Across My Desk

Okay. Yes, it's the beginning of the second month of a New Year and market outlook reports might be considered old news. Then again, what others see in their crystal ball can be of interest all year long.

What follows are some of the content of the Market Outlook for 2005 from Harrisdirect, published by Jack. A. Ablin, senior vice president and CIO of Harris Private Bank. The report makes some points worth pondering as you consider an investment plan for your future:

"Although the presidential victory was decided by a larger margin than in 2000, the challenges that face a second Bush administration are enormous. Here are, by our estimates, the key domestic issues:

The savings rate. For decades, the average savings rate in the United States has declined. In 1981, savings as a percent of national income was 8.5%. That figure declined to 6.5% in 1998 and plummeted to 1.2% by the end of 2003. During that same period, household debt has soared to $9.7 trillion. Despite lower taxes and tax rebates, household debt has increased by a whopping 39% over the past four years. Sure, spending helps our economy in the short term. But in the long term, an inadequate savings rate has the potential to raise capital costs for investors.

Medicare and Social Security. The oldest Baby Boomers turned 58 this year, and it remains unclear how the demands on the nation's Medicare and Social Security can be met. According to a Government Accounting Office study, the present value of Medicare's prescription drug benefit alone exceeds $8 trillion -- almost twice the outstanding U.S. Treasury debt. The outlook for Social Security is equally grim: The number of workers available to support Social Security recipients has dropped from 16 to 1 in 1950 to 3.3 to 1 in 2003. A recommendation to allow workers to establish private savings accounts with part of their Social Security taxes could reduce the federal government's obligations over the long-term, but the cost of such a shift would be enormous.

Dependence on foreign oil. Our nation's reliance on imported oil puts us at a strategic disadvantage. Conservation could help, but so far efforts to improve automobile fuel efficiency standards have been met with resistance. According to the Environmental Protection Agency, U.S. oil consumption could fall by 143 million barrels per year if fuel standards increased by just one mile per gallon.

Budget deficit. In the past four years, the federal budget has moved from surplus to a deficit of more than $400 billion. The nation faces tough choices between lower taxes and spending cuts. Economic growth in excess of 3% should help ease the deficit. One looming problem is the Alternative Minimum Tax, which could affect 18.6 million Americans next year with its higher tax rates."

What's my bottom line given this information? Save. Save. Save. It may be an old-fashioned concept but is the smartest way to secure your own future.