Investing:

As a retired person I first had to start investing 20 years before retirement so I eventually would have enough money to retire. The idea of putting away enough money to last 20 or 30 years is daunting. Here I am today with Social Security income, a pension, and our portfolio to live on. But where to invest? What are my expectations over the next years regarding investing.

The biggest problem I see is our federal debt is out of control, federal spending is out of control, and we are implementing Obamacare which will further sink the country into debt. The effects of these federal programs are going to have major impacts on our economy for the foreseeable future.

The dollar is the most stable world currency, but it is sure to be downgraded and has been once recently. At some point the world will switch to another currency which will further disturb the dollar. The U.S. trade deficit already is weakening the dollar because more dollars flow out of the country than are brought into the country. As the U.S. slowly looses its credit rating those who own our debt, like China, will begin to put their money elsewhere and that too will impact the value of the dollar.

As the dollar loses value inflation rises. This will steel more value from the dollar.

The next biggest problem is the U.S. is no longer manufacturing products sufficiently to bring dollars into the country (as already evidenced by decades of trade deficit spoken of above). As we lose expertise in manufacturing, and we no longer have the factories to produce products we will slip further and further into being a "service economy." Hogwash. A few decades ago we were told that we were becoming a service economy as if that was a reasonable replacement for manufacturing. It simply isn't.

Service dollars move from hand to hand inside the country. Nothing is added. As we import more than we export our dollars dwindle and end up in the hands of others outside the country.  This is a loosing proposition.

The next biggest problem is the baby boomers are retiring, I'm one of them. As we retire a couple of things happen. We no longer have income with which we portion some of into the stock market. When there is less money going into the stock market there is less money for companies to use to expand and add jobs and manufacturing to our economic base.

Further not only are the baby boomers not investing but we are drawing money out of our investments to live on. The size of the population of the baby boomers is sufficient that this draw down will impact the value of the overall stock market.

So how does one invest in the face of a failing U.S. economy? Well first there is still growth left in the market. Historically equity return has been about 7.8% average annually since 1929. That number will slowly decrease over the next 10 to 20 years. Don't count on earning an average over about 5% for the next 10+ years if you invest in the stock market.

Bonds are nice stable investments, but that is the problem. They may return 5% but if inflation kicks in, as I expect it will, the 5% return on bonds may easily be less than annual inflation. So bonds won't be a good investment.

Stocks adjust with inflation somewhat. If we have 10% inflation the market will rise faster than if we have 2% inflation. Equities aren't inflation proof, but they are the best option anyway.

Investing overseas. This is tricky but any portfolio should have some percentage invested in external markets. Your guess is as good as mine which countries or businesses to invest in overseas, but I think that will become more clear as time passes. Will it be China? Will it be India? Brazil?

So in general we must adapt to the perfect storm of higher taxes, higher inflation, lower stock market returns, and lower salaries. If you're pre-retirement spend less and save more. If you're in retirement spend less so your portfolio will go further.

If you want to start a business don't start a retail outlet. Manufacture something and do it in the U.S. That won't be easy but find a way, and a product.

Vote against any suggestion that we raise the minimum wage. That is simply going the wrong direction. Costs have to come down and salaries have to come down too for us to survive. We are being priced out of the world with our spending habits. How can we possibly compete with $10-20/hour salaries when equally good workers earn less than $1/hour. Their standard of living and salaries have to improve, our's has to decrease. There is no other way.

We can't vote these problems away. It's simply too late. we are on a path that is set in stone. Voting can impact the outcome but we still have trillions of dollars of debt, an annual deficit, and nearly impossible entitlement programs that aren't going to go away anytime soon.

What can save us? Manufacturing more would be the biggest improvement. But we have to manufacture quality products that cost the same or less than those products we are currently importing. We must manufacture for our own consumption and for export too. For that to happen either the overseas manufacturers prices have to increase, or our costs (read salaries) have to decrease. To close the salary gap between the United States and other countries will be painful but it will have to happen. However this will exacerbate the problem of paying off our debt. If there are less dollars being paid to workers, there is then also less tax dollars to pay off debt.

The federal government must cut their horrible spending habits.

Federal regulations that force companies to manufacture in the United States and not overseas is doomed to fail. That will only force manufacturers to spend more on salaries which will make our products too expensive to export. It is a loosing proposition. Higher taxes on corporations has the same impact. It drives jobs and profits overseas. We mus lower corporate taxes to encourage them to do business here.

The entitlement programs have to be revamped. Social Security must be altered to pay way less than it does, and to way less people. Medicare is totally out of control and sinking the country. Obamacare is a third major expense that will be added to the Social Security and Medicare abominations.

We must, as a country, learn to live within our means; and our means will be shrinking. We are now living on borrowed money, both federally and individually.