for my personal benefit.  Einstein is attributed with saying, "my pencil is smarter than I am."  I believe the writing process makes you smarter.  If you're a writer you know exactly what I mean.  And, if you're not a writer, I'd recommend you try it and you'll see.  Write to yourself if you have to - and you'll soon discover the profound truth said so simply by Einstein.   Back to the point of my letter (post). 

As I see it, 2014 is going to be the year the economy launches into a new stratosphere of prosperity.  That's not to say we'll see an end to poverty.  Or an end to wealth inequality.  Or to people dieing because they don't receive medical attention, let alone food.  No, I'm afraid those realities are still all to real.  But fortunately, prosperity generates tax revenue and more importantly, it also leads to generosity which in turn supports charities and great causes.  Unfortunately, the middle class will still struggle, and the poor will still need to climb up.  But a rising tide lifts all boats.  So, let's not begrudge the wealth that prosperity brings about - let's be glad for it. 

Why will 2014 be the year?  What is going to happen in 2014 which will make it a trans-formative year for the USA economy?  I'll bullet it - for the sake of brevity.  The following are not in any sort of order:

1. Back To Normal - Before the economy could take off it had to get back to normal.  It's been called "the new normal."  Either way, we had to fight our way back on many fronts including but not limited to unemployment, the deficit, bank capitalization, etc.  Even the stock market had to get back to the old highs before it could go to the new highs.  This took time - and beside, if it all happened to fast, I believe that would have been a bad thing.  The fact that it has taken several years to get back to normal is a good thing!  But now that we're mostly back to normal we can take it to another level.  Old resistance is new support, as they say in the financial markets.

 

2. Obsolescence - Consumers have been making everything they own last longer.  That is what happens in a recession.  Everything you need and want to do has to wait.  Meanwhile, thanks to technology, today everything is new and better.  You know what that means?  The force of "human nature" will drive a giant replacement cycle.  What sorts of things does this include?  The question is what doesn't it include?!  From your carpet to your roof to your appliances - the home is ready for a make over.  Your car, on average in America, is 16 years old.  Now, have you seen how much cars have improved in that time and it is notable that this coming year automakers are releasing a record number of new models and designs.  Fashion is always on the move, but 2014 will be the year "wearables" is added to the dictionary. 

3. Getting Healthy - What about your health?  There are more options for living better in general than ever!  Heck, they're printing (3d) ears and noses.  The advances in drugs, devices, testing, treating, are nothing short of amazing.  And now, with the ACA (like it or not) more people have the health care coverage to afford treatments that were not available to them before.  Better yet, American's are starting to take responsibility for their health.  Which means new opportunities for products and services to help us to do so.  Some of those options will look like traditional health care.  Others won't.  In 2014, a garden, or at least access to fresh produce, is a health care strategy.  

4. Distribution and Convenience - See it, buy it, it arrives.  Things go from eyeball to home in under 48 hours without ever leaving your sofa, or should I say you're tablet or phone.  If things are easier to acquire people acquire more things.  And, that time they save is a good thing too.  Because there are more productive uses for time than driving to stores!  America is learning all sorts of good things from the logistics revolution that is going on behind the scenes in factories, stores, shipping departments, and transportation companies.  It will lead to capital spending which will support the infrastructure demanded by our new consumer ways!

5. The Power of Travel - People can go anywhere more affordably than ever.  Travel opens markets and stimulates trade in all directions.  The "new world" is the new world of travel.  Travelers bring new ideas.  Ideas like freedom, democracy, equality, education, opportunity, and free markets can't be denied now matter how much communists and Muslim fundamentalist want them to be.  They are infectious and the germ has been exposed to China, Russia, Cuba, Iran, Egypt, and they are sneaking their way into even the most closed societies like North Korea.  When people travel more, they spend more, it's that simple!

