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U.S. Economy

How Washington Should Handle the Bush Tax Cuts

The big political issue for the remainder of this year will be the so-called "Bush tax cuts" engineered by U.S. President George W. Bush in 2001 and 2003.

Those tax cuts are scheduled to expire on Dec. 31, with taxes reverting to their 2001 levels.

It's not at all clear which of the cuts will be extended and which will be repealed.

But one thing is clear: The outcome of the Bush-tax-cut debate will have major implications for the U.S. economy.

To understand the economic implications of extending the Bush tax cuts, please read on...

Three Ways to Brace for a Double-Dip Recession: Recession-Proof Stocks

Today (Friday) we conclude our series on bracing for a double-dip recession.

In Part I of this investment series, "Three Ways to Brace for a Double-Dip Recession: Going for the Gold," we discussed ways investors could safeguard against the imminent decline of the U.S. dollar by buying gold.

In Part II, "Three Ways to Brace for a Double-Dip Recession: Going Global," we
explored potential investments in foreign countries that have more stable economies and better growth prospects.

And today, we're going to conclude by looking at "recession-proof" stocks right here in the United States.

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Money Morning Mailbag: Ending Bush Tax Cuts Not a Cure-All for U.S. Financial Woes

The question of whether or not to extend the Bush tax cuts will be a pivotal issue as Washington prepares for this year's midterm election.

The Congressional Budget Office yesterday (Thursday) reported that extending the tax cuts would result in only short-lived economic benefits.

"[It would provide] a considerable boost to economic activity in 2011 and beyond for a few years," CBO Director Douglas Elmendorf told CNN. "Over time, [however,] the negative consequences of very high federal borrowing build up."

The CBO reported that if the cuts for most U.S. taxpayers were made permanent – as proposed by U.S. President Barack Obama – the nation's accrued debt (not including money owed to Social Security and other government trust funds) could climb to 100% of gross domestic product by 2020, up from 62% this year.

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GM's IPO Filing Reveals Challenges That Could Discourage Investors 

When General Motors Co. filed registration papers for an initial public stock offering (IPO) on Wednesday, it also revealed the formidable challenges it faces – some of which may give pause to investors considering taking a stake in the venerable automaker. The 734-page document GM filed with the Securities Exchange Commission (SEC) paints a picture […]

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Investing Strategies: How to Protect Yourself if the U.S. Economy Catches the "Japan Disease"

Grim unemployment figures, growing worries about crushing debt loads and the apparent absence of any inflation are causing many investors to ask a tough question: Is the U.S. economy catching the "Japan disease," the dreaded and dreadful malaise that has left the onetime Asian powerhouse in a stagnant state since 1990?

It's a crucial question.

And the answer will guide your investment decisions for the next 20 years.

To find out the best investments to be making right now, please read on…

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Three Ways to Brace for a Double-Dip Recession: Going Global

The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

That 1981-82 double-dip downturn – the result of an economic "shock treatment" aimed at curing those ills – consisted of two recessions that were separated by a single quarter of growth.

The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real.

The world's No. 1 economy lost 8.4 million jobs during the recession that got its start in December 2007, making it the worst national downturn since the Great Depression and the biggest loss of employment since the end of World War II.

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BHP Billiton's Bid for Potash Could Spark Surge of M&A Activity in Agribusiness Sector

BHP Billiton's (NYSE ADR: BHP) $38.56 billion bid for Potash Corp. of Saskatchewan Inc. (NYSE: POT) is just the latest episode in what's likely to be a continuing surge of merger-and-acquisition (M&A) activity in the agribusiness sector.

Canada-based Potash, the world's largest producer of potash, yesterday (Tuesday) rejected an unsolicited takeover bid from the Australia mining giant, calling the offer "grossly inadequate."

The fertilizer company also quickly adopted a so-called poison-pill defense to fend off would-be suitors, though it said it would be open to a transaction if the price were right.

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Emerging Stock Markets Thrive as U.S. Shares Tumble

As the U.S. stock markets struggle in the midst of slowing economic growth, emerging stock markets are thriving as their surging economies provide cover for savvy investors.

Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook from Cisco Systems Inc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.

Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.

Read on to find which markets are outshining the U.S....

Investing Strategies: How to Open an Options Account

Although many traditional brokers still recommend against them and many equity investors are fearful of using them, options are becoming increasingly essential to success in today's unsettled stock market environment. And that means you have to figure out how to open an options account.

"New financial times require new financial tools, and I believe options are a must in today's fragile markets," says Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Learning to use options effectively takes some time – particularly if you are set in your ways – but market conditions have changed so much in such a short time that you have to make the effort if you expect to both maximize profits and guard against major reversals."

Fitz-Gerald regularly employs both stock and index options in his Geiger Index advisory service, which has scored a remarkable 32 profits in 32 tries since its inception.

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Buy, Sell or Hold: Tata Motors Ltd. (NYSE: TTM) Is Kicking Into High Gear

I am constantly hunting for profitable opportunities for my Money Map VIP Trader, the Money Map Report and this column in Money Morning.  And I realized months ago that India would be the one major emerging market that would notably accelerate in the second half of the year and into 2011. 

To take advantage of that trend, I recommended a very pro-cyclical play in my trading service, which you can only see by subscribing. But I also kept up my search and was able to find another good opportunity to recommend here. That opportunity is Tata Motors Ltd. (NYSE ADR: TTM).

About a month ago, my colleague and Money Morning Managing Editor Jason Simpkins articulated a view of the Indian economy that clearly details how that country is looking to accelerate growth.  The major headwind for India has been inflation – more specifically, food prices. 

However, India is experiencing a normal monsoon season and will soon see its production of food increase and food prices drop – the recent spike in wheat prices notwithstanding.  This drop in food prices, coupled with renewed fiscal discipline will help bring inflation down from around 10% to about 6% by year end.

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