1558 days ago
Michael Pento President and Founder of Pento Portfolio Strategies does not mince his words. He says that “We see now a rebound in the virus, the closing of the economies, and a fiscal cliff that is going to be absolutely devastating… The cliff is coming because you can’t print trillions of dollars and borrow trillions every few months. No economy in the history of planet earth has ever been able to do that without destroying its currency and bond market. I don’t think the US will be any different.”
4254 days ago
The One Free Share Tip A Day offering yesterday was my review to date of my macro themes for 2013. Some – such as a US Fiscal Cliff fudge, with no meaningful progress on tackling the budget deficit – have been spot on, but others have not come to pass currently. The following comes with help from my friend and colleague Steve Moore – he is as bearish as I am about equities but we both offer two caveats.
4316 days ago
Forgiver the delayed appearance of the December column for me. I have two excuses. The first is that amid all the present buying, goose cooking and mince pie eating I just got a bit snowed under on the work front. But better late than never. Okay. That is a poor excuse. The second is that I wanted to see how dust settled on the US fiscal cliff drama before commenting. It has settled. I comment.
I never really had any doubt about what would happen. Bluster, bluster, last minute compromise and nothing really settled. We have been here before and it seems with increasing regularity there is almost a sense of ennui. Perhaps that is the wrong imagery. A better one is heroin addiction.
4337 days ago
Thanks to a reader for this which explains why “averting the Fiscal Cliff” has not actually happened. The finances of the US Government are in terms of GDP/Debt ratios pretty much where Greece was just a few years ago. And the trend is not good…
Lesson # 1:
U.S. Tax Revenue: £2,170,000,000,000
Federal Budget: £3,820,000,000,000
New Debt: £1,650,000,000,000
National Debt: £14,271,000,000,000
Recent Budget cuts: £38,500,000,000
Let’s now remove 8 zeros and pretend it’s a household budget:
Annual family income: £21,700
Money the family spent: £38,200
New debt on the credit card:£16,500
Outstanding balance on the credit card: £142,710
Total budget cuts so far: £385
Got it? Obama has not. But I reckon most folks can see that the sums do not add up.
There was a lesson #2 attached involving sewerage but I think the point is well enough made already.
Another analogy is with a 20 a day smoker. The budget cuts agreed to date equate to him cutting out one cigarette….a year.
4340 days ago
Equities have got off to a flying start to 2013 but do I believe that the surge will continue? Sort of Yes and sort on No. It is complicated. I certainly do not assume that buying any old stock and expecting it to surge will be a way to make money this year. It never is and 2013 will be tough in many ways.
Part of the early January surge is a relief rally thanks to the US not falling off the Fiscal Cliff. Well not yet anyway. Tough decisions with regard to spending have not been taken, merely postponed. The fundamental issue of America’s deficit and its ever growing debt has not been addressed; Ron Paul puts it thus:
Under the sequestration plan, government spending will increase by 1.6 trillion over the next eight years. Congress calls this a cut because without sequestration spending will increase by 1.7 trillion over the same time frame. Either way it is an increase in spending.
Yet even these minuscule cuts in the “projected rate of spending” were too much for Washington politicians to bear. The last minute “deal” was the worst of both worlds: higher taxes on nearly all Americans now and a promise to revisit these modest reductions in spending growth two months down the road. We were here before, when in 2011 Republicans demanded these automatic modest decreases in government spending down the road in exchange for a massive increase in the debt ceiling. As the time drew closer, both parties clamored to avoid even these modest moves. Make no mistake: the spending addiction is a bipartisan problem.
