- Busch: US Health Care Bill a Concern for the Chinese
- Farrell: The Market is Still Seeking Reassurance
- Schork Oil Outlook: Still Bearish Crude, But Skeptical
- Taking a Page from Obama's Asia Agenda in Investing
- Hirschhorn: Risk-Averse Traders
- Roginsky: A Funny Thing Happened on the Way to Financial Reform
- Downturn is Prime Time for Airport Infrastructure Projects
- Busch: Pressure Builds and Expands For Chinese Trade War
- Tamminen: Carbon Insurance For Your Car May Be Down The Road
- Busch: Another Obama Opportunity
MOST SHARED
- Stocks Overvalued, Recession Will Return: Meredith Whitney
- Has Twitter's Finest Hours (Seconds) Come and Gone?
- U.S. May Wind Up Green With Envy
- Fed Likely to Keep Rates Low Despite Dollar's Fall: Bernanke
- Bernanke Offers Something For Everyone
- BofA Ex-Counsel: I Was 'Stunned' When I Got Fired
- Oil Tomorrow
- Millions May Have to Repay Part of Obama Tax Credit
- Gold Is in a 'Bubble' And Will Keep Going Higher: Gartman
- Stanford Receiver to Release Funds Of Frozen Acounts
- Answers to Your Questions: A Path to Economic Disaster?
- 5 Ways to Play the Chinese Markets: Analyst
- Meredith Whitney: Turns Bearish
- 3 Stock Plays on Rising College Costs
- Warren Buffett's Berkshire Hathaway Almost Doubles Wal-Mart Holdings During Summer
- Nov. 16: Unusual Volume Leaders
- Getting to the Heart of the Merck-Abbott Embargo Break
- What MGM's Sale Could Say About Value of Content
- My Ratings on Lowe's & Home Depot: Analyst
- Gates Boosts Waste Management, Coca Cola Stakes
- Stocks Overvalued; Recession to Return: Whitney
- What's Kept Stock Rally Going? Fear, Not Confidence
- Fed to Keep Rates Low Despite Dollar's Fall: Bernanke
- Citi Shares, A Strange Indicator Of Unemployment?
- Millions Could Have to Repay Part of Obama's Tax Credit
- Hollywood Turns to Porn as Unemployment Rises
- Slideshow: US Cities With Most Underwater Mortgages
- Solar Energy Emerges From a Dark Period
RSS FEED
CNBC Guest Blog
Text Size 
Michael Yoshikami
President & Chief Investment Strategist
YCMNET Advisors
In a recent blog, I mentioned that all of us need to cut back, consumers and businesses alike. But right now, there's a significant exception to this rule -- the U.S. Federal Government.
The government is moving towards a budget that will raise the national deficit to almost $2 trillion dollars. $2,000,000,000,000. That's alot of zeroes! Even the Chinese government this weekend, expressed concern about American deficits and its impact on U.S. Treasury obligations. Now when the Chinese, the biggest buyer of U.S. debt express concern, you know deficits are real and there's something to be worried about.
It's an economic jump start carpet bombing strategy that may be what is needed to avert a deeper downturn. The Fed Chairman, Ben Bernanke, said in an interview with 60 Minutes,it's his view that intervention was critical and needed. And he sounded an alarm that we need to rein in spending and a gigantic money supply at some point. Absolutley true. We need to be vigilant and make sure we don't start the descent down a very slippery slope. Spending money you don't have can have some very ugly consequences.
If all goes well, the deficit will stop at $2 trillion and eventually be reduced as economic growth returns and spending restraint takes hold. I hope this is the case. But deficits generally spawn an ugly outcome -- higher inflation, higher interest rates. In the longer term, deficits usually yield a weaker economy. This is not a good destination to be sure.
As investors, we need to be aware of how higher deficits will affect our investments. You can expect commodities to do well: energy, agricultural products, gold and other precious metals. Beware of long-term bonds when rates rise, that's the next potential bubble to unwind.
Treasurys, the safe haven so many have fled to in this scary world, are quite expensive right now and could provide unwelcome capital loss when risk appetite returns.
As higher interest rates impact the economy, look for staples companies like Johnson & Johnson [JNJ
Loading...
()
] and Campbell's [CPB
Loading...
()
] that provide goods that we all need (basic goods , health care, food products). Firms like McDonalds [MCD
Loading...
()
], WalMart [WMT
Loading...
()
], and Costco [COST
Loading...
()
]that cater to tougher economic times will also likely benefit from economic tailwinds.
For better or worse, 2009 will be a government spending party. It may be necessary for us to take this risk now as the limping economy needs somebody to spend. Consumers and businesses are shutting down. Something needs to be done and it's the government stepping in to save the day. At least that's the desired outcome.
More from CNBC.com
- Plan for 'Toxic' Bank Assets Could Come This Week
- Obama Changes Tune for Wall Street?
- Bernanke Sees US Recovery Beginning in 2010
With the economy deleveraging, the U.S. has credit card in hand, ready to spend America out of this downturn. But remember $2,000,000,000,000 must one day be repaid. You can't print money without consequence. Hopefully, the debt will paid from economic growth and fiscal restraint. The alternative is not pleasant and one we all hope to avoid.
Here's to keeping our fingers crossed.
___________________
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at .
Data is a real-time snapshot *Data is delayed at least 15 minutes