Even This Economy Has Opportunity

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People ask me if I see signs of a recovery.

Sure I do.

But are we in recovery?  Well, that’s a different matter altogether.

I wouldn’t say things are all bad, but many things still need to be changed. But don’t get me wrong, I’m neither an optimist nor a pessimist.

Rather, I see things as they are…and they are not good.

But I also see opportunity…

For too long, Americans and the government have both spent more than they earned.

It’s not surprising that both are in now deep debt.  Americans and the American government both need to cut back.

However, in each of these areas, I see good opportunities to earn some money.

But first, a look at where we are today.

The current leadership

I think the President is a great speaker, a smart guy and all of that, but he hasn’t been able to do what needs to be done.  He just hasn’t.  He says that he inherited this mess, but he’s only made it worse, not better.

And yet he continues to deficit spend.

We can’t keep running deficits every year.  There’s not one business that could survive the way our government does, spending more than it earns every year.

And yet, no matter what, Congress continues to spend money we don’t have.

And, both the President and Congress must realize that taxing the country more is not the answer, either.

Taxes are important, but there is the law of diminishing returns.  After a certain point, over-taxation actually has the effect of reducing revenues, not increasing them.

The truth is, there’s a lot we spend money on that we no longer should.

Cutting costs

Regarding the economy, there’s a lot we can do to cut costs.  The government spends money on many things that are no longer necessary.

For instance, I don’t know why we still have 50,000 troops stationed in Germany.  I mean really, who’s going to invade Germany?  Sure, I understand the situation with the war way back when, but now?  It doesn't make any sense.

And why do we have to be the world’s policeman?

Those days are over, but we still have troops in over 100 countries.  We don’t need to be in all of those places.  We could just pull the money we spend abroad and spend it here, or not spend it at all.  Or pay down the debt with it.

The federal government also spends way too much money here at home.  A big part of that spending goes to US firms.

But, there is opportunity there for investors, too. Those firms reap huge benefits from government spending.

If you look at the sectors where federal spending is rising, it stands to reason that the companies getting large government contracts should be more profitable and see their values go up.

Do your research into those areas and you should find some good opportunities.

Middle class disappearing

While the government continues to spend, American families are cutting costs wherever they can.

It is shocking, but it’s not an overstatement to say that the middle class is disappearing in this country.

How do I know this?

The biggest sign that the middle class is in trouble is…the rise of the Tea Party.

The Tea Party is truly the voice of the middle class. They’re sending the message loud and clear that the tax paying citizens across the country are being left behind. The middle class just isn’t making it any more. They can’t pay their mortgage; they can’t send their kids to college. Their jobs are gone. The cold reality is that if things don’t change, the middle class will disappear.

It’s a big problem that needs to be addressed by Washington. The other side of that problem is that 50% of American households don’t pay any federal income taxes at all.

That’s a horrible statistic, but it shows two things:  That too many Americans are not earning enough income to meet even the lowest tax threshold; and that Washington politicians are not doing enough to help that group of Americans get back to work.

There’s a no doubt that problems exist in the system and need to be corrected.

Another sign is that businesses that sell to the middle class are seeing problems.  Firms like Barnes & Noble, for instance, are in trouble; even Wal-Mart is seeing its numbers dropping.

What does this mean?

It means that people are running out of money before their next paycheck.  It also means that people are finding somewhere else to shop instead of their usual places.

So where’s the opportunity?

There is value and opportunities to be had in firms that sell to the low income consumer market. It’s not a good thing that that market is growing, but it’s a fact.

Whatever it is--food, clothing, household supplies, or whatever--there are firms that serve the low income buyer very effectively.

That means higher profits for those firms.

If you think about it, you know some of them already: they offer dollar menus and sell all kinds of items for a very low price.  Many online businesses do the same thing.

The point here is not to celebrate the financial adversity of the nation, but to find opportunities to make money in the situation as it is; not as we would like it to be.

All the best,

George

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