6. Social Media and Connectivity - The influence of social media is remarkable.  But what's most amazing about social media is the speed at which it transfers ideas, information, culture, etc.  A "thing" can start anywhere and be everywhere in 24 hours.  A business or person can literally be an overnight sensation.  The potential for entrepreneurs and business, let alone a good cause, is nothing short of amazing!  And, it's never happened in the history of mankind!  This IS bigger than radio and TV combined!  The social media trend goes hand-in-hand with connectivity.  Mobility is the new connectivity.  You're never unconnected.  But that's just the beginning.  As CISCO says in their ads, "Each day, more and more people, process, data and things join what we call the Internet of Everything. And as we wake up the world, amazing things will happen."  I agree with CISCO, "It's not one thing, it's many things, it's everything."  When your car is talking to your calendar which is getting an invitation you got to a party that is big.  When your car turns to you and tells you where to go shopping for a gift and how to get there, and get gas or a bite to eat on the way, that's huge.  The possibilities are endless, and so are the economic benefits. 

7.  Intelligence - Artificial as it may be, it's still intelligence.  It's way more than computers.  Your car, your house, your phone, your watch and even your clothes, are all going to have some form of the new intelligence built into them.  Aside from the benefits brought about from a thermostat that learns on it's own, the businesses that make things smarter have a lot to gain too.  Robots that sweep our floors only scratch the surface (pun intended).  Before you know it, you won't drive your car because it will drive you.  You won't need to go to the market, because the market will know you're out of detergent and it will come to you automatically from a distribution company, possibly Amazon, that has the intelligence to know you need it as well as other essentials and automatically packs them and delivers them to you.  2014 is the year "intelligence" and robots truly take hold in our lives. 

8. A River of Capital - They call it "currency" for good reason.  And, when currency flows, the money supplies expansion.  The banks and corporations and the rich have vast amounts of money swashing around.  That dam holding it back has been the lack of confidence, disbelief, and fear.  There are cracks in the dam as we end 2013 and in 2014 that dam is going to bust, and the money is going to pour out into the greater economy.  Spreading it's way over the entire nation, and the world.  And while we were all worrying about debt an ironic thing happened.  America, the government, businesses, and households have lowered the cost of financing their debt.  One of the biggest effects of the Great Recession is the Great Refinance, and it will be paying benefits for years to come!

9. Government Get's It - Now that both parties have the lowest approval ratings in history they get it.  We're all losers when government fails to function because they are consumed with partisan politics and have lost sight of Country before Party.  I believe politicians are coming to a new conclusion about their service to America.  One that is much more conducive for the economy.

10. Energy Surplus - We aren't just becoming less dependent on the Arabs for oil.  This is just the start of it!  We are becoming the largest supplier of oil and natural gas in the world.  The money that was once sucked out of this country is being poured back into our own economy - to the tune of hundreds of billions of dollars a year.  And that's just the half of it.  America is building an entirely new infrastructure to support it.  The wealth creation from this super cycle trend is hard for people to fathom.  The implications to our lives and national security are enormously beneficial. Nothing is bigger!  Nothing!

11. Made In USA - Manufacturing is coming home. This topic is the result of of the confluence of several points I've listed, including energy surplus with low cost natural gas, developments with intelligence and robots.  Even "Government Get's It" as we find a way to encourage firms to repatriat profits from overseas back into the USA investment.  But it's more than that.  Foreign firms more and more are building in the USA for the USA.  And as bad as the NSA scandal has hurt American firms, many large corporations know they can trust the safety of their intellectual property (patents, trademarks, research, etc.) more in America than anywhere else!

12. Transportation Resurgence - The biggest and most obvious transportation improvements so far are coming in rail.  Railroad expansion in the USA is much a result of the need to transport vast oil and gas production.  But it won't end there.  Corporate fleets and trucking are converting to natural gas.  Electric/Hybrid vehicles are going to finding recharging options like never before.  The massive growth in online (internet) sales is driving a massive expansion and improvements in home delivery. In the process, the USA is learning and gaining superiority on top of capacity in logistics.  These abilities will serve us well around the world!

