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America The Debt Pig: We Are A ‘Buy Now, Pay Later’ Society – And ‘Pay Later’ Is Rapidly Approaching

America The Pig - Public DomainIf you really wanted to live like a millionaire, you could start doing it right now.  All you have to do is to apply for as many credit cards as possible and then begin running up credit card balances like there is no tomorrow.  At this point, I know what most of you are probably thinking.  You are probably thinking that such a lifestyle would not last for long and that a day of reckoning would eventually come, and you would be exactly right.  In fact, anyone that has ever had a tremendous amount of credit card debt knows how painful that day of reckoning can be.  To mindlessly run up credit card debt is exceedingly reckless, but unfortunately that is precisely what we have been doing as a nation as a whole.  We are a “buy now, pay later” society, and our national day of reckoning is approaching very, very quickly.

Often we like to focus on our exploding national debt, but household debt is out of control too.  In fact, the total amount of household debt in the United States is now up to a whopping 12.3 trillion dolllars

In the second quarter, total household debt increased by $35 billion to $12.3 trillion, according to the New York Fed’s latest quarterly report on household debt. That increase was driven by two categories: auto loans and credit cards.

We throw around words like “trillion” so often these days that they often start to lose their meaning.  But the truth is that 12.3 trillion dollars is an astounding amount of money.  It breaks down to about $38,557 for every man, woman and child in the entire country.  So if you have a family of four, your share comes to a grand total of $154,231, and that doesn’t even include corporate debt, local government debt, state government debt or the gigantic debt of the federal government.  That number is only for household debt, and there aren’t too many Americans that could cough up their share right at this moment.

Do you remember when I wrote about how credit card companies are specifically targeting less educated and less sophisticated consumers?  Well, that is where much of the credit card debt growth has come lately.  Just check out these numbers

Now, credit cards are returning among individuals with low credit or subprime credit scores below 660. Among people with credit scores between 620 and 660, the share that had a credit card rose to 58.8% in 2015 from a low of 54.3% in 2013. Among those with scores below 620, the number of people with a credit card increased to 50% from a low of 45.6% two years ago. Both figures for 2015 are the highest since 2008.

In America today, we are enjoying a standard of living that we do not deserve.

We consume far more wealth than we produce.  The only way we are able to do that is by going into debt.

Debt takes future consumption and brings it into the present.  In other words, we are damaging the future in order to make the present a little bit better.  On an individual level, we may enjoy the big screen television we buy with a credit card today, but we are taking away our ability to spend money later.  And on a national level, what our unprecedented debt binge is doing to future generations of Americans is beyond criminal.

Earlier this month I explained these things to a live studio audience down at Morningside, and you can view a video of that right here

In this article I haven’t even talked about corporate debt yet.  Instead of learning their lessons from the last financial crisis, big corporations have gone on the biggest debt spree of all time.  If you can believe it, corporate debt has approximately doubled since the last financial crisis.  In other words, since the last recession we have essentially matched the total amount of corporate debt that we accumulated from the beginning of the country up to 2009.

Unfortunately, a lot of that debt is now going bad.

In previous articles I have documented that corporate debt delinquencies are now the highest that they have been since the last financial crisis, and corporate debt defaults are also the highest that they have been since the last financial crisis.

At this point, even the mainstream media is acknowledging that we have a corporate debt “crisis”.  The following comes from an article that was just put out by the Denver Post

The number of companies that have defaulted so far this year has already passed the total for all of last year, which itself had the most since the financial crisis. Even among companies considered high-quality, or investment grade, credit-rating agencies say a record number are so stretched financially that they’re one bad quarter or so from being downgraded to “junk” status.

Companies whose debt is already deemed “junk” are in the worst shape in years. To pay back all they owe, they would have to set aside every dollar of their operating earnings over the next eight and a half years, more than twice as long as it would have taken during the 2008 crisis, according to Bank of America Merrill Lynch.

Are you starting to get the picture?

