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  • Where is the U.S. economy headed?
    Following the global financial collapse in 2008, the financial markets around the world have struggled to regain composure and stability. The significant advancements made in technology have essentially inter-connected the global financial markets in a manner not foreseen by investors. Concerns over recent years about the fiscal stability of the Euro and European nations has played a dynamic role in the volatility seen in the U.S. stock market - with recent daily swings of 400-points or more. So investors must remain vigilant of the ever changing dynamics of the European nations to make informed investment decisions in the U.S. stock market simply because of the inter-connection between the fast-paced electronic trading systems now employed around the world.

    Recent brinkmanship displayed by the dysfunctional U.S. Congress in raising the debt-ceiling resulted in further loss of investor confidence; and concerns about whether that the U.S. can effectively govern itself as a nation and act to grow the U.S. economy in a timely and meaningful manner. A subsequent credit-rating downgrade of the U.S. by the S&P credit rating agency further undermined investor confidence not only here in the USA but across the world and especially in China which holds the majority of U.S. debt. The Obama administration appears exacerbated in its attempts to lead Congress to enact policy that will form the basis for companies to hire Americans to reign in the extremely high unemployment numbers seen across America. Indeed, the dysfunctional Congress had to create a special super-committee just to rehash economic issues which neither party was willing to resolve through compromise prior. Then there is the continuing saga of the housing market where large banks like Bank of America are laden with extensive debt due to foreclosures, bad loans, etc. Houses that have remained unoccupied for an extended period of time have actually been destroyed to rid the debt from the lenders' books.

    So what is the solution to this dilemma that faces not only the USA but nations across the globe? First, we must separate the U.S. situation from that of the European nations. The issue central to the fiscal problems in Europe can be traced directly to the creation of the Euro which ties all of the European nations together with a common currency. This situation has created a degrading fiscal scenario for strong economies like Germany where such nations have to continually bail out failing economies of other nations tied to the Euro currency. The countries of Greece, Spain, Italy, and Portugal are a major drain on the entirety of the European collective to continue under a single common currency "the Euro". It would appear that sooner rather than later, the Euro will be rejected by one country after another to enable each country to return back to its original currency which will provide each country with the fiscal flexibility needed to stabilize their independent economies. In the alternative, a complete collapse of the European nations is inevitable due to the extensive debt of large countries like Greece, Italy, Spain, and Portugal which are likely to default in the near term.

    This brings us to the U.S. economy where the central concern lies with the high level of unemployment across America coupled with a significant downturn in the housing sector. The solution is for the Obama administration and the U.S. Congress to compromise on timely and meaningful programs to stimulate the economy. The ongoing debate between Republicans and Democrats over spending cuts and programs like social security and medicare must end quickly. Reasonable lawmakers in Congress on both sides of the isle realize that spending cuts are needed to reign in the extensive U.S. debt - but the manner and method to cut spending has caused grid-lock. There are real concerns about the viability of the social security and medicaid programs as more and more Americans reach retirement age. The funding for these programs is in grave jeopardy - but there is a solution. Let Wallstreet investment firms create and manage trust funds for these programs which will secure the fiscal future for these programs going forward. Spending cuts must start with significant cuts in military budgets, ending military actions in Iran and Afghanistan, and decreasing military bases around the world. The USA must focus military strength in its homeland and not abroad. Rapid deployment of skilled military personnel (seal teams) and strike forces must replace costly warships, fighter jets, and the like. Corporate taxes should be cut to nearly zero to encourage U.S. based companies to hire Americans and to increase manufacturing in the USA for export to other countries. Congress must realize that spending is needed in areas such as infrastructure in refurbishing bridges and roads and support for renewable energy programs like solar, wind, fuel cell technology, etc, to enable construction of manufacturing facilities - all of which will create millions of American jobs - which will boost the U.S. economy.

    The bottom line here is that - the U.S. economy has more potential than the collective of Europe to stabilize and grow in a dynamic manner quickly - but it will ultimately take a cooperative effort on the part of the Obama administration and a compromising Congress to timely put in place the fiscal infra-structure and economic reforms required to meet the challenge. The strength and vitality of the U.S. economy should not be under-estimated even in these dire times as the world economies struggle to stabilize and grow.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Aug 21 10:07 AM | Link | Comment!
  • Shares in (NFLX) headed lower to the $190-level in the near term.
    Aug 20 8:03 PM | Link | Comment!
  • Shares of (AAPL) likely to retest support at the $350-level.
    Aug 20 8:02 PM | Link | Comment!
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