Amidst all the soundbites and data tidbits about the condition of the U.S. fiscal and debt situation, it may be helpful to look at the data produced by the Congressional Budget Office.  While they may be way off, it is a good idea to know what figures your government is using to make its spending and tax policy decisions.

The downloadable PDF file provides an historical perspective from 1968 through 2008, and projections for 2018 for taxes, spending and public debt.

click image to download PDF file

On the economic projection front, the CBO sees real GDP growth for 2009, 2010, 2011 and 2018 at: -2.5%, 1.7%, 3.5% and 2.2% respectively.

They see unemployment for the same periods being: 9.3%, 10.2%, 9.1% and 4.8%.

For CPI, the CBO sees -0.5%, 1.7%, 1.3% and 2.0% for

Equity income has the potential to grow.  Bond income does not.  Investors with an income orientation should have at least some level of equity income to supplement fixed income from bonds to keep up with the cost of living.  Inflation is the inevitable long-term outcome of monetary and fiscal policy (current deflation notwithstanding).

When selecting stocks for equity income, the choices should be high quality and with yield characteristics that generate more income than the same amount invested in a broad index, such as the S&P 500.

Remember that individual stocks have issue specific risks that are massively mitigated by the diversification of an index, so there is some added risk that comes with the added income that might be derived from individual stocks.

Here’s what we did today.

First, we determined the threshold requirements based on the performance of the S&P 500 through its proxy SPY.  Then we identified financially strong companies that

Most of the time that we see or produce performance comparison charts, either a stock index (such as the S&P 500) or a bond index (such the US Aggregate Bonds) is the base.  However, cash might be a reasonable base to use as well.  We can’t spend stocks and we can’t spend bonds.  We can only spend cash, which seems like the real world’s most reasonable minimum performance benchmark.

Since few of us actually put cash in our mattress or a coffee can, and instead put it to work in short-term, very safe assets, let’s use the Barclay’s Short-Term (1-12 months) Treasuries index (proxy SHV) as our cash measure, and then compare several key asset categories to that.

The first two charts show the relative performance over 2 years weekly and YTD daily for VEU (world ex US stocks), SPY (US stocks), BND (aggregate US taxable bonds), UUP (US Dollar versus basket