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Strategies & Market Trends : Guidance II

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To: SusieQ1065 who wrote (1175)	6/22/2003 12:29:48 PM
From: SusieQ1065	Read Replies (1) of 2077

A look into the future by Jim Brown... I attended a conference last week where quite a bit of time was spent predicting the economic future. I have to say it was not bright. We are talking long term here, in years not months. The overall consensus of opinion was that 2003 would end well and the recovery would carry over into 2004. It is an election year and we know how politicians like to paint a rosy picture in their campaign speeches. Typically the 3rd year of a presidents term is the best year of the term. The problems come in year 2005. The tax cut just approved was said to be $350 billion. There are things in it that sunset in 2004. Get serious, are politicians going to raise taxes again in an election year? The consensus was a total cut before it could be rescinded of about $850 billion. The deficit for 2003 is already $292 billion as we saw this week. It is expected to be $400 billion by the end of September. Add another $450 billion in 2004 and the numbers start to be really ugly. What most people don't realize is this is in funded items like defense, security, etc. Unfunded items like social security, Medicare and military pensions are not accounted for in these totals. The estimates I am hearing are for a $1.5 trillion deficit by 2005. Assuming Bush is reelected he will tackle this problem head on in order to clean up his legacy and prepare for the transition to the next republican president. He cannot get elected again so he has nothing to lose. He will take the first two years 2005-06 and force stringent changes in the economy including the tax code. He has to. He cannot let the deficit continue to climb. The current capital gains tax is the lowest it has been since the depression. This is the first place he is likely to act as it is the least painful to most taxpayers. Regardless of where he acts it will not be pleasant and the market is not going to like it. The next president is going to have it even tougher. In 2008 37 million baby boomers will begin hitting the social security/Medicare rolls. This massive influx of retirees will decimate the workforce and swamp the already overburdened social security system. This massive cash drain will have to be compensated for in some form. That means taxes on the rest of us in some fashion. Lots of taxes. The drain of 18% of workers from the workforce will be good for employment but that will raise wages significantly. Obviously all 37 million are not workers and not all are going to instantly quit working and move to Florida. Still the trend is there and 2008 is not that far away. The number one field for investment to profit from this boom was healthcare and drugs. With that many people moving into the geriatric category there is going to be a huge demand for health services. Real estate in retirement locales was also mentioned as potential targets. Oddly enough the beef industry was mentioned as something likely to suffer as retirees ate less beef due to income and health reasons. I am bringing this up as something to think about as you position your portfolios for the future. We get so preoccupied about the next day or the next week when the big money is really made over time in those retirement accounts.

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