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Why Not To Invest in America
I made a very strategic move about two weeks ago that I had to think long and hard about. Facts are very hard to take in sometimes. Everytime I let emotion come in my thought process, I had to realize one thing about investing: "Money has no emotion and only does what you tell it to do". That is what most Americans do not want to except about money. Take a dollar bill out and place it on a table. Tell it to go help the poor or buy something that will make you happy. It will still just lay there until you make it work for the goal you desire.
Taking the above analogy, I decided I could no longer participate in America from a financial investment perspective. I make no apologies for being an American, but at the sametime, I cannot condone what is going on in our financial society today. America can be a great superpower but we are getting away from our core principles and replacing them with false prophets. I decided to invest in other countries and unfortunately, I placed financial bets against America getting weaker from a economic standpoint. I didn't do this from pure emotions, but I did it by laborous study of what good economic leaders have been writing about for decades. Here are some keypoints I took in:
- The housing market will continue to detoriate with more government intervention and low interest rates being propped up by the Federal Reserve to bank lenders. We created bad loans through banks that were propped up by our own government. Foreclosures will continue for more years to come. The sub prime market has re-adjusted itself, but now the 30 year mortgage market is getting hit. Home prices still need to dramatically fall, but with government giving out $8k tax breaks that is used as a down payment on a home, more bad things are yet to come. The FHA has dramatically increased its ownership of mortgages from banks and is now underwater with some of its loans.
- Government debt and spending. This is probably our biggest cancer in our financial society today. People do not destroy economies but goverments do. The dollar is getting weaker by the months and many politicians are to blame. Medicare/medicaid are bankrupt but we are now going to add another entitlement with a new healthcare bill. Social security is artificially backed with Treasuries that cannot be paid back. With this years budget deficit at $1.4 Trillion dollars and many more years of deficits projected, what good can come out of that?
- Printing of money by the Federal Reserve will lead to bad results. Inflation has already hit our country and yet more will come. The dollar has been projected to fall even more but now the "daytime" analysts are just picking up on it. The dollar will fall even more and our purchasing power will decline leading to our standard of living.
- China and the Saudis will not continue to finance our debt. Them and other countries are slowly turning away from the dollar and going into other currencies. Whether its Republican or Democrat in office, these are hard consequences we must accept.
- We are a consumption nation and do not produce anything from a manufacturing perspective. We have successfully taxed/regulated our manufacturing out of the country. Companies do not leave based soley on labor costs, but they do with how much it costs to do business in the US. We have the second highest corporate tax rate on a federal level and then add what the states tax and it becomes very clear that business leaders will move their operations. Our consumption rate is around 71% and growing. We need that to drop to 50% and made up with production from manufacturing.
- Look at the proposals coming from government on taxes and regulation. Why would you want to expand business in this country? Healthcare bill has many hidden taxes, the climate change bill has massive regulation costs and the captial gains tax are going to go up. Once again, if you are investing in our country, you can see the attack on small business's while more regressive taxes/regulations are implied on producitive members of society.
- Corruption of our business society is starting to become more visible. I am not writing about the "greed" talking points which is non exsitent. I am talking about the relationship with business and government. Rules/regulation are now being written by politicians/business behind closed doors. Other business's are now being harmed or put out of business from this cozy relationship. Whenever competition shows its true powers, their is usually a business leader/politician going on tv spouting about fairness and ethics and then pushing legislation to hurt that competition. Why invest in that?
Investing can be emotional, but at the sametime it comes down to the individual protecting their property and not letting the collective tear it down.
Taking the above analogy, I decided I could no longer participate in America from a financial investment perspective. I make no apologies for being an American, but at the sametime, I cannot condone what is going on in our financial society today. America can be a great superpower but we are getting away from our core principles and replacing them with false prophets. I decided to invest in other countries and unfortunately, I placed financial bets against America getting weaker from a economic standpoint. I didn't do this from pure emotions, but I did it by laborous study of what good economic leaders have been writing about for decades. Here are some keypoints I took in:
- The housing market will continue to detoriate with more government intervention and low interest rates being propped up by the Federal Reserve to bank lenders. We created bad loans through banks that were propped up by our own government. Foreclosures will continue for more years to come. The sub prime market has re-adjusted itself, but now the 30 year mortgage market is getting hit. Home prices still need to dramatically fall, but with government giving out $8k tax breaks that is used as a down payment on a home, more bad things are yet to come. The FHA has dramatically increased its ownership of mortgages from banks and is now underwater with some of its loans.
- Government debt and spending. This is probably our biggest cancer in our financial society today. People do not destroy economies but goverments do. The dollar is getting weaker by the months and many politicians are to blame. Medicare/medicaid are bankrupt but we are now going to add another entitlement with a new healthcare bill. Social security is artificially backed with Treasuries that cannot be paid back. With this years budget deficit at $1.4 Trillion dollars and many more years of deficits projected, what good can come out of that?
- Printing of money by the Federal Reserve will lead to bad results. Inflation has already hit our country and yet more will come. The dollar has been projected to fall even more but now the "daytime" analysts are just picking up on it. The dollar will fall even more and our purchasing power will decline leading to our standard of living.