13. Military to Civilian Change Over - As America rounds up 3 wars, and is retisent to start another large military action, we have hundreds of thousands of troops who have to come home and go back to work.  These are disciplined workers and leaders and they will provide critical talents, skills, and dedication for USA firms for many years to come.  In addition, the Pentagon and many military subcontractors have to find civilian applications for their products and capacity.  While they won't enjoy the margins they received at the expense of USA taxpayers, they will contribute more the GDP and less to the national deficit. 

14. Mapping New Worlds - Exploration and finding new worlds has been a hallmark of Mankind and has generally led to great increases in the world GDP.  In December 2013 the National Institute of Health kicked off the "Brain Research through Advancing Innovative Neurotechnologies (BRAIN)" Initiative, part of a new Presidential focus aimed at revolutionizing our understanding of the human brain.  In the years ahead, accelerated development and application of innovative technologies will to produce a revolutionary new dynamic picture of the brain that, for the first time, shows how individual cells and complex neural circuits interact in both time and space.  Like the Human Genome Project, which produces fantastic benefits both in health and financially, the BRAIN initiative will do the same.  And, once again, America will have the lead.  I believe research projects with similar size and significance relating to the worlds oceans and seas will be launched in 2014.  The understanding and riches that can be discovered in both these areas is impossible to calculate. But one things certain as I see it, they are part of the reason for brilliant 2014 and beyond. 

15. Research to Reality - America's university research  programs and laboratories are the envy of the world.  One of the great things about the great recession is that investment into these programs was funded as a means of Federal stimulus and that students continued on for or went back for advanced degrees since the job market was so weak.  The brightest students from around the world flocked to our Universities in record numbers.  As a result, America was able to make incredible advances in leading edge technologies that will change everything. We have the edge in nanotechnology,  materials technology,  robotics, and other fields that will be behind and inside amazing developments that will fuel our economy well into the 21st century.

16. Cost Savings Funds Capital Investment and Consumption - When a consumer can go from getting 18 mpg to 35 mpg (a 94%+ increase in mileage) they have a big incentive to buy a new car!  Add to that the fact that instead of having to worry about thousands in repairs on their old vehicle they gain a worry free warranty that carries them for the next 3-5 years.  Last but not least, they can finance or lease their new car at great rates.  In 2014 you have to be an idiot to keep driving an old car, and so millions will make that purchase.  A similar economic argument can be made for energy saving appliances, a better furnace, and insulation or maybe windows.  The concept of justifying capital purchases based on the cost savings and low financing rates doesn't only apply to consumers.  Businesses of all kinds can make an economic case for consumption.  As soon as sentiment shifts from pessimism to hopeful (see bullet #19 below), we're going to see a lot of this kind of justification for purchases in 2014 and beyond!

17. Global Warming Can't Be Stopped In Time - That's right, I don't think we can stop climate change, and the consequences.  But I do believe we can do something about it, and that in 2014 the attitude and dollars shift to this point.  We can start to protect the coastline in major population centers.  We can supply water in new ways to areas that experience drought. We can build or protect buildings from high winds.  We can improve the grid and back-up power systems to cope with severe storm damage.  There are many things and that means investment, and new jobs, and material demand!  It means economic expansion!

18. Tuned Up & Ready - American businesses, especially, have used the last 5 years to fine tune operations in order to operate at maximum efficiency and profitability.  Margins and profits are at an all time high.  When business picks up, the increase in sales & revenues will lead to two things which are good for the economy and the equity markets - greater profitability and hiring!  And, once businesses are confident that a great expansion is underway they will use the cash and financing they've accumulated to invest in everything from plant, to equipment, to technology, to training, to entering new markets, to mergers and acquisitions.  Business will lead the way as soon as they sense the consumer is ready to join them. 

19. The Pendulum Will Swing from Pessimism to Hopeful - Eventually, this 5 year tide of pessimism is going to go back out.  And, when it does, as I believe it will in 2014, the expansion is off to the races!  On Wall Street they call it "Animal Spirits."  I'm betting we see some of the most upbeat moods and positive consumer confidence ratings we've seen in decades!

