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“Never A Borrower Nor A Lender Be”

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I ran across this graph of the total debt in our country and I was astounded.  The graph from Yardeni and Assoc shows that our nation has total debt of nearly $70 Trillion.

I had to stop and think about how much a trillion dollars actually is since my checking account is a few zeros shy of that number.

Look at it this way, if you were to spend $115 Billion every hour of every day of one year, you will have roughly spent $1 Trillion.  In 2016, the US government added $1.4 Trillion to the national debt, which now stands just shy of $20 Trillion.  If you look at it from a per person standpoint in our country, each person owes $60,000 to cover the outstanding debt – or a family of four owes nearly a quarter of a million dollars.

How can that ever be repaid???

When you add in the other debt, from states and municipalities, from corporations, from consumers, etc, you total $70 Billion.  Its too depressing to think about because there is absolutely no way it will ever get paid off.  We as a nation are collectively bankrupt – and the deferred liabilities like unfunded Pension and Healthcare Obligations of the US Gov’t of $20 Trillion (per the Business Insider) plus state municipal pension obligations of $1.75 Trillion (per CNBC) and corporate unfunded pension liability of $3.79 Trillion (per the California Policy Center) and we have a nearly $100 Trillion problem.

The only way out of this is to continue to print money so that the debt is paid back in severely deflated dollars.  Demographics will not allow for adequate population growth to ensure GDP grows at a +4% level, so inflation is the only answer – or such a severe depression that all the debt is wiped out but I am not ready for a Road Warrior type of lifestyle.

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Maybe not tomorrow, maybe not this year, but at some point, the chickens will come home to roost and we will have some ugly decisions to make.  At a minimum, our government cannot add $1.4 Trillion to the debt each year – don’t believe those news items saying that the deficit is shrinking like we have heard for a couple of decades.  If our spending only $400 billion deficit per year as we heard in 2016, there is no way we could have put on $1.4 Trillion in new debt.  The government has lots of ways to obscure what they do at both the state and national level, always follow the money and you will see what is really happening.

With the stock market surprisingly holding onto its gains in spite of the fact that:  (1) economic indicators have turned down, and (2) the Federal Reserve stated today that they were on pace to raise interest rates again in June, we will continue to hold onto above average levels of cash so that we have funds to invest when we finally get the over due correction.

The stock market months ago separated from the economic reality of our country – that cannot continue and the smart money is holding on the sidelines to buy when values are more compelling.  I know it is hard to sit back and see the market at current levels, but its better to give up a couple of points of upside in favors of double digit upside in the not too distant future.

In spite of the above statement, as companies in my favorite investment themes have a pull back in price, we are buying or adding to positions.  Those themes are:  cloud computing, selfies, experiences, home life, and pets to name a few.  These are all things that are in secular upswings (businesses moving operations into the cloud; people wanting to look their best knowing that there will photos of themselves on facebook or instagram; the current trend of people not spending money on stuff but spending it on events or vacations that they can experience with families and friends; the trend toward staying home and ordering pizza, watching movies, and playing video games; and the fact that people will spend money on their pets through good times and bad, particularly since the pets are part of the family and add to the home life trend).

For those of you who grew up in the 60’s and 70’s, this is for you…

For those of you who want something a bit more recent (ok, its still from the 90’s) this is for you…

Mark