SOME BURNING QUESTIONS

Here are several investment related questions that burn in my mind every day, I would love to develop conviction regarding the answer to one or more of them:
 
1. Is it possible to have the sovereign debt of the United States continue to grow relative to the current or even prospective GDP of our economy without eventually having to pay higher and higher interest rates on its re-funding?

2. Are the actions of the Federal Reserve (or inaction) likely to result in a devaluation of the U.S. Dollar and cause prices to rise faster than any increased productivity in labor’s output generated as a result of managerial action or improved technology?

3. Some respected money managers predict that the U.S. and other developed economies are moving into what they call a “New Normal”. When asked what does that mean they respond: slower growth rates in domestic industrial production and even a greater shift of emphasis to services requiring intellectual as opposed to physical skills. Asked to give an average growth rate for normal, their response is 1-2% per annum. Can the U.S. maintain its contracted entitlements and pay interest and principal on the projected debt they will cause with this growth rate?

4. We are in a massive rationalization of individual and corporate balance sheets, primarily due to continuing real estate devaluation. At the same time the chaos in Europe and fears elsewhere in the world are contributing to inflows supporting demand for the U.S. Dollar and pushing the U.S. Treasury security bubble ever upward. This apparent circumstance is contributing to the Fed’s ability to keep its low interest rate policies in place without increasing its security purchases. Question, is the risk of this reversing such that interest rates could explode if and when management and individuals decide to invest their huge cash horde? 

5. How can we invest comfortably in China, Southeast Asia and Eastern Europe, the emerging and dynamic growth areas, with some degree of confidence that these countries are protecting investor rights and assuring transparency in shareholder financial information?  

6. The basic question I think about is: “How do we protect the purchasing power of our wealth without losing reasonable,or at least comfortable, levels of liquidity and convertibility?” I have written on the subject of Gold, but are the other investment vehicles, stocks, bonds, notes, CD’s, Money Market Funds, Commodity ETF, Foreign Currency, Real Estate, Annuities, etc.,more likely to preserve wealth? I don’t know! But I feel less uncomfortable with one or the other and so I have tried to diversify among those with good marketability and liquidity until I am able to develop greater conviction for just where we are going.

7. Of course here is the most important question: “Are Obama, Reid, and Pelosi leading this country down the path of becoming more of a social egalitarian society at the expense of its freedoms and individual’s liberty? I think you know my opinion on that. What bothers me the most about it is that there doesn’t appear to be a real leader in the conservative camp who is strong enough to turn those misguided beneficiaries of redistribution around in their understanding and conviction of which system is best for them in the long run- Free market capitalism (with all its potential exploitive risks) requiring individual responsibilities or a state controlled, highly regulated beauracratic social capitalist system with its loss of freedom and liberty to pursue and benefit from individual aspirations.

These questions keep me awake at night (or rising early in the morning) and motivate my watching and learning from “Squawk Box”.

One Man’s Opinion–Bud Brewer