Entitlement Reform Is Inevitable

recession governmentThis five-year bull market will continue for a while… or it may soon peter out. (Flip a coin.) Every bull market is followed by a bear market. Just as every bear eventually turns back into a bull.

This is the normal course of events and investors are wise to prepare for both in advance. That means now is a good time for a reality check:

    1. Is your money diversified among not just among high-quality stocks but also among bonds, real estate investment trusts, inflation-adjusted Treasurys, metals and cash? (Yes, low-paying cash allows you to put money to work when the values get irresistible.)
    1. Are you running trailing stops behind your stocks to protect your principal and your profits?
    1. Are you psychologically prepared for the inevitable: the appearance of a nasty downturn?

However, this bull market is not going to end – as the merchants of doom like to claim – because the nation is on the verge of insolvency.

U.S. corporations are enjoying record profits and sitting on more than $2 trillion in cash. The Federal Reserve reported that U.S. household net worth just hit a new all-time high: $80.7 trillion. (Yes, that’s assets minus liabilities.)

Dangerous Debts

The danger, of course, is the large and growing federal deficit. It is truly ugly and I make no excuses for the pols in Washington who have promised voters the moon in return for their votes.

The deficit – at 100% of GDP – is not fatal if Washington gets its act together. Rest assured, however, that won’t happen before November’s elections.

Politics are polarized right now because there is a fierce battle

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