And I haven’t even started talking about our national debt yet.  When Barack Obama entered the White House, we were 10.6 trillion dollars in debt.  Today, we are 19.4 trillion dollars in debt.  That means that we have added 8.8 trillion dollars to the national debt under Obama, which breaks down to an average of 1.1 trillion dollars of additional debt a year.

We have been taking more than 100 million dollars of future consumption and bringing it into the present every single hour of every single day during the Obama administration.  That is why I am constantly referring to our “debt-fueled standard of living”.  We do not deserve to live the way that we do, but since we are able to steal from our children and our grandchildren we are able to enjoy a standard of living that most people in the world can only dream about.

Of course we are literally destroying the future of America in the process, but very few people seem to care about that these days.

Without all of this debt, we would be in a very deep economic depression right now.

But even with all of this “stimulus”, we are still mired in the worst economic “recovery” since 1949.  In fact, Barack Obama is actually on track to be the very first president in all of American history to not have one single year when U.S. GDP grew by 3 percent or better, and he has had two terms in which to try to get that accomplished.  The percentage of working age Americans that actually have a job is way down from where it was just prior to the last recession, and in this video I explain why the employment numbers put out by the government are not nearly as good as the administration would have us believe…

If the American people would have been willing to sacrifice and make some very hard choices a long time ago, maybe we could have gotten a handle on all of this debt.

But instead we continue to rack up debt as if there is no tomorrow, and in the process we are literally destroying tomorrow.

Every dollar of debt that we accumulate now makes life worse for our children and our grandchildren.

Unfortunately, we are a bunch of debt pigs, and we just can’t help ourselves.  We have come to believe that it is “normal” to go into so much debt, and as a society we continue to race toward economic oblivion.

Detroit Has Gone From Being The Greatest Manufacturing City In The World To A Global Joke

The Ruins Of Detroit - Photo by CsmcmIn 1960, the city of Detroit was the greatest manufacturing city that the world had ever seen.  Nearly two million people lived there, and it had the highest per capita income in the United States.  That may be hard to believe, because today it actually has one of the lowest per capita incomes of all of our major cities.  Over the decades more than a million people have left the city, and thousands of abandoned homes have been torn down.  But there are still tens of thousands of abandoned dwellings that remain standing, and some have sold for as little as one dollar in recent years.  Once Detroit was the envy of the entire planet, but now it has become a global joke and in other countries they love to do news stories about “the ruins of Detroit” to show how rapidly America is rotting and decaying.  Sadly, Detroit is far from alone, because there are other formerly great manufacturing cities that have declined just as fast as Detroit has.

Earlier today, I came across a video that contains footage that someone recently captured as they drove through the city of Detroit at night.  To say that the footage is disturbing would be a tremendous understatement

It has become known as a mecca of violent crime and poverty, and now a viral video is giving an unpleasant view of Detroit after dark.

The clip, called Driving through Detroit at night, was filmed by a woman who was a passenger in a car going around the Motor City and was posted to Twitter at the weekend.

It shows terrifying scenes of gangs gathered on the sidewalk, prostitutes lifting up their skirts and dancing, and even a man being run over by a car on purpose.

I would have liked to share the video with you all, but it is just way too graphic.  There really are prostitutes lifting up their skirts in the video, and a man really is hit by a vehicle.  If you want to watch it for yourself, it is very easy to find on YouTube.  But please be warned that children should not be watching this.

If you live in a peaceful rural or suburban setting, the kind of behavior displayed in this video may seem very foreign to you.  In America today, it is way too easy to allow our televisions to define reality for us.  But the warped view of reality that we get through our televisions is nothing like the real world.  The real world is cold, cruel and very unforgiving.

If you are in the wrong place at the wrong time, the real world will eat you alive.

In the city of Detroit today, close to half the population is functionally illiterate, and one survey found that 60 percent of all children in the city are living in poverty.  It has been reported that 40 percent of the street lights do not work, and as you can see from the video it is a very frightening place to be after dark.