So there you have it.  Now you know why I'm fully invested and have been for a few years!   I have referred to the economy as a giant snake that has been coiling up and is ready to strike.  It's a metaphor for the energy that is about to be released at a speed and with a force that will surprise us.

Advantage USA

Moving forward, as the economic recovery picks up steam, one of the bright spots is American Manufacturing.  For too long the trend has been for USA firms to move production offshore to Asia.  The tide is turning, and American Manufacturing has a number of advantages:

1. The real estate bust is a boom for USA firms seeking land and facilities.  Rapid real estate inflation in Asia only makes American space costs that much more attractive.
2. Borrowing costs in the USA have never been lower and with banks beginning to lend the cost of financing plant & equipment has never been more affordable.
3. The exceptionally low cost of natural gas as a fuel source gives American firms a huge advantage over energy intensive production overseas.  New technology for efficient co-generation means that natural gas is also a fuel for lost cost onsite electricity.  And, excess electric production can be sold back to the grid.
4. USA is safe!  The ability to secure intellectual property, such as patents, designs, formulas, processes and methods, etc., is made easier on USA soil.  Plus law enforcement and the legal system is on "our side!" Spies aren't as available and can't hide out as easily either.
5. Labor has done a 180 in the USA.  Thanks to 9% unemployment, workers and unions have come to realize job security is better when they work with their employers to make better products and compete internationally.  
6. American technology can help American manufacturers.  In conjunction with labor, technology is helping USA firms to have one of the most productive workforces on the planet.
7. Government gets it - American manufacturing means American jobs - and that means votes!  Bring the jobs home is the mantra of both parties.  Government, at every level, can do more to get out of the way and help manufacturers, but at least they see the connection between regulation and jobs.  
8. The "Made in the USA" brand is a positive marketing advantage.  Consumers are more inclined to "buy America" to "support America" than in recent memory.  Chrysler tapped into this spirit in their 2012 Superbowl half-time ad! 
9. Foreign firms that want to grab a share of the giant USA market see putting production in the USA as a critical part of their strategy.  USA firms save on shipping costs and time to market when they bring production home.  Both reduce the risk of currency fluctuation by keeping the supply chain in the USA.
10. As the manufacturing jobs come home the boost it gives to the economy feeds on itself! 

" It's halftime America, and our second half is about to begin!"  (click to see commercial)

Timing is Everything

Timing is everything when it comes to the Euro Crisis.   It's terribly obvious that the situation must come to head and that a big change in fiscal policy will be required to address the debt problems in Europe, not to mention the USA.  The problem is that very few Europeans are willing to accept what this means to their lifestyle and the sacrifices they must face together.

At the same time, if the Europeans were to take the extreme measures they need to in order to get their annual deficits down to a reasonable level, it is fair to say the drag to their economy would send tax revenues into a free fall thereby countering in large measure their budget cuts effects on the deficit.  Without the means for fiscal stimulus, the Euro is dammed if they do and dammed if they don't.  The situation would appear hopeless.  But maybe not!

Europe does not operate in a vacuum, they operate in a world economy.  The answer to Europe's extraordinary strains and dire need for growth could come from the emerging nations, especially China and India.  They could supply the lift to the world GDP that would pull Europe through.  The key is the timing.  Can those growth regions put their foot on the pedal to increase their domestic demand soon enough and fast enough to satisfy investors that all hope is not lost for Europe.

After some 15 major meetings of Europe's leaders it's painfully obvious that they can not lift themselves out of their mess on their own.  A coordinated world effort is required.  I'm not talking about the world "bailing out" Europe by paying their debts or loaning them more money!!  That's not a solution and the proverbial can has been kicked to the end of the road.  Countries that have the means to encourage growth have to work together to do so and to open their markets.  Supply from Europe and the USA will help keep a lid on inflation in the growth regions as their domestic economies grow.  And, seeing demand from Asia, Africa, South America, the Middle East, etc., will help Europe and the USA to take the fiscal austerity steps we need to in order to get our budgets under control with less concern about triggering a deep global recession.

