by Archie M. Richards, Jr., CFP^®
January 31, 2005

There follows a potpourri of significant items - mostly positive:

• We're in the first year of George W. Bush's second presidential term. From Herbert Hoover in 1929 to George W. in 2001, there were 19 first years of presidential terms. The stock market fell in 10 of them, for an average loss of 11.4 percent. The market rose in 9, for an average gain of 28.4 percent.

  The down-years slightly outnumbered the up. But the down-years were mild while the up-years were fabulous.

  See archierichards.com for the column dated 1/3/05 to find out why 2005 will be an up year. The market has been falling lately. I have no idea why. Maybe the decline will continue; maybe it won't. The year as a whole will be a beaut!

• The huge trade deficit of the U.S. is supposed to be bad news. Nonsense! Selling us more goods than we sell to them is the only way foreign nations can accumulate the dollars to invest in business enterprises in the U.S. America remains the business Mecca of the world. Foreigners are taking advantage, hiring lots of Americans.

• The world contains about 1 trillion barrels of proven oil reserves and uses 30 billion barrels a year. At the current rate, we run out in only 33 years, right?

  Wrong. The proven oil reserves grow continually, because oil keeps seeping to the surface and because oil-recovery technology keeps improving. Plus, the one-trillion proven oil reserves doesn't even count 3.5 trillion barrels that soak the clays of Venezuela and Alberta, Canada. The cost of recovering that oil is only about $15 a barrel. Moreover, nuclear power is coming back. No way will the price of oil remain above $45 a barrel. It's coming down.

  Even if the oil price doesn't fall, it's no big deal, because energy useage has become more efficient. According to the International Energy Agency, the world's purchases of oil account for only 2 percent of the world's Gross Domestic Product. This is way down from 8 percent in 1973, when the oil embargo caused economic havoc.

• According to the Index of Economic Freedom, published by the Wall Street Journal and the Heritage Foundation, the U.S. for the first time no longer ranks among the top 10 freest economies in the world. It ties for 12th. (Hong Kong is the freest.)

  The U.S. continues to score well in strong property rights, low inflation, and competitive banking and finance laws. But its heavy regulations, protectionist trades policies, high government spending, and high marginal tax rates are hurtful. Indeed, U.S. corporate tax rates are among the highest in the world.

  The per-capita income of the 20 "free" nations is more than twice that of the 58 "mostly free" nations and more than four times that of the 74 "mostly unfree" nations. Freedom works.

  During the 11 years the Index has been published, freedom has advanced considerably throughout the world. This is bullish. Freedom anywhere benefits everyone.

  The percentage of the Gross Domestic Product (GDP) flowing through China's government is 30 percent - down from a whopping 82 percent in 1979. This is bullish too.

• Michael Powell is resigning as Chairman of the Federal Communications Commission. Powell tried to deregulate the telecom industry but was bucked by Kevin Martin, a Republican appointed as a commissioner by George W. Bush.

  Mr. Bush better get on the ball. Excessive regulation of the telecom industry caused the recession of 2001. Because of Mr. Powell, the regulations have been reduced. But the FCC remains a malignant tumor. Its heavy-handed regulations must be cut back, and Mr. Martin must not be made Chairman.

• Since 1945, U.S. intellectual opinion (other than in the fanciful towers of academia) has moved away from a belief in socialism to a belief in free markets and limited government. But during the same period, U.S. government itself has become larger and more socialistic. Opinion has moved one way; actual practice has moved the other.

  After legislators become subject to term limits, the practice of government will catch up with the opinion. Government will be cut back far more quickly than it was assembled. I can hardly wait.