And don’t count on the police to help you.  The size of the police force in Detroit has been reduced by about 40 percent over the years, and it has been estimated that it takes the Detroit police an average of 58 minutes to respond to a call.

If it was just one major city where all of these things were happening, that would be bad enough.

Sadly, the truth is that what is happening in Detroit is happening all over the nation.  In fact, St. Louis and Memphis now have higher gun crime rates than Detroit does

The listing places St Louis above the notoriously dangerous Detroit which has topped the list in previous years thanks to the city’s high gun crime rate.

Detroit is now listed as third after Memphis, Tennessee which had 84.2 violent crimes per 10,000 residents.

Birmingham, Alabama comes in fourth place with 82.8 violent crimes per 10,000 residents while Rockford, Illinois was fifth with a rate of 76.3.

Earlier this month, we saw how a major city such as Milwaukee can erupt in flames in just a matter of hours.  And in Chicago, some of the major gangs have agreed to use automatic weapons and sniper fire in their battle against the police.

A spirit of chaos and violence has descended on America, and things are going to get much worse during the months and years to come.

Meanwhile, crime continues to rise in our smaller cities and in our suburbs as well.  For a moment, I want you to consider a short excerpt from a recent Bloomberg article entitled “Walmart’s Out-of-Control Crime Problem Is Driving Police Crazy“…

The call log on the store stretches 126 pages, documenting more than 5,000 trips over the past five years. Last year police were called to the store and three other Tulsa Walmarts just under 2,000 times. By comparison, they were called to the city’s four Target stores about 300 times. Most of the calls to the northeast Supercenter were for shoplifting, but there’s no shortage of more serious crimes, including five armed robberies so far this year, a murder suspect who killed himself with a gunshot to the head in the parking lot last year, and, in 2014, a group of men who got into a parking lot shootout that killed one and seriously injured two others.

Police reports from dozens of stores suggest the number of petty crimes committed on Walmart properties nationwide this year will be in the hundreds of thousands.

Did you catch that?

This Bloomberg report says that there will be “hundreds of thousands” of crimes just committed at Wal-Mart stores alone this year.

If people are behaving like this while times are still relatively stable and relatively good, what would things look like during a real crisis?

Many people openly wonder what happened to Detroit, but it really isn’t much of a mystery at all.

Over the decades, our politicians have stood idly by as tens of thousands of businesses and millions of good paying jobs have left the country.  Our economic infrastructure has been absolutely gutted, and as a result formerly great manufacturing cities have become rotting, decaying hellholes.

And it certainly doesn’t help that voters in many of these cities have willingly chosen to put radical leftists into power time after time.

Unfortunately, it appears that the nation as a whole is about to hand the keys to the White House to a radical leftist that has a violent temper that is absolutely legendary.  If she gets into power, that might just be the final nail in our coffin.

What has already happened to Detroit is slowly happening to the entire country, but we never seem to learn from our past mistakes.

So now we will suffer the consequences for our very foolish decisions, and it will not be pretty.

Overwhelmed By Debt, Nearly 1 In 5 Young Adults Live With Their Parents Or Grandparents

Young Man - Public DomainIn America today, more than 60 million people live in multi-generational households.  That number is so large that it may seem difficult to believe, but the truth is that vast numbers of young adults have had to move back in with their parents and grandparents in recent years due to the deteriorating economy.  Millions of our young people cannot find decent jobs once they leave school, and millions of them are absolutely overwhelmed by debt.  Of course some of them are just lazy, but whatever the reason it is undeniable that multi-generational households are on the rise.  According to the Pew Research Center, 12 percent of the U.S. population was living in multi-generational households back in 1980.  Today, that number is up to 19 percent.  That means nearly one out of every five U.S. adults now live with their parents or their grandparents.

One of the big culprits, of course, is student loan debt.

According to CNN, approximately 70 percent of all college graduates will have student loan debt to pay off once they leave school, and the average loan balance for those graduates is about $28,950.