I believe this kind of coordination is the answer.  The question is the timing!  Can we time our efforts in a coordinated way, or must there be a crisis and much less orderly series of events and process?   That's anyone's guess.  Get it right - make a fortune.  Get it wrong - take a beating!  Therein you have the uncertainty facing investors around the world!!

Am I A Fireman Yet

Dear Reader:

The following story came my way in an email from a client of in the fire fighter field.  One of those "pass it on" chain letters that you wonder about sometimes.  Have a tissue ready ... Bob

AM I A FIREMAN YET?

In Phoenix , Arizona , a 26 year-old mother stared down at her 6 year-old son, who was dying of terminal leukemia.

 
Although her heart was filled with sadness,
She also had a strong feeling of determination.
Like any parent, she wanted her son to grow up &
Fulfill all his dreams. Now, that was no longer possible..

The leukemia would see to that. But she still wanted her son's dream to come true.

She took her son' s hand and asked, 'Billy, did you ever think about what you wanted to be once you grew up? Did you ever dream and wish what you would do with your life?'

Mommy, 'I always wanted to be a fireman when I grew up.'

Mom smiled back and said, 'Let's see if we can make your wish come true.'

Later that day she went to her local fire Department in Phoenix , Arizona , where she met Fireman Bob, who had a heart as big as Phoenix !

She explained her son's final wish and asked if it might be possible to give her 6 year-old son a ride around the block on a fire engine.

Fireman Bob said, 'Look, we can do better than that. If you'll have your son ready at seven o'clock Wednesday morning, we'll make him an honorary Fireman for the whole day. He can come down to the fire station, eat with us, go out on all the fire calls, the whole nine yards!

And if you'll give us his sizes, we'll get a real fire uniform for him, with a real fire hat - not a toy -- one-with the emblem of the Phoenix Fire Department on it, a yellow slicker like we wear and rubber boots.'

'They're all manufactured right here in Phoenix , so we can get them fast.'


Three days later Fireman Bob picked up Billy, dressed him in his uniform and escorted him from his hospital bed to the waiting hook and ladder truck.

Billy got to sit on the back of the truck and help steer it back to the fire station. He was in heaven.

There were three fire calls in Phoenix that day and Billy got to go out on all three calls.

He rode in the different fire engines, the Paramedic's' van,
And even the fire chief's car.

He was also videotaped for the
Local news program.

Having his dream come true,
With all the love and attention that was lavished upon him, so deeply touched Billy, that he lived three months longer than any doctor thought possible.

One night all of his vital signs began to drop dramatically and the head nurse, who believed in the hospice concept - that no one should die alone - began to call the family members to the hospital.

Then she remembered the day Billy had spent as a Fireman, so she called the Fire Chief and

Asked if it would be possible to send a fireman in uniform to the hospital to be with Billy as he made his transition.

The chief replied, 'We can do better than that. We'll be there in five minutes. Will you please do me a favor?

When you hear the sirens screaming and see the lights flashing, will you announce over the PA system that there is not a fire?'

'It's the department coming to see one of its finest members one more time. And will you open the window to his room?'

About five minutes later a hook and ladder truck arrived at the hospital and extended its ladder up to Billy's third floor open window--------
16 fire-fighters climbed up the ladder into Billy's room.

With his mother's permission, they hugged him and held him and told him how much they LOVED him.
With his dying breath, Billy looked up at the fire chief and said,

'Chief, am I really a fireman now?'

'Billy, you are, and the Head Chief, Jesus, is holding your hand,' the chief said.

With those words, Billy smiled and said, 'I know, He's been holding my hand all day, and
The angels have been singing.'

He closed his eyes one last time.

My instructions were to send this to at least four people that I wanted God to bless and I picked you.

Please pass this to at least four people you want to be blessed.

True Story
Love to all....

Rating Agencies May Deliver for Chancellor Merkel

Euro sovereigns have been borrowing and spending to excess but the party can't go on forever.  Could the rating agencies spoil the party?  I muse on this question ...

