'Tis Only My Opinion!™
February 2019 -
Volume 39, Number 2
The US economy continues
moving forward!
Despite the political winds of
change flowing throughout the halls of Congress and the Federal
Reserve Bank's efforts to reduce its balance sheet, the economy
continues to move forward. A further rate hike appears to be
postponed due to concerns about the economy.
For the past 115 months, the
market has not seen a real down period. However, it has become
more volatile thanks to computer programs attempting to skim a few
cents off a trade as each news item moves the market.
Unemployment
Unemployment continues below 4%
as counted by the government and women, African-American and
Hispanics are at record low levels. The real problem is with
those individuals who have not been able to adapt to the changing
requirements of the workplace. Technology and robotics have combined
to reduce in many work environments, the requirement for personnel.
China and Tariffs
While the U.S. economy continues
to move forward that is not the case in most of the rest of the
world. Tariffs on Chinese imports are beginning to cause strains in
the Chinese financial system. Leverage on debt to GDP in China is
beginning to be worrisome to many investors particularly as the
legal system within China can change almost overnight.
Debt continues upward
World-wide debt continues
to grow while several European countries are facing economic slowdowns and
Italy is really facing bankruptcy. According to the IMF, the
U.S. has accumulated $20 billion of the $63 billion of World
Debt as shown in the following chart.
The real problem is that the
GAAP report for FY 2017 for the U.S. shows about $45 trillion of
debt on a discounted cash-flow basis but no where in the report is the discount
rate shown.
Political upheavals in not only
South & Central America are raising the spectacle of financial
insolvency in Venezuela, Brazil and Argentina.
The China debt is understated by
about 7 times as it does not include that of the state-owned
industries.
Immigration
Despite the surge of immigrants
trying to gain entrance to the U.S., many politicians are demanding
that immigration laws be abandoned.
For the past decade, politicians
and immigration activists have tried to tell us that there were only
10 or 12 million illegals in the U.S.
A new Yale study, using mathematical modeling on a range of
demographic and immigration operations data, suggests that the
population of undocumented immigrants in the United States may be
more than 22 million—more than twice what was previously believed.
But don't worry they won't vote.
Politicians
rarely understand the demographic changes that illegal immigration
will bring to the nation in two generations largely caused by the
differential in birth rates.
The Minsky moment
The real question is who is the
ultimate buyer of debt and is the cash really available to meet all
the debt obligations in not only the U.S. but throughout the world.
At what point does the U.S.
dollar lose its position as the world's reserve currency? For that
is when the dam will break.
Remember to:
Keep It Safe, Simple and Stay Focused!
But then 'Tis Only My Opinion!
Fred Richards
February 1, 2019
www.adrich.com
www.strategicinvesting.com
Corruptisima republica plurimae leges. [The
more corrupt a republic, the more laws.] -- Tacitus, Annals III 27
'Tis
only My Opinion! Archive Menu, click here.
This
issue of 'Tis Only My Opinion was copyrighted by Strategic Investing in 2019.
All rights reserved. Quotation with attribution is encouraged.
'Tis Only My Opinion is intended to provoke thinking, then dialogue among our
readers.
|