But there are many that run up $50,000 or $100,000 in debt at high end schools.  We encourage our young people to apply to the “best schools” that they possibly can, and we tell them that they shouldn’t worry about how much it will cost.  We assure them that they will be able to easily pay back any debts once they leave college because of the “good jobs” that they will get upon graduation.

Unfortunately, millions upon millions of our young people have discovered that the good jobs that they were promised simply do not exist.

We are also seeing other forms of debt rise to frightening levels in this nation.  The following comes from the New York Times

Over all, Americans’ use of credit cards has recently been creeping up again: Household debt in the United States increased by $35 billion, to $12.29 trillion, during the second quarter of 2016, a 0.3 percent rise from the previous quarter that was driven by credit cards and auto loans, according to a report released on Tuesday by the Federal Reserve Bank of New York.

We often criticize the federal government for being 19.4 trillion dollars in debt, and rightly so, but let us not forget that U.S. households are 12.2 trillion dollars in debt.

We are a society that feels entitled to everything, and we are not afraid to go into debt to get it.  And unfortunately we have passed on this “entitlement mentality” to the next generation.

In a recent blog post, Jenna Abrams did an amazing job of describing the crisis that we are facing with our young adults today.  Here is an excerpt…

Today I asked my followers how would they describe Millennials and this is what I got: “lazy”, “thin-skinned”, “spoiled”, “selfish”, “undisciplined”, “self-absorbed”, ”fragile”, “oblivious”, etc. and I can agree on this. This generation is really what you call it. But there was one description that is the most accurate.  “Raised by neglectful, over-compensating for inadequacy, self-serving parents.”

You’re in charge. You insisted your children and grandchildren have to get higher education instead of taking a blue-collar job or just entering the workforce after school like your generation did. Most of you pay for that (often unnecessary) higher education. You are overprotective and prevent your children from playing outside and making mistakes you had a chance to make to gain that thick skin. You don’t let your 12-year-old kid stay at home alone because they are too young. And who is wrong when your child has a conflict at school? I bet you always blame the other side, not your “special snowflake”. And how you get surprised that the whole generation gets offended by facing the truth: they are not special. It must hurt, right?

This generation of young adults is the most “educated” in our history, and yet they also appear to be one of the least competent.  Just check out these numbers from CBS News

Half of American Millennials score below the minimum standard of literacy proficiency. Only two countries scored worse by that measure: Italy (60 percent) and Spain (59 percent). The results were even worse for numeracy, with almost two-thirds of American Millennials failing to meet the minimum standard for understanding and working with numbers. That placed U.S. Millennials dead last for numeracy among the study’s 22 developed countries.

In the old days, our institutions of higher learning had exceedingly high standards and they demanded the best from students.  Today, our system of higher education is a joke, and many of our best colleges are more focused on political correctness and “safe spaces” than they are on preparing our young people for the harsh realities of the real world…

At Brown University – like Harvard, one of the eight elite Ivy League universities – the New York Times reported students set up a “safe space” that offered calming music, cookies, Play-Doh and a video of frolicking puppies to help students cope with a discussion on how colleges should handle sexual assault.

A Harvard student described in the university newspaper attending a “safe space” complete with “massage circles” that was designed to help students have open conversations.

We have raised a generation of overly-coddled, self-absorbed boys and girls that have never learned how to become men and women.  They don’t understand how things really work, and they are completely and utterly unprepared for the exceedingly difficult times that are coming.

And since our education system is completely and totally dominated by progressives, our young people have had decades of liberal propaganda pumped into their skulls, and the results are absolutely frightening.

For example, one survey discovered that 62 percent of Millennials say that they are “liberal”, and 42 percent of them say that they are “socialists”.

A different survey discovered that more than half of all U.S. adults under the age of 30 say that they reject capitalism.

If the coming election were to be determined by the Millennials, Hillary Clinton would win by one of the biggest landslides in U.S. history.  But of course she wouldn’t have even been the nominee for the Democrats, because Bernie Sanders would have crushed Clinton.

If something is not done, this is what the future of America is going to look like.