Back in November 2011the new IMF Managing Director Christine Lagarde said the world economy is in a “dangerous phase,” and  US Treasury Secretary Geithner said that Europe needs to "move more quickly and with more force behind it.”  Since then little has been accomplished in 14 European Union meetings and the credit crisis has only deepened.

On January 5th Bloomberg Financial reported that the European Central Bank made an unprecedented cash injection to ease borrowing costs for Italy, Spain and Belgium, compensating for the lack of a solution to the debt crisis and the risk of recession. (I question whether the word recession is strong enough. I think they fear worse.)  European leaders have failed to come up with what German Chancellor Angela Merkel described as a “big-bang” solution to the crisis, so the ECB did the only thing in could do to prevent Europe's mounting crisis from imploding.  But the ECB did not solve the problem, they only postponed the inevitable a little while longer.

While there is no physical limit to how much money the ECB, or the Federal Reserve, can print, eventually market forces will come to bear and to draw a line on what the world's financial markets will accept. The trillion dollar question is where and when is that line.

We may get a preview or foreshadowing sooner than latter. Standard & Poor’s said Dec. 15 that it was reviewing the credit ratings of 15 euro nations for a possible downgrade, including AAA rated Germany and France, citing “systemic stress in the euro zone.”. It is more than conceivable that they will indicate what everyone already knows which is that there is no visible or sensible way that many of the Euro countries can pay back the debt they have been rapidly accumulating and that if the ECB where to stop printing money and buying their bonds they would have to default. A meaningful move down by the rating agencies would ostensibly be saying that the countries are insolvent.

One might say, "so what?" since for all practical purposes they have been insolvent and anyone with any sense already knows it. But the difference here is that the rating agencies have the power to make it official!  A damaging multiple notch reduction would make it virtually impossible for those countries to sell their bonds, making the ECB, assuming the US Federal Reserve stands down, the only way for them to fund their governments and largely their economies. Thus worsening the reality of the crisis, and setting up the real likelihood of a ratings death spiral as rating agencies do another series of rating reductions until many Euro counties are lowered to junk status, significantly devaluing the Euro currency in the process, and drawing France and Germany fully into the mess. At that point, if not sooner, the whole party is over for the Euro. Or is it?

One might think that forcing write-downs of the debt (haircuts) on bondholders is the answer, but it isn't.  By definition that has to constitute default and trigger insurance claims.  That just deepens the crisis.  There will not not be a credible solution in sight until Chancellor Merkel gets what she wants and the world needs to see, which is serious fiscal austerity by virtually every insolvent Euro country. Countries like Italy, Spain, and Belgium will have to cut beyond the point of discomfort.  Beyond the point that their unions will stand for. Beyond the point of hurting their national pride. They will have to cut into the bone! They will have to chop off limbs!  I'm talking the sale of national treasures!  Things and institutions that were once considered sacred will be on the block for cuts or sale until these countries can prove to the world that they can sustain their government's funding requirements without depending permanently on the ECB.

This is not to say that the ECB's job is done. Oh no!  But instead of buying these nation's debt they will be funding their liquidation as well as finding creative mechanisms for funding growth.  Who's to say the ECB can't concoct some indirect way to fund the purchase of equities in new offerings for start-up or growing businesses or why couldn't they buy a priceless piece of artwork owned by a government and put it back on display in the same location where it is presently located?  Radical times call for radical actions! And I except the Federal Reserve to be as creative as any body at finding ways to stir the phoenix from the ashes.

All countries may not go along with the draconian steps that I am describing.  Those that refuse will for all intents & purposes be kissing their Euros goodbye.  What will be left is the "haves & the have nots." Those that have have euros and those that have defaulted on their obligations and opted to revert back to their original currency.  Who's the better?  There's too many variables for me to form a prediction at this time.

But eventually, the counties that take the necessary austerity actions, voluntarily or by market force, will get to a point where they can fund themselves.  And provided their populations and civilization can handle the turmoil of so much change and sacrifice they will reach a new equilibrium.  (The so called new "new normal" that Pimco co-chair El-Erian declared will have to wait a bit.)  Signs of new life taking hold will be evidenced in the same way the death of the old was announced -- we'll know we've survived when the ratings agencies collectively raise the ratings back up.

