As a result of the increasing pressure on Congress to finish health reform and spend much more to fix the unemployment situation the United States is likely to see much higher deficits.  Thus, we have decided to investigate the impact of increasing deficits on BRIC nations and their unique economies.  Below is a chart of treasury securities held by each of the BRIC nations over the period of 2000 to 2007 (a period of relatively consistent bullish trends accross the globe, similar to what we expect for the next several years).  The data was compiled from the United States TreasuryDepartment.  The chart is followed by  a chart of GDP in billions of dollars, accounting for inflation in each of the BRIC nations over the same time period (data compiled from Index Mundi).  Analysis follows the jump:

Read the rest of this entry »

Most investors generally like to diversify their portfolios and use asset allocation in order to reap the best profits for the least risk.  We believe that this is a good time to reallocate your assets as we are beginning to see the transitions from a bearish market to a bullish market.  Firstly, we believe that you should begin pulling money from bonds and treasuries and investing it into stocks or ETFs.  The last continued bullish cycle that we witnessed was during the 80s and 90s.  The chart below indicates pretty clearly that in bullish market cycles, stocks and bonds diverge.

This should give you a good idea of why we believe that bonds are going to continue lowering yields while stocks and funds will give you drastically better returns than the past decade.  Specifically, if you look at the 1984-1987 period of rapid growth following a recession (similar to today’s expected situation) you will see the sharp drop in bond yields.  Thus it is advisable to take most of your money out of cash or cash equivalents except for a necessary emergency reserve.

Read the rest of this entry »