Category: Economics

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Putting $6 Trillion “Stimulus” in Perspective

The most recent COVID relief bill was signed by President Biden yesterday. In one year’s time our government (two different administrations) has passed about $6 trillion worth of stimulus. We’re so used to “trillions” being thrown around I believe we’ve become numb to the mind-blowing magnitude of it all so I’ll try to put it in perspective:

  • $6,000,000,000,000 (that’s twelve zeros) divided by a population of 330 million is about $18,000 for every man, woman and child.
  • The average household is about 2.5 people (130 million households) so $6 trillion of stimulus is about $46,000 for every household on average. For our family of five, it’s about $90,000 (no, we didn’t get any of that).

Continue reading “Putting $6 Trillion “Stimulus” in Perspective”

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Toilet Paper “Shortage” Solved

I’m again hearing stories of grocery store shelves emptied of toilet paper. Like many things in life, it’s actually a very simple problem to address but not always easy.

I’ve heard a lot of people exclaim how irrational it is that people are stocking up on toilet paper in response to this particular virus. But, I disagree. It’s actually quite rational.

After all, toilet paper doesn’t expire so it’ll be just as useful in five years as it is today so you don’t have to worry about buying more than you can quickly use since it doesn’t go bad anyway. Therefore, if you’re worried other people are going to raid the shelves it’s perfectly rational to want to get out ahead of it and stock up yourself ASAP.

This then leads to a cycle that feeds upon itself. As more people begin hearing stories of difficulty in obtaining toilet paper they rush to the stores and buy whatever they can get their hands on and the cycle continues.

The problem is with *PRICE.*   Continue reading “Toilet Paper “Shortage” Solved”

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$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”

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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”

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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”