It must be very daunting and scary for those agency committees today!  Imagine, knowing your actions can literally trigger events that will reshape the world today, but NOT knowing where it will all lead.  (If there is one thing that truly does scare me is how such a deep crisis as I am describing has a way of bringing out the worst, along with best, in people.)

Efforts to reach an orderly resolution between bold holders and Greece authorities seem dire.  The only thing keeping bond holders from calling in their insurance claims is the contagion effect on their other holdings, which also threaten both national and bank solvency, and the Union itself.

It seems to me the only hopeful course is an unprecedented and synchronized combination of massive fiscal austerity actions by insolvent Euro nations, enormous monetary stimulus from the ECB, and aggressive pro-growth policies in Europe, the USA, and emerging nations around the world. 

Back in 2009 when America was in the throws of its own financial crisis, Federal Reserve Chairman Ben Bernanke made the point that the biggest concern he had was whether or not America had the "political will" to deal with the challenge.   When it comes to the Euro crisis, Chancellor Merkel has proven that she has great political will, but she can't do it alone, and I seriously question whether her German and Euro colleagues have the political will to brake the pattern of this Euro crisis BEFORE it brakes them and us?!  And, the ratings agencies are saying the time to do so has nearly run out!!

10 Reasons Why I Am Bullish on Stocks

A few weeks ago I moved into a more bullish position with my stocks.  I share my reasons why for the interest of other investors. 

10 reasons why I am bullish about the stock market.  I realize that they are not your traditional points that stock analyst write about, and that I can't provide you with research to back them up, but I think you can appreciate them.  Here you go in no particular order:

1.  The flip side of weak housing is the best housing affordability index in decades.  Heck, there are millions of home owners who aren't paying anything to live in their home because they've defaulted on their mortgages and haven't been evicted yet.  If housing consumes a smaller percentage of the consumers' income they have more to spend or invest on other things.  

2.  Accelerated depreciation on capital investments/purchases is going to kick in three ways: 1) stimulating purchases, 2) those investments impact on business productivity and profitability, 3) as the full expense is written off in 2011 and 2012 the write-off is used up meaning the effects on EBITA are going to be more pronounced in 2013, thus compounding reported profit estimates for 2013 and adding to forward PE estimates. 

3. Coming off years of low interest rates and presently more favorable debt markets for commercial lending has provided a large window for business to restructure debt at lower carrying costs.  Many firms have used their cash to retire debt and/or to buy back their stock.  All these moves translate into hirer EPS, and greater valuation.

4. The attitude of organized labor has shifted from combative to parterning.  In addition, years of high unemployment has given the vast majority of workers a much better appreciation for their employers and higher motivation to help their firm to succeed. This win-win mentality is under estimated in terms of prodctivity, innovation, and competitiveness, especially against our European competitors!  Furthermore, unemployment fuels entrepreneurship both as a catalyst and as an "agent of capitalism." 

5. While the economy has been lackluster to say the least since 2008, the last five years have yielded many advances in science and technology.  Developments in virtually every area of science and technology are maturing into practical use and will be applied to great value in the coming years in business, medicine, transportation, communication, defense, logistics, waste management, energy, space and sea exploration, etc.  America's strong trade relations with countries like ours that excel in R & D, such as Israel and Singapore will serve us well too. Together we will have better and more innovative solutions for the world's needs and problems.  The "next big thing" may not be one thing, rather I think it will be many big things!

6. Energy is coming home and so are the dollars. America is fed up with OPEC and our dependency on energy suppliers from the Middle-East. As we source more of our energy in North America we keep the energy revenues in North America too.  The direct and indirect impact on the USA GDP and trade balance will be enormous!

7. Mobile computing, combined with, social networking, the cloud, and e-commerce are going to have a profound effect on everything!!  All one has to do is look around to see how the smartphone and tablet have become an extension of human beings.  Look around at a restaurant or in a mall and you will see them in everyone's hands!  Couples and groups of friends can be sitting with one another while texting or tweeting or posting or checking something at the same time.  The speed at which an idea can travel and become a transaction is unlike anything our world has ever known!  As information and currency flows more easily and rapidly the velocity and multiplier of money will contribute to our GDP on a grand scale.

