Tag: fiscal policy

When You Are Your Biggest Customer

When You Are Your Biggest Customer

The U.S. is similar to a legacy Technology company whose best days are in the rear view mirror. A telltale sign of this reality is that fact that the Federal Reserve is the largest buyer of U.S. Treasuries. There was a time when Japan and China were the largest holders of U.S. Treasury securities. Today, … Continue reading When You Are Your Biggest Customer

Multiple Fiscal Stimulus Rounds Are Coming. Good News for Equities. Bad News for The Real Economy.

Multiple Fiscal Stimulus Rounds Are Coming. Good News for Equities. Bad News for The Real Economy.

We believe there will be multiple fiscal stimulus rounds. When one considers the stalled economy, negligible Real GDP growth and high unemployment, it would seem that this $2 Trillion stimulus round under discussion won't be sufficient to satisfy the narrative that Government needs to do more. When one factors in runaway entitlements (table below), it … Continue reading Multiple Fiscal Stimulus Rounds Are Coming. Good News for Equities. Bad News for The Real Economy.

Muted GDP Will Force Investors to Become More Selective

Muted GDP Will Force Investors to Become More Selective

"There is nothing more permanent than a temporary government program" - Milton Friedman. First is was the financial crisis of 2008 that "forced" the Fed to perform unnatural acts. It was at this time that the Fed introduced Quantitative Easing ("QE"). QE was to be a "one-and-done" program. That program remains part of the Fed's … Continue reading Muted GDP Will Force Investors to Become More Selective

Poor Executive Management Must Be Held Accountable

Poor Executive Management Must Be Held Accountable

The airlines knowingly placed themselves between a rock and a hard place when they decided to gorge on cheap debt for the purpose of funding share buyback plans designed to boost executive compensation. The lack of financial wiggle room is of their own doing. It's time for the airlines to restructure, to shrink capacity to … Continue reading Poor Executive Management Must Be Held Accountable

U.S. Debt to Reach 195% of GDP by 2050

U.S. Debt to Reach 195% of GDP by 2050

Icarus flew too close to the sun and the United States' fascination with debt may prove to be equally destructive. Yesterday the CBO published its long-term Debt-to-GDP estimates. Those figures show U.S. debt steadily increasing as a percentage of GDP ramping-up to 195% of GDP by 2050. If debt-funded stimulus, zero interest rates and expansionary … Continue reading U.S. Debt to Reach 195% of GDP by 2050

China Is Not Bullish On The U.S. Economy

China Is Not Bullish On The U.S. Economy

Mainland China is not bullish on the U.S. Economy. China's U.S. Treasury holdings have generally declined since 2013 from a peak of approximately $1.32 Trillion (Nov-2013) to $1.07 Trillion as of Jul-2020. Charts and graphs are at the article's end Both the U.S. and China have interventionist fiscal and monetary policy. The difference is that … Continue reading China Is Not Bullish On The U.S. Economy

The Tech Stock Speculation Era

The Tech Stock Speculation Era

When it comes to Technology stocks we are firmly in the Speculation Era. It is likely to stay that way for the near-term. October earnings calls may provide a bump in the road. Looming corporate tax increases will likely put an end to the bubble. The combination of Trump tax cuts and the recent fiscal … Continue reading The Tech Stock Speculation Era

Fiscal & Monetary Policies Are Joined at the Hip

Fiscal & Monetary Policies Are Joined at the Hip

Fiscal and Monetary policy enjoys a symbiotic relationship. Both the fiscal side of the house as well as the monetary side believe (in true Keynesian fashion) that spending is the answer to nursing the U.S. Economy back to health. This shared philosophy ensures that fiscal and monetary policies - State-Led Capitalism - will be coordinated … Continue reading Fiscal & Monetary Policies Are Joined at the Hip

Real GDP Doesn’t Begin To Tell Inflation’s Story

Real GDP Doesn’t Begin To Tell Inflation’s Story

I mentioned to a friend last night that I expect 1% Real GDP growth once we normalize after this recovery that will last at least for the next several years. However, the traditional "Real GDP" calculation understates inflation due to its narrow definition of inflation - the CPI. The Bureau of Economic Analysis does not … Continue reading Real GDP Doesn’t Begin To Tell Inflation’s Story

One Big Step Closer To Fiscal Stimulus II

One Big Step Closer To Fiscal Stimulus II

If you regularly read these pages you know the last thing we want for the economy is another fiscal stimulus round. With today's downward step function in the markets - notably Tech - we are one step closer to Fiscal Stimulus II. President Trump values short-term market valuations far more than long-term economic health. Therefore, … Continue reading One Big Step Closer To Fiscal Stimulus II