by Archie M. Richards, Jr., CFP^®
December 23, 2002

I see only one cloud on the horizon. Otherwise, stock prices should rise big time in 2003.

Here's the cloud: A ship-launched nuclear missile attack on the major U.S. city - the only terrorist weapon against which the U.S. has no defense, and won't have for two more years.

On most days, the high seas contain about 25,000 ships. One of them could carry a scud missile and launcher on the deck. If New York City or Los Angeles were destroyed, America and its stock market would be thrown for a loop. But except for that nightmare, the prospects for the stock market are terrific. Here's why:

After a three-year bear market, investors are too pessimistic and hold too much cash. Cash fuels higher stock prices.

The third year of the four-year Presidential term is invariably favorable for stocks. Mr. Bush's third year is 2003.

Mind-boggling technologies are coming soon. Technological revolutions fuel higher stock prices.

In wiping out terrorism (yes, it will happen eventually), the U.S. and Britain are bringing enormous benefit to the world. Both nations - especially Britain - did the same 200 years ago in suppressing piracy.

Oh, sure, when the President lifts a bugle to his lips to signal "Charge into Iraq!" stock prices may fall a little. But don't count on it. Ground fighting during the Gulf War lasted for only a few days. The U.S. military is now ten times stronger than it was then, and Iraq's military is only half as strong. The next Iraqi war should be over by lunch.

The U.S. will remain in Iraq for quite a while, of course, doing the wonderful things for that nation that we did for Germany and Japan after World War II.

Iraq's neighbor, Iran, is loaded with young people who love America. With little help from us, they will overthrow Iran's archaic theocracy. Between Iraq and Iran, the heart of terrorism's darkness will be exorcised.

The 2002 election was a watershed event. For about 130 years, America's principal political conflict has been labor versus capital. The conflict was overdone. Labor needs capital, and capital needs labor. On average, each American job is made possible by about $500,000 of investment money. This comes mostly from rich people. The money enables other people to get rich as well. Nailing the rich hurts labor, too.

Fortunately, the 2002 election revealed a new political divide: people against government - the private sector against a huge, intrusive public sector. Almost everything big government does creates more harm than good. Its diminishment will help everyone, especially the poor.

Conservative majorities in both houses of Congress should enable passage of policies that are favorable for America and its stock market. Here are policies the President will tell Congress he wants enacted:

• Lower tax rates immediately and make them permanent.

• Repeal death and transfer taxes permanently. Those disasters raise little revenues, but cause tremendous harm.

• Appoint judges who evaluate laws but do not make them. We don't need judges, such as those in Florida and New Jersey, who respect the laws they like but treat those they don't like as mere technicalities.

• Lower tariffs on international trade, especially on the food and textile products produced by poor nations. Enable the world's disadvantaged people to become prosperous so they can buy more of our products.

• Suppress class-action lawsuits and punitive-damage awards. Sky-high awards have driven scores of companies out of business, helping hardly anyone except the scumbag tort lawyers.

• Privatize the gigantic Ponzi scheme they call Social Security.

• Create educational vouchers.

• Make payments of dividends deductible to corporations. In raising capital to finance business growth, corporations borrow excessively. They borrow because interest payments are deductible and dividend payments are not. When the government enables corporations to deduct dividends, companies will raise capital by selling to the public more stock and less bonds. This will cut the nation's level of debt.

The Dow now stands at 8511. Barring a ship-based scud attack, I expect the Dow to exceed 11,000 by the end of 2003. Happy Holidays!