Today I’m proud to announce the addition of two well-respected newsletters to the Cabot Family of investment advisories, Dick Davis Digest and its companion, Income Digest.
For over two decades these newsletters have served both professional and individual investors by providing a convenient source a wide variety of expert investment advice. Twice a month, the Dick Davis Digest presents dozens of well-researched investing ideas and financial musings from a cross-section of the finest investment newsletters in the world. Income Digest, which is published monthly, does the same for dividend-paying investments.
Now, it’s our honor to be the steward of these well-respected publications. Our goal is to honor the past reputation of these digests, while improving the newsletters so they serve subscribers better in this Internet age. I’ll be telling you much more about these Digests in the future.
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A few months ago, finding myself in Chicago with nothing to read, I picked up the book “Where Does the Money Go? Your Guided Tour to the Federal Budget Crisis” in a bookstore. I didn’t just pick it up; I bought it. And I read it. For a financial book, it’s light reading, with plenty of graphs and pictures, all geared toward getting regular people to think hard and intelligently about a major problem.
The problem, of course, is that the U.S. is deeply in debt and digging itself deeper every year, thanks in large part to the decisions made by our elected representatives in Washington.
For 31 of the past 35 years, we’ve spent more than we’ve earned. Our national debt is now more than $9.5 trillion, or more than $31,500 per person. And it’s growing. The obligations already stand at $175,000 per person!
If you think stopping the War in Iraq will fix the problem, you’re wrong.
If you think returning all illegal aliens to their home countries will do it, you’re wrong.
And if you think taxing all millionaires at higher rates (pick any number) will work, you’re wrong.
If you think drilling in Alaska will solve it, you’re wrong.
The biggest factors in our debt problem are the Social Security and Medicare obligations that will come due in the years and decades ahead. The only course of action that will get us out of our hole is a multi-pronged approach that combines serious spending reduction with revenue enhancement.
Getting Out of Debt
At the top of my list are the following:
Increase the retirement age gradually.
Reduce Social Security and Medicare benefits for the richest Americans.
Reduce Medicare drug coverage.
Simplify the tax system dramatically.
Tax the richest Americans more.
Spend less money on defense by reducing our presence in foreign countries.
Spend less money supporting foreign countries.
Reduce federal aid to farmers.
Shrink government.
Further down on my list are some fringe ideas.
Reduce the cost of the War on Drugs-and get young men back in productive occupations-by legalizing marijuana ... and taxing it.
Sell off some public lands to the highest bidders, who would then pay taxes while getting the greatest economic value from the land.
Move to the gold standard, which would curtail the easy printing of money by our Treasury. As Alan Greenspan said, “Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth... The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit... In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.”
Admit Mexico as our 51st state ... or break it into several states. Remittances from immigrants already account for nearly 3% of Mexico’s revenue, yet we spend billions of dollars trying to keep their workers out.
These are not new ideas, but every one has its proponents and detractors, who lobby hard to protect their turf. In short, politics gets in the way of the greater good. And in the end, we all suffer. The goal of the non-partisan authors of “Where Does the Money Go?” is to raise people’s consciousness so much that they pressure the folks in Washington to act more responsibly.
Unfortunately, it doesn’t seem to have made much difference yet. The book has been out since February, and I don’t see any noticeable impact. Most people are still unaware of the book ... and of the problem. In American’s minds, our biggest problems are the economy, education, jobs, health care, energy, Social Security and Iraq. The national debt ranks a lowly eighth.
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I.O.U.S.A.
Fortunately, there’s a new player in the fight against our growing national debt. It’s called I.O.U.S.A., and it’s a movie ... which means it just might be as successful as Al Gore’s “An Inconvenient Truth.”
Unfortunately, it doesn’t have Al Gore; it has Peter G. Peterson. The 82-year-old billionaire, formerly the United States Secretary of Commerce and currently Senior Chairman of Blackstone Group, doesn’t star in the movie; there are no stars. But Peterson’s foundation recently bought the movie, which was nominated for a Grand Jury Prize at the Sundance Film Festival, and opens at 400 theaters across the country on August 21.
Interestingly, Peterson has been singing this song for a long time. In 2005 he wrote a book titled “Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It.”
In 2000 he wrote “Gray Dawn: How the Coming Age Wave Will Transform America - and the World.”
In 1993 he wrote, “Facing Up: How to Rescue the Economy from Crushing Debt and Restore the American Dream.”
None of them, of course, was a bestseller. They seem to have made no more impact on the American psyche-or behavior in Washington-than “Where Does the Money Go?”
I think the movie has a better chance. The Sundance name helps. And obviously, when it comes to getting inside the hearts and minds of Americans, movies are far more powerful than books today. Now all we need are some high-profile celebrities climbing on the bandwagon.
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On the investment side, meanwhile, the market continues to build a bottom. You can’t rush these things. But you can be prepared, by building a watch list and continually updating it. Last week I gave you some names in the biotechnology sector, and I’m still very high on those.
And today I’m suggesting you take a look at trucking stocks, which have been acting very well since fuel prices began coming down.
One of our recent recommendations is Werner Enterprises (WERN), which has more than 9,000 tractors, 25,000 trailers and 14,000 employees and independent contractors, spread throughout the U.S., Canada, Mexico, Asia, Europe and South America.
Werner earned a spot in Cabot Top Ten Report last week, and here’s what editor Michael Cintolo wrote.
“Trucking firms have enjoyed some heady gains in the past couple of weeks, and many of them have stretched out to new peaks. So why the strength? First, investors are clearly anticipating higher earnings now that gasoline prices are beginning to come down. But that can’t be the only reason-we think it’s likely the market is looking ahead toward a faster-than-expected recovery in the economy, or at least in shipping volumes. In its recent quarterly report (which beat expectations by 25%), Werner’s management noted that prices are firming up, likely a result of decent demand and fewer trucks on the road. Analysts are estimating that Werner’s bottom line will jump 29% next year, but in a cyclical industry like trucking, that could prove to be conservative if energy prices continue to decline.”
That was written after the stock had soared from 19 to 24 after the release of second quarter earnings. At the time, the stock was trading at 23. Mike gave it a recommended buy range of 22 - 24, believing that the surge sparked by the earnings report was just the beginning of a longer uptrend, and in the week since, the stock has traded tamely in that 23-24 region. If you like trucks-or even if you don’t-take a look.
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Editor’s Note: Werner will be followed in every issue of Cabot Top Ten Report until its momentum fades ... perhaps a year from now! This momentum-centric newsletter, published every Monday, is your ticket to the hottest stocks in the market, and as the new bull market pulls itself together, there’s no better way to keep an eye on the potential leaders than subscribing to Cabot Top Ten Report. It’s your best chance of discovering the next Research In Motion, the next First Solar, or the next Hansen Natural. To get started with your no-risk trial subscription, simply click the link below.
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Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher
Cabot Wealth Advisory
