Poor Mitt! Road Ahead Tests His Portfolio
By Richard Schmitt
NEW YORK (TheStreet) -- If you checked out Mitt Romney's tax return information in the news lately, "Poor" probably would not be a word that would leap to mind. With reported wealth of over $200 million, Gov. Romney seems to be doing quite well, thank you. Yet many economic and demographic factors point to Mitt finding himself poorer over the next few years.
Ignoring any Swiss bank accounts, Romney presumably holds U.S. stocks that he or his blind trust expects to appreciate in value. History suggests the degree to which his stocks appreciate depends on the health of the U.S. economy. However, many factors, such as flagging GDP growth, record debt and high unemployment suggest the U.S. economy, and possibly the stock market, may not be so robust at this point.
So far, unprecedented government intervention in the form of monetary easing and deficit spending has managed to somewhat prop up a languishing U.S. economy, sporting GDP growth of only1.3% for the second quarter of 2012. Recognizing the continuation of this type of government stimulus would make U.S. investments less attractive to Americans as well as foreigners, credit rating agencies downgraded U.S. debt earlier this year.To deal with the problem, the U.S. has imposed a fiscal cliff that would call for automatic reductions in government spending and tax increases next year. Government policy changes could affect the economy and Romney's portfolio in the following ways:
This lag in personal consumption that historically comprises 70% of GDP may continue until the even larger Generation Y picks up the slack in the economy as they reach their peak spending years in the 2020's.
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