- China and the Saudis will not continue to finance our debt. Them and other countries are slowly turning away from the dollar and going into other currencies. Whether its Republican or Democrat in office, these are hard consequences we must accept.
- We are a consumption nation and do not produce anything from a manufacturing perspective. We have successfully taxed/regulated our manufacturing out of the country. Companies do not leave based soley on labor costs, but they do with how much it costs to do business in the US. We have the second highest corporate tax rate on a federal level and then add what the states tax and it becomes very clear that business leaders will move their operations. Our consumption rate is around 71% and growing. We need that to drop to 50% and made up with production from manufacturing.
- Look at the proposals coming from government on taxes and regulation. Why would you want to expand business in this country? Healthcare bill has many hidden taxes, the climate change bill has massive regulation costs and the captial gains tax are going to go up. Once again, if you are investing in our country, you can see the attack on small business's while more regressive taxes/regulations are implied on producitive members of society.
- Corruption of our business society is starting to become more visible. I am not writing about the "greed" talking points which is non exsitent. I am talking about the relationship with business and government. Rules/regulation are now being written by politicians/business behind closed doors. Other business's are now being harmed or put out of business from this cozy relationship. Whenever competition shows its true powers, their is usually a business leader/politician going on tv spouting about fairness and ethics and then pushing legislation to hurt that competition. Why invest in that?
Investing can be emotional, but at the sametime it comes down to the individual protecting their property and not letting the collective tear it down.
Replies to This Discussion
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Permalink Reply by PK Koduri on -
Do you mind sharing what countries you plan to invest in? You couldn't invest in Europe - what with taxes, socialism and stuff, China is Communist. Saudis are hell bet on destroying the infidels, and South America hates the US. So who is left? Africa?
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Permalink Reply by Steve Stuck on -
I went to India because they will benefit from the "Cap-n-Trade" bill with more manufacturing going there. China does have its flaws with communism but them and Asia also got some of my dollars they are shifting their business production to more development. I didn't go with the Saudis. Africa maybe in my next move because of some positives they went to on the business side.
Brazil will be a good strategic move with the celebration of oil fields they found down there. I also stuck with commodities because with a weaker dollar means their prices will go up. I still will invest in oil companies because no matter how many windmills and solar panels you install, America will still need oil. Production of oil in America is continously dropping, but they will just import more.
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Permalink Reply by PK Koduri on
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Thanks. I will be heading to India myself shortly for business, will be an interesting trip. I have half my portfolio in a diversified international fund and the rest divided up between an S&P 500 index fund and several domestic stocks. I did not lose my shirt in the recent market turmoil but cannot say that I escaped unscathed though.
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Permalink Reply by Steve Stuck on
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News just came out that foreclosures rose another 5%.....
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Permalink Reply by PK Koduri on
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I don't recommend ditching America all together. We have significant pockets of strength and a University system that allows ground breaking research as evidenced by the haul of Nobel Prizes that American scientists have won. Having said that it is disingenuous to claim that the main reason why businesses move production overseas is taxes and not labor costs. They also move there because there are no equivalent OSHA or EPA regulations for which we should be thankful in this country. I lived in India growing up and I have seen first hand how the rivers are dead or dying because of pollution. The Taj Mahal is crumbling because of acid rain. I toured a chemical plant that did not have basic safety equipment or gear for its employees. Not to gross any one out but your nose snot turns black after spending a few hours out in the open air in New Delhi. Your chest burns and your eyes are red 24/7. I cannot wait to come back, get out of the plane and take a deep breath. All one has to do is google Guangzhou or Shenzhen + Pollution in google and see what unfettered capitalism with little regard to the environment has done.
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Permalink Reply by Steve Stuck on
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I have very little money left in America. Universities are ok but are not the answer to what is our problem today. I did not state taxes were the only reason and laid out several others such as regulation.
The pollution problems are not due to unfettered capitalism but go ahead and believe that. Our pollution problems were not solved excusively by OSHA or the EPA and many business's started changing way before they got involved. I understand India's problems. But I deal with several investors that go over there the government is still very corrupt. It is is getting better but much change is needed.
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Permalink Reply by Steve Stuck on
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This link also proves the context of my concerns with our financial industry on mortgage loans. The government at no time should be getting into the business of affordable housing by helping private industry back mortgage loans to people that would not be approved. We now have a mess on our hands with government being left with foreclosed loans and more money to be printed to pay for them. When are we going to stop this process? It is time to take our medicine and let these mortgages default, home prices fall dramatically and let the rebuilding process begin.
http://online.wsj.com/article/SB10001424052748704107204574475110152...
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1. Please use your real name (first and last) when you sign up, or we cannot open your account
2. Please do not use logos or commercial images for your profile photo
3. Events should be posted in the events calendar
4. You can post pretty much anything you want on your own personal page (self promotion, etc), and you can change the style of your personal profile page to reflect your corporate identification if you so choose.
5. Please keep all comments civil and polite. It's OK to feel strongly about a subject, and it's OK to be critical of ideas, but please refrain from personal attacks of any kind.
If you witness or experience any issues, please contact admin@smallerindiana.com and we will look into the matter.
6. Smaller Indiana is supported by its members, and by corporate sponsors. If you're interested in learning more about sponsorship, please call Pat Coyle at 317 332 7878.
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