New Year, New Congress, New Thoughts

New Year, New Congress, New Thoughts

February 2011

New Year

Expectations for growth in the US are on the rise following a dramatic 22 month run in the US stock market.  In May of 2008, the S&P traded at 1,425.  Today it is trading close to 1,320.

Ben and Tim seem to be on the same page and want to error on the side of over-stimulating by keeping the foot on the gas pedal of the US economy which generally leads to higher interest rates and inflation.

Currently sovereign debt concerns in the west are being temporarily replaced with civil unrest that started in Tunisia and has spread to Egypt and possibly beyond.  This certainly highlights risks associated with Emerging and Frontier market investing all the while it will create new opportunities.

New Congress

The President’s State of the Union address certainly marked a changed tone.  The business channels were gushing about a possible corporate tax cut announcement that could have taken several forms; it did not materialize that evening.  Job creation and therefore tax revenue should be the single economic focus of the New Congress with cooperation from the White House.  This will solve most ills in the United States and would alter deficit projections dramatically just as CBO projections in 2000 showed surpluses into the future, not anticipating a tech and tax collection implosion followed by 9-11.  They tend to be arithmetic in their projections.

New Thoughts

Robert has been posting about his findings from various countries which translate into investing ideas.  Some of the new ideas will be implemented in portfolios.

Back home investor sentiment has remained bullish as the S&P and Dow march higher.  Human emotions are a real part of the market and right now, people are happy about corporate earnings and are bidding shares higher.  For me the biggest concern about the sustainability of the US market and economy is our National Debt level and debt servicing costs over the next decade.  We are projected to add another $1.5 trillion in fiscal year 2010 to the debt.  The question that I’ve raised several times on this site is this: Is the world ready to accept new, much higher sovereign debt levels?”

Again, for now the answer is yes.

About Matthew Kolesky

Matthew Kolesky is a Principal at ACM, Inc. and joined the firm in 2004. Matthew Kolesky was born and raised in Alaska and has served on many Anchorage area non-profit boards.