Pensions were supposed to earn 7% or 8% a year, but for the last decade their returns have been closer to 1% or 2%. It's not only New Jersey Governor Chris Christie who is sounding the alarms about public employees' pensions. Mauldin cited the case of San Jose, Calif., where a Democratic mayor told firemen, teachers and policemen that he was going to cut their pensions and make them increase their contributions. When he put it to a vote, it passed by a 2-to-1 ratio.

"If we don't deal with the deficit, we'll become Spain or Greece before 2016," he predicted. The Simpson-Bowles budget commission produced what Mauldin termed a terrible "legislative" proposal and "I'd vote for it in a second" simply because it puts the federal budget on a sustainable glide path.

President Obama's indifference to the report of the deficit commission he appointed was unforgivable, in Mauldin's view, and is a primary reason he plans to devote most of his newsletter coverage in September and October to the election. At some point, supporters of entitlements will confront the reality that if they don't make major adjustments, they are waging a losing war against mathematics.

What remains so frustrating is that America's problems, unlike those of Europe and Japan, are not insurmountable. The 16% savings rate Japan enjoyed in 1989 has fallen to 1% and is about to go negative. When they cross that line, "that's when they will become a bug looking for a windshield to hit them," Mauldin quipped.

Demographics remain Japan's main problem, since that nation's population is scheduled to shrink by 30% over the next few decades and they refuse to admit immigrants. Still, there are glimmers of hope even there. Companies like Canon are moving production back from China to highly automated domestic facilities that are suddenly cheaper than those in mainland China.

One way Mauldin is studying investing in the insular nation is possibly going long Japanese exporters while shorting the yen.

With the exception of Germany and a handful of nations, particularly those in Scandinavia, Europe's prospects look grim. In an interview before he spoke, Mauldin noted that Sweden initiated entitlement reform after its 1993 financial crisis that could prove a model for other nations. It tied rises in entitlement spending to GDP expansion, thereby averting the situation where these outlays consume an ever-growing portion of a shrinking economy. Canada also followed this system later.

With its new Socialist government raising tax rates to 75% while lowering retirement age, France is likely to hit the wall in two years. Mauldin doubts Germany will bail them out. It's questionable if they even possess the means to do so.

In contrast, America is faced with many opportunities. "We could become energy independent" in seven to 10 years. Within a few years, the U.S. could be exporting $60 billion to $70 billion of gas annually, and that will make a big dent in our trade balance. Moreover, this country is exporting "more stuff than ever, we're just doing it with fewer people," Mauldin said.

For a man in his early 60s, Mauldin's portfolio reflects his long-term optimism about America's potential. He admits he is overweighted in private technology, biotechnology and venture capital.