Furthermore, because America does "the Internet" so well we have a competitive advantage worldwide in a trend that is freeing up people, nations, and their wallets around the world.  I like the idea of the "human network." Plus, a first cousin to e-commerce is shipping, and here again the USA excels in "logistics."

8. Emerging nations have developing economic classes.  China, India, countries in South America, and in Africa are all joining the modern world with massive modern needs.  The demands they have for transportation, telecommunications, waste management, water and food supply, consumer products and distribution, medicine, and much more is staggering!  When you compound growth in these massive countries over years like we have seen and will continue to see you reach levels that will make huge contributions to world GDP and as a result our economy and the profits of USA businesses.  You don't even have to be a direct supplier to benefit.  

9. Nations and politicians in America and Europe realize that their fiscal spending spree is over and that Debt to GDP ratios have to be brought down. Government leaders (an oxymoron today) would rather increase the denominator (GDP) than just lower the numerator (debt).  With their fiscal options limited and the need for higher employment posing a threat of social unrest, let alone to their political future, they know they have to turn to business with pro growth policies.  The politicians are starting to realize that the best thing they can do to stimulate growth is to do nothing. In other words, the more government gets out of the way the better.  Less regulation, faster approvals, fewer agencies, and lower taxes & fees are as stimulative as anything!  Since "getting out of the way" is also less expensive for government it is a win-win for the taxpayer and business. At the same time, central banks are doing their part with extremely accommodative practices!  (E.g. Low interest rates, monetary purchases of debt, easy access, etc.)

While the Federal Reserve has been surprised thus far at the lack of traction they have gotten in translating their aggressive monetary policies into economic growth I believe that is about to take a big turn.  And I think we could all be surprised at how fast the turn is.  I can't help but wonder if the Federal Reserve is thinking the same way with their recent announcement about broadcasting rate changes more frequently in order to give them a means to respond in a more timely way without creating any sense of panic.  

10. Last but not least, the pendulum of doubt and despair has a wide swing coming back the other way. The mood in the country and with investors is going on a long arch towards renewed optimism. Couple this the trillions of dollars in bank reserves and more trillions on business balance sheets and we can expect to see a giant wave of consumption and investment when the mood is right, and it is about to be right.

In conclusion, as these ten factors kick in they are self-reinforcing and the business cycle will gain more momentum.  When this happens future EPS estimates will be raised upward. When this happens the current 12x multiplier that the market is priced with will be corrected by the market to be closer to the 14x historical average for the market.  But, since estimates are being taken higher you have a double reason for a boost to stock prices.  That is why I am bullish! If you read all this, thank you!  I hope you liked it.    Bob Ritter                

28th Ammendment

Here's an idea that was passed to me and I am passing it on ...

No one has been able to explain to me why young men and women serve in the U.S. military for 20 years, risking their lives protecting freedom, and only get 50% of their pay. While Politicians hold their political positions in the safe confines of the capital, protected by these same men and women, and receive full pay retirement after serving one term. It just does not make any sense.

Monday we learned that the staffers of Congress family members are exempt from having to pay back student loans. This will get national attention if news networks will broadcast it. 

When you add this to the below, just where will all of it stop?

For too long we have been too complacent about the workings of Congress. Many citizens had no idea that members of Congress could retire with the same pay after only one term, that they specifically exempted themselves from many of the laws they have passed while citizens must live under those laws. The latest is to exempt themselves from the Healthcare Reform... in all of its forms. Somehow, that doesn't seem logical. We do not have an elite that is above the law. I truly don't care if they are Democrat, Republican, Independent or whatever. The self-serving must stop.

If each person that receives this will forward it on to 20 people, in three days, most people in The United States of America will have the message.. This is one proposal that really should be passed around.

Proposed 28th Amendment to the United States Constitution: "Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States."