We're Back

Whew!  Been gone a long time and apologize but it's been a bit crazy here.  Got the book done, then two days later the computer had a major heart attack, fatal, took it to a computer guy here (75 years old, the guy not the computer) who fixed it but then wouldn't connect to the internet.  My guy said the internet provider was screwed up and they said the computer was screwed up.  A classic standoff. 

I said the hell with it and went to California.  Went to see a high school buddy who is the webmaster or whatever for this site and played  a little golf and saw the Bay area which, as we all know, nobody can afford.  I mean nobody.  San Francisco is nice but ...

Then back here and the computer guy said maybe it is the computer and built a new one for a very reasonable price.  But not necessary as it didn't work. 

Said the hell with it again and planned a trip, for some reason, to Asheville, North Carolina.  Then got news that my uncle died so my wife, a good person, canceled the trip to NC and we went to Chicago for the funeral.  Don't feel too bad--my uncle was 96.  For those who want to move to Chicago--you can't afford that place either.  Plus it snows.

Back home and finally got somebody at the internet place that knew what she was doing and I'm up, at least for the time being. 

And was looking at the last post which was about the One Armed Economist which was to be continued.  Lost the article but got this from Paul

I'm curious as to your take on where the US is headed with regard to the problems Larry made mention of. I read his book and I have to admit I got suckered by the fera-tactics he employed. I've got a decent net worth and am 37 years old , but have zero invested outside US. I'm definitely conserned with the present and future debt obligations the US is looking at. Would like to hear your thoughts....

Fera-tactics?

First, good for Paul.  Invested in his 401k and saving. 

Then his concern about the US and his lack of investing outside the US.  Well, Paul, you may think you are not invested overseas but you are.  Most multinationals get at least 40% of their revenues internationally so even is you had only P&G, Pepsico, IBM, Apple, Microsoft or any other member of the S&P500 you have at least 40% exposure outside the US. 

Then the concern about the US debt obligations.  When we read about a deficit of trillions of dollars that is bad.  I guess it is bad--it is in the trillions (how much is that anyway?) and deficits, by definition, sound bad.  But are they?  Maybe, maybe not when compared to other countries.  I saw a study once and I'm sure it can be found somewhere that compares deficits to GNP and ranks the countries.  Since we, the US, have the biggest GNP and our debt is not totally out of line, our ranking is pretty reasonable.  Compared to some other countries like Japan, I seem to remember, we look great.  And we spend a huge amount on the military compared to most other countries so their situations are even worse than ours. 

So when should we worry about too much debt?  When the government starts printing money to pay for it.  This probably won't happen here.  I've seen it but it was in Brazil and Argentina and it ain't pretty.  I have a 10,000 peso note that the Argentine Treasury stamped 10 pesos.  When things got out of control, just lop off the last three digits.

The marketplace here is a little more ruthless.  If we start towards too much debt interest rates will climb accordingly, the stock market will plummet and the politicians will be voted out.  If you don't think so, just ask Jimmy Carter. 

But you should still be invested internationally.  Why?  Because their economies are more screwed up than ours.  Why is that a reason to invest there?  Because any improvement, no matter how small, will result in big stock market gains.  If a US company reports a 15% increase in earnings, the market yawns.  If a German company or a French company reported a 15% increase, the stock there would explode.  Just look at the Japanese market which has really taken off. 

So my advice for Paul it to get some 401k money in a Euro/Pacific fund.  How much?  I don't know.  I put 15% of my son's thrift plan into international so that should give a clue but I'm thinking about upping that to at least 20%.

And if anybody can find that study that compares deficits to GNP I would like to take another look.  That should tell us where we are heading.

Comments

[Paula]

Glad to see you back in writing mode again. I enjoy your blog immensely. I need to finish the post I started a month ago about finances and feelings now that my life has settled back down.

[Paul]

Sorry, should have read "Fear tactics". Thanks for your advice! I had not considered the S&P offering a rather nice exposure to Int'l.

[AXJMS]

Nice post and nice to have you back.