US snouts still firmly in the trough

You don't have to be a Democrat to feel repelled by the charades being played on the floor of the US Congress.

The simple notion that to balance the books you need to both increase revenue and cut spending appears to escape hardliners on both sides.

It is the lack of tax revenue particularly that raises the blood pressure. Because it is a plain fact that, through bungled policy, US companies do not pay their rightful share of tax.

Matt Taibbi, writing at rollingstone.com, reckons Google pays an effective tax rate of only 2.4%. General Electric, "which received a $140-billion bail-out en route to worldwide 2010 profits of $14-billion", pays no taxes at all - and also gets a $3.2-billion tax credit from the federal government.

"And nobody appears to give a shit. What the hell is wrong with people? Have we all lost our minds?" thunders Taibbi.

The laws say companies can avoid paying tax as long as they keep their profits overseas. Given that both parties in the US appear to be more concerned with staying on the good side of their campaign funders, there's little chance that this tax legislation will be repealed any time soon. Pork-barrel politics still rules in Washington.

Like all good cynics, we have to make the most of a sorry situation. So the most counter-intuitive, contrarian trade might be to load up on big US stocks. Unlikely to be hurt on the tax front at home, they sit pretty on an earnings base that is diversified around the world - and they pay solid dividends.

Investment adviser Kelley Wright has a watch-list of 50 blue-chips that has produced a 7.2% annualised return over the past 10 years (against 3.7% a year you would have got for buying and holding an index tracking the S&P500 itself).

I've picked out five of the more familiar names to us, and to just about everybody in the world: Coca-Cola, Walmart, Colgate-Palmolive, Johnson & Johnson and Procter & Gamble.

You may as well add General Motors. Never mind a shrinking US market, this week Imara Africa Securities reported that GM sales in Zambia, Malawi, Zimbabwe, Mozambique and Mauritius had increased 65% in the first five months of the year compared with those in last year's corresponding period.

The developing world is still where it's at - but you don't have to buy shares in emerging-market companies to get in on the growth story.