Cornerstone Chartbook Jan 2011

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Slide 1:

Broad Theme: In the USA we have been painting over rotten wood for much too long… :

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Copyright 2003-2011, All rights reserved. investwithcornerstone.com 1/15/2011 If you want to turn to the last page and get the bottom line on what we are thinking, here it is. As long as the Fed keeps up the asset purchase programs, things will be fine. Even kinda bubbly. But what the *&^! happens when they stop? Hopefully just a shallow recession, if they time it perfectly and they have a good plan to do so. What happens if we get popped in the mouth forcing us to stop asset purchases? (The mouth popping might be some dummy replacing Bernanke as Fed Chair, Ron Paul is successful in outlawing the Fed, the Chinese go on a buyer’s strike @ the same time they invade Taiwan… just let your imagination run wild; the list of Gotchas is endless.) All bets are off then. Why? Because the USA is one big A$$ leveraged hedge fund addicted to cheap money, and we have gone from giving the patient methadone in treatment back to straight Heroin. Nicht gut. What makes this all worse is we have been paying our monthly bills with money borrowed from abroad, leaving us all dependant on the kindness of strangers. Yikes!

Some of the Challenges before us… :

Public policy @ all levels of Government must begin to address our structural problems, or we will all be poorer for it. :

Sound & Consistent Economic Policy is Very Important :

Average Joe Index :

Slide 9:

Copyright 2003-2011, All rights reserved. investwithcornerstone.com 1/15/2011 The USA is hostile to capital formation. Three examples (there are many more): 1.You are taxed on the very first dollar of money market or savings account interest even though you aren’t earning anything above the rate of inflation. So, in saving money you are automatically getting poorer. Not good policy. There are few Corporate Structures that allow for Capital retention (retained earnings) without undue tax penalties. An example would be the LLC, there is no incentive to retain earnings in an LLC because the owners will be taxed personally on every penny of those earnings. This is harmful economic policy. Saving for retirement is a labyrinth of accounts and rules that requires you retain two or three experts in order to handle it all. (SEP, SIMPLE, ROTH, IRA, Rollover, 401k, 403b, etc, etc.) Why not just one account that you can defer a certain level of money over a lifetime? It is as if we allowed an foreign enemy to design this policy.

Economic Policy is the USA means that a “safe” yield is .07%. Nice for capital formation. :

Here is a simple construct for you. As pages in the Federal Register grow, potential GDP contracts. :

Part and parcel to being deliberate about the total volume of regulation is protecting the ratio of Entrepreneurs to Bureaucrats :

Part and parcel to being deliberate about the total volume of regulation is protecting the ratio of Entrepreneurs to Bureaucrats Copyright 2003-2011, All rights reserved. investwithcornerstone.com 1/15/2011

To recap, we have structural problems that hinder growth. Brains are more important than brawn in the information age. Capital and innovation must be nurtured.Unless we address these problems we are doomed to a slow descent in our power and prestige. The Chinese and Indians wake up every day preparing to go toe to toe with us. Wake up! :

To recap, we have structural problems that hinder growth. Brains are more important than brawn in the information age. Capital and innovation must be nurtured.Unless we address these problems we are doomed to a slow descent in our power and prestige. The Chinese and Indians wake up every day preparing to go toe to toe with us. Wake up! Copyright 2003-2011, All rights reserved. investwithcornerstone.com 1/15/2011

Cornerstone Chartbook Jan 2011

Presentation Description

Comments

Presentation Transcript

Slide 1:

Broad Theme: In the USA we have been painting over rotten wood for much too long… :

Slide 3:

Slide 4:

Some of the Challenges before us… :

Public policy @ all levels of Government must begin to address our structural problems, or we will all be poorer for it. :

Sound & Consistent Economic Policy is Very Important :

Average Joe Index :

Slide 9:

Economic Policy is the USA means that a “safe” yield is .07%. Nice for capital formation. :

Here is a simple construct for you. As pages in the Federal Register grow, potential GDP contracts. :

Part and parcel to being deliberate about the total volume of regulation is protecting the ratio of Entrepreneurs to Bureaucrats :

Ok, we have challenges, what about the current economic environment? :

QE2 (quantitative easing) is in full effect. :

Recent QE2 in high resolution. :

Asset Markets have responded to QE2 :

QE2 was necessary because inflation expectations dipped sharply after QE1 was complete. :

Since QE2 went into action, high frequency leading indicators have improved markedly. :

Since QE2 went into effect long term interest rates have risen. Do not be fooled. :

I leave you with this… :