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
Tag: monetary policy
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.
"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
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. policymakers have increasingly utilized debt to fund various spending initiatives without a thought as to the consequences (reminiscent of the last days of the Roman Empire). U.S. reserve currency status and endless monetary expansion have supported this debt addiction. At this rate U.S. reserve currency status is in jeopardy. The chart below depicts total … Continue reading A Nation in Decline: Total Federal Debt Is 136% of GDP
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
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
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
Powell is a paper-loving, paper-printing Fed Chair. Powell has never hesitated to print his way out of a tough spot. We predict that should the equity markets roll over another 10-15 percentage points Powell and his band of merry Federal Reserve Board members will seek to support the equity markets with Equity ETF purchases. Tickers … Continue reading Powell Is A Paper Fed Chair. That’s Good News for Stocks.
Equity funds continue to experience fund outflows as taxable bond funds enjoy fund inflows. (see table & chart below). A modicum of sanity has crept into the equity markets insofar as Technology names are concerned. High multiple growth names that were driven primarily by speculation and momentum have finally started to pull back over the … Continue reading Equities Continue to Experience Fund Outflows as Technology Stocks Slide