A nation united in debt

About a month ago, the national debt topped $22 trillion for the first time. What’s more, it only took a year to tack on another $1 trillion. Unless we do something soon, we could see those kinds of yearly borrowing double within the next decade. Let’s define U.S. debt as the sum of all outstanding debt owed by the federal government. Two-thirds of this debt is held by you and me. It is called public debt, while one-third is held by various inter-governmental departments and agencies such as Social Security and other trust funds. We have the distinction of being the world’s largest debtor, although the European Union is a close second. We now have more debt on our books than we produce in goods and services in a year. If you and I were in the same boat (and most of us are), we might have a problem repaying that debt in the future. If interest rates begin to rise, we might need to cut back on our spending just to make the monthly payments. As you might imagine, your debt and the government’s have a lot in common. Using the nation’s debt practices as our model, we find that more and more Americans are accumulating debt. And, what’s more, we are dying with that debt on our books. About 73% of Americans who die have unpaid debt that totals much more than their funeral expenses, according to Experian PLC, a large credit card reporting bureau; the average amount of that debt is about $62,000. As you might expect, unpaid mortgages account for 37% of those liabilities, followed...

Stocks on hold

February delivered good gains for the markets. All the main averages were up, continuing January’s climb toward the old highs. This week, momentum stalled a bit, indicating that investors need more good news to continue buying. A China trade agreement (or lack thereof) still takes center stage. Despite the Washington, D.C. circus surrounding the testimony of Michael Cohen, the president’s chief “fixer” for over a decade, traders largely ignored the hype. At the same time (no accident in the scheduling), President Donald Trump hoped to take the spotlight off Cohen and back on him by meeting with Kim Il Jung in Hanoi for a second summit. Unfortunately, that meeting was such a bust that Trump left early without any progress at all. One wonders if the whole trip was just a publicity stunt to draw attention away from the Cohen testimony before Congress. Traders ignored that event as well. What really kept the lid on the market was U.S. Trade representative John Lighthizer’s comments before the House Ways and Means Committee on Wednesday. “Let me be clear,” Lighthizer said,“Much still needs to be done both before an agreement is reached and, more importantly, after it is reached, if one is reached.” The trade rep went on to say that China needed to do more than just buy more of our trade goods, citing all the other concerns such as technology transfers and intellectual property theft. None of the above should be new to my readers, since it is something I have been talking about for months. However, this dose of reality flies in the face of all the hype...

Veterans are on the receiving end of the Trump Administration

In the 2019 fiscal budget, the Department of Veterans Affairs received over $200 billion in spending. That’s a 6% increase over last year and counts as the largest amount ever received by the VA. The money will go a long way in implementing an array of much-needed reforms. There will be $400 million ear-marked for preventing opioid abuse. As you might imagine, Veterans are a high-risk group since opioids are used extensively in treating war-time casualties. An additional $1.1 billion will jump-start the overhaul of the VA’s electronic health records, while $1.75 billion will go to implementing the VA Mission Act. That money will revamp and re-write the veteran’s community care programs, which allows for an entire array of new health care choices for the veteran. This will boost the vet’s ability to access private health care at taxpayers’ expenses. On the education front, the Veterans Benefits and Transition Act will help to right some past wrongs inflicted on Post-9/11 GI bill users. Last year, there was a series of technology glitches at the Department of Veterans Affairs that resulted in delayed and inaccurate payments for many thousands of vets attending college. In many cases, the government was not paying the tuition costs, or if they were, the payments were delayed. GI students were being hit from all sides. Schools were charging them late fees, preventing them from access to campus facilities, or were not allowing them to register for their next semester. As vets scrambled to pay the tuition shortfalls, money for mortgage and rents were in short supply causing even more late fees to accrue. Some schools...

When enough is enough?

For weeks now, ever since Christmas Eve, stocks have climbed almost straight up. It has been a classic “V” shaped recovery in the markets. We are due for a break, but who knows when. If I am correct, we should see either a 3-5% pullback or a multi-week period of back and forth. Either way, it should be nothing for you to be worried about. The worst, I would expect is that it would be a dip to purchase after all is said and done. Last week I mentioned that a U.S./China trade agreement may have already been partially discounted by the market. The anticipation of a deal was the fuel that has propelled this 18% gain in the markets since December. As to exactly when this next decline will occur is anyone’s guess. We could easily run another 1-2% from here if a trade deal is struck today or over the weekend, and if we do, just enjoy the ride. The contrarian in me recognizes that the “fast money” crowd is expecting a correction, like just about everyone else and they might be right. Afterall, markets are extremely overbought. Investor sentiment, while not yet near the September readings (just before the market correction), is over 50% (51.9% to be exact). That indicates some caution should be exercised on new purchases, but bullish sentiment would need to increase to something like 62% bulls before a pullback is all but assured. On the fundamental front, earnings expectations are dropping again. As it stands right now, Wall Street analysts are expecting overall results to increase by 7.8% this year, which is...

Economic prosperity in the United States

The stock market is once again approaching historical highs. Unemployment is at multi-year lows. Interest rates and inflation, if not at record lows, are close to it. The president claims we are enjoying the strongest economy in our nation’s history. Is that true? The short answer, according to a recent study by Bloomberg, would be no, not even close. They went back over the course of the last 43 years and measured the nation’s economy under three Democratic and four Republican presidents. They found that in all but one case both the economic and financial performance of the U.S. was better than it is now. Bloomberg used 14 different gauges to measure a wide range of economic activity. Everything, from manufacturing jobs to the value of the greenback versus other currencies, was included. All the traditional variables such as GDP, unemployment, wages productivity, etc. were also analyzed. It turns out that the economy under the last seven presidents saw the greatest improvement under President Bill Clinton between 1993 to 2001. Ranking number two was Barack Obama. President Obama, readers may recall, took office in 2009 during the worst recession since the 1930s. By the time he departed in 2017, he handed Donald Trump an economy that saw the second-best performance of all seven presidents. Ronald Reagan only ranked number three, followed by George H.W. Bush, Jimmy Carter then George W. Bush (who presided over the largest financial crisis in 80 years). President Trump settles in at the number six place, not quite as bad as George W., but clearly lagging Jimmy Carter. Even though it is early days, with...