$27 Trillion National Debt and Counting, How It Gets Paid and Who Pays It

The debt of the US government recently crossed $27 trillion. Additionally, there are talks for another $2 trillion of stimulus (which the stock market is loving by the way). So, if passed, that would put the US national debt at around $29 trillion!

We should note that the US National Debt was about $20 trillion at this time in 2016. So, the debt was doubled to $20 trillion from $10 trillion (2008-2016) during President Obama’s two terms and looks to be on pace to double again over the subsequent two terms based on the increase thus far in President Trump’s first term.

A $29 trillion debt represents almost $90,000 per US citizen. That means a household with four people has about $360,000 as their share of the national debt in addition to their own private debt and their state and local government debt. Consider that total US household debt is about $14 trillion so that’s another $42,000 per citizen, or $170,000 for that same household of four on average.

Let’s consider what this really means. Continue reading “$27 Trillion National Debt and Counting, How It Gets Paid and Who Pays It”

Quarterly Market Update – 2020.Q3

Below you’ll find the returns for various asset classes spanning stocks, bonds, precious metals and the U.S. Dollar for the last month, quarter and year-to-date.

We observe that the dispersion year-to-date is extremely interesting. For example, there is a massive discrepancy in the performance between U.S. large companies and U.S. small companies. The S&P 500 (large companies) made 5.57% on the year while small caps lost 8.64% on the year. Foreign developed country stocks haven’t fared much better as they’ve lost over 7% on the year. I’ve talked about the recent concentration of returns in the five major tech names previously (Apple, Amazon, Google, Facebook and Microsoft) here and here.

The performance of silver has also caught my eye. It was by far the worst performer in September suffering a 15.5% loss but, even with that loss, silver remains the best performing asset on the list for the year making almost 30% in nine months!

The best performer in September was the U.S. Dollar with the USD ETF (Symbol: UUP) returning 1.68% in the month. Continue reading “Quarterly Market Update – 2020.Q3”

Cyclicality of Profit Margins and Why Most Common Valuation Metrics Are Unreliable

Often in the past I’ve discussed current market valuations and implications for market returns over the next decade. In those statements I’m careful to refer only to the most reliable valuation metrics with reliability defined as having the greatest correlation to actual subsequent returns throughout history.

This distinction must be made because it’s the least reliable valuation metrics that often get tossed around by retail investors, the financial media and even professional advisors. Continue reading “Cyclicality of Profit Margins and Why Most Common Valuation Metrics Are Unreliable”

Wild Ride So Far in 2020

The S&P 500 just logged one of its worst quarters in history and one of its best quarters in history back-to-back in the first half of 2020.

Specifically, the S&P 500 lost 20% in Q1 while making about 20% in Q2. The only other times in history this has happened were both during the Great Depression (Q3 or 1932 and Q2 of 1938) (Source: @Sentimentrader).

I’ve written about the potential for huge price swings in both directions previously.

This puts the S&P 500 down a little over 3% on the year while the global stock market is down over 7%. Meanwhile, gold and bonds are up on the year.

 

Continue reading “Wild Ride So Far in 2020”