Tags: ashish | advani | obama | bush | tax | cuts | profit

Position Yourself to Profit from Obama’s About-Face

By    |   Wednesday, 08 December 2010 09:06 AM

I’m sick today.

Not the fever kind of traditional “sick,” but sick to my stomach at the shenanigans that politicians play with the fate of the average citizen.

The politician who knocked on your door and asked for your vote has sold your financial future down the river for party affiliations and misguided hopes of winning re-election.

What am I talking about? President Barack Obama’s about-face on the renewal of the Bush-era tax cuts.

All along, his stand was (along with his campaign promise which got him elected in the first place) that tax cuts for the rich won’t be renewed. Alas, that promise turned out to be hollow. He has now agreed to extend the tax cuts for all — including the rich — as well as the middle class.

I’m not sure what backroom deals were done for him to agree to this about-face. In reality, this acceptance of tax-cut extensions will hurt us much more that meets the eye.

He has agreed to extend the Bush-era tax cuts for all classes of people. This means that the government will be collecting fewer tax dollars than they would have, had the tax cuts expired. What he hasn’t done is reduce an equal amount of expenditures to hold the deficit constant, let alone to try and reduce it.

So in this day and age where we are so acutely aware of the crushing weight of the deficit, he has nonchalantly increased the deficit by nearly $800 billion. Eerily enough, this is equal to the first bailout plan that was unleashed on the United States nearly three years ago. Several trillion dollars later, the politicians haven’t learned that this won’t help anyone for more than a few months.

However, you and I, dear reader, are prudent financial investors. We capitalize on missteps of such misguided politicians by carefully and selectively pouncing on such opportunities to protect ourselves and our investment portfolios from financial ruin.

As soon as the consequence of this "bailout" is understood, in my opinion, you will see the stock markets rally, you will see bond prices collapse and you will see the U.S. dollar sold like funnel cakes at the state fair.

The continual increase in the deficits will cause all this to occur. On a regular daily (spending-more-than-earning) basis, the government will create a deficit of more than $1.4 trillion. Add to that the Federal Reserve contribution of $600 billion that it has announced (but I personally believe that it will be nearly $1 trillion). And to this the new $800 billion due to the loss of tax revenue that has just gone into effect. So without counting the expenditure of the wars, our beloved elected representatives have added $3.2 trillion to our national debt. And that is this year alone.

With such recklessness, it is no wonder that gold sits well above $1,400 per ounce, silver nearly at $30 per ounce and oil at nearly $90 a barrel.

How can we hedge our investments to save ourselves from this foolishness?

The simplest way would be to emancipate yourself from the U.S. dollar. A wise investor will buy into solid, fundamentally sound currencies and protect their portfolios from such madness. Mind you, you have to carefully pick sound currencies. Some of the current batch of currencies have fundamentals worse that the U.S. It's hard to imagine some other nation's currencies could be worse off than the United States dollar, but there are, such as the British pound.

A wise investor will invest in currencies such as Australia’s dollar, Brazil’s real and Norway’s krone. One should also invest some funds in long-term currency plays like the China’s renminbi (yuan) and India’s rupee.

There are multiple ways to play such markets, such as ETFs, options and buy-and-hold currency CDs. Depending on your trading style, risk tolerance and investment horizons, pick the strategy right for you.

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I m sick today. Not the fever kind of traditional sick, but sick to my stomach at the shenanigans that politicians play with the fate of the average citizen. The politician who knocked on your door and asked for your vote has sold your financial future down the river...
Wednesday, 08 December 2010 09:06 AM
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