I don’t know about you, but to me that is a rather distressing thought.

Why The Jobs Report Is Not Nearly As Strong As You Are Being Told

Jobs Unemployment Main Street - Public DomainHappy days are here again? On Friday, the mainstream media was buzzing with the news that the U.S. economy had added 255,000 jobs during the month of July. But as you will see below, the U.S. economy did not add 255,000 jobs during the month of July. In fact, without an extremely generous “seasonal adjustment”, the number of jobs added during the month of July would not have even kept up with population growth. But the pretend number sounds so much better than the real number, and so the pretend number is what is being promoted for public consumption.

Why doesn’t the government ever just tell us the plain facts? Unfortunately, we live at a time when “spin” is everything, and just about everyone in the mainstream media seemed quite pleased with the “good jobs report” on Friday. However, as Zero Hedge has pointed out, the truth is that the “unadjusted” numbers tell a very different story…

As Mitsubishi UFJ strategist John Herrmann wrote in a note shortly after the report, the “jobs headline overstates” strength of payrolls. He adds that the unadjusted data show a “middling report” that’s “nowhere as strong as the headline” and adds that private payrolls unadjusted +85k in July vs seasonally adjusted +217k.

In Herrmann’s view, the government applied a “very benign seasonal adjustment factor upon private payrolls to transform a soft private payroll gain into a strong gain.”

He did not provide a reason why the government would do that.

Every month, the U.S. economy must create at least 150,000 new jobs just to keep up with population growth. According to the unadjusted numbers, we did not hit that threshold, and so the employment situation in this country actually got worse last month.

In America today, there are 7.8 million Americans that are considered to be officially unemployed, and another 94.3 million working age Americans that are considered to be “not in the labor force”.

When you add those two numbers together, you get a grand total of 102 million working age Americans that do not have a job right now.

Rather than focusing on the headline “unemployment” figure, we get a much fairer look at the employment crisis in the United States when we examine the employment-population ratio. The following chart comes directly from the Bureau of Labor Statistics, and it shows that the percentage of Americans that are employed has never even come close to getting back to where it was just prior to the last recession…

Employment-Population Ratio 2016

Over the past couple of years we have seen a slight bump in this number, and that is good, but normally after a recession ends the employment-population ratio goes back to at least as high as it was before.  Unfortunately, this has not happened after the last two recessions.  The following comes from Wolf Richter

The ratio always drops during recessions, but before 2001, it always climbed to higher highs during the recoveries. The 2001 recession and subsequent recovery changed this. For the first time, the ratio never fully recovered, never got even close to fully recovering. That was a new phenomenon: employment growth could no longer keep up with population growth.

When the Great Recession hit, the ratio plunged from its lower starting point at the fastest pace on record (going back to 1948). The Fed’s efforts were all focused exclusively on bailing out bondholders, re-inflating the stock market, re-inflating the housing market, and generally creating what had become the official Fed policy at the time, the Wealth Effect (here’s Bernanke himself explaining it). This has re-inflated asset prices – many of them way beyond their prior bubble peaks.

But the Fed’s astounding focus on capital accelerated the already changing dynamics of the economy, at the expense of labor.

Even the Wall Street Journal admits that we are in the weakest “economic recovery” since 1949, and now there are lots of signs that we have entered a brand new economic downturn.  Here are just a few examples from Chad Shoop

  • Ford, GM and Chrysler — three of the U.S.’ largest auto companies — reported sales for July that missed estimates: down 3%, 1.9% and up 0.3%, respectively.
  • Delta Airlines, one of the largest airlines in the world, said revenue fell 7% in July as part of its monthly performance update.
  • Macy’s, the biggest department store company, reported a decline in sales for July, leading to more aggressive markdowns and an industry-wide sell-off.

And lots of ominous signs continue to pop up on Wall Street as well.  For one thing, the Libor rate has surged to the highest level since the last financial crisis.  If you are not familiar with Libor, here is a pretty good explanation of it from Business Insider

The Libor, or London Interbank Offered Rate, measures the interest rate at which banks lend to each other at different durations, and its sharp jump was a harbinger of the financial crisis.

And according to that same article, the Libor rate is now the highest that we have seen since early 2009

In the past month, the Libor rate has spiked to rates not seen since the first quarter of 2009, the heart of the banking meltdown.

Not to mention, the spread between the Libor and the Overnight Index Swap rate, which tracks the lending rate from the Federal Reserve, has widened, another potentially worrying sign.

But of course I have been quoting facts and figures like this for months, and yet U.S. financial markets continue to hold it together.

There are literally dozens of parallels between the global financial crisis of 2008 and what is happening in 2016, but Wall Street continues to defy the laws of economics.

Of course it won’t last forever, but it certainly has been a sight to behold.

And I am certainly not alone in my analysis.  As I noted the other day, DoubleLine Capital CEO Jeffrey Gundlach is entirely convinced that stocks “should be down massively”…

“The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview. “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”

For the moment, investors continue to pay extremely irrational prices for stocks, and the mainstream media is just giddy about the state of the economy.

So let us enjoy this very strange period of stability for however much longer it lasts, but let us also protect ourselves from the horrible crash that will inevitably follow.

The U.S. Has Lost 195,000 Good Paying Energy Industry Jobs

Layoffs - Public DomainNot all jobs are created equal.  There is a world of difference between a $100,000 a year energy industry job and a $10 an hour job running a cash register at Wal-Mart.  You can comfortably support a middle class family on $100,000 a year, but there is no way in the world that you can run a middle class household on a part-time job that pays just $10 an hour.  The quality of our jobs matters, and if current long-term trends continue unabated, eventually we are not going to have much of a middle class left.  At this point the middle class has already become a minority in America, and according to the Social Security Administration 51 percent of all American workers make less than $30,000 a year right now.  We have a desperate need for more higher paying jobs, and that is why what is happening in the energy industry is so deeply alarming.

Just today we got some more disturbing news.  According to Challenger, Gray & Christmas, the U.S. has lost 195,000 good paying energy jobs since the middle of 2014…

Cheap oil has fueled a massive wave of job cuts that may not be over yet.

Since oil prices began to fall in mid-2014, cheap crude has been blamed for 195,000 job cuts in the U.S., according to a report published on Thursday by outplacement firm Challenger, Gray & Christmas.

It’s an enormous toll that is especially painful because these tend to be well-paying jobs. The average pay in the oil and gas industry is 84% higher than the national average, according to Goldman Sachs.

Those are good paying jobs that are not easy to replace, and unfortunately the jobs losses appear to be accelerating.  In their new report, Challenger, Gray & Christmas went on to say that 95,000 of those job cuts have come in 2016, and 17,725 of them were in July alone.

We also got some other bad news for the U.S. economy on Thursday.

Factory orders are down again, and at this point U.S. factory orders have now been down on a year over year basis for 20 months in a row.  That is the longest streak in all of U.S. history.

Needless to say, we have never seen such a thing happen outside of a recession.

In addition, it is being reported that U.S. banks have been tightening lending standards for four quarters in a row.

Once again, this is something that has never happened outside of a recession.

On top of all that, tax receipts continue to plummet.  This is a very bad sign for the economy, because falling tax receipts are usually a sign that we are headed into a recession.  The following comes from Zero Hedge

July “Withheld” receipts – those tax and withholding payments that come straight from wage earner pay stubs – are down 1.0% year over year. 

This data series can be choppy, and looking at the three month trailing average yields a 3.1%.  That’s a touch slower than the 2016 YTD comp of 3.3%, and tells us to not expect too much from Friday’s number.

Also worth noting: YTD non-withheld tax receipts (such as those that come from “Gig economy” workers) are down 6.5%, and July’s comp is 15% lower than a year ago.

Last, corporate tax receipts are down 11% YTD, and if the current pace of these payments holds it will be the first negative comp since 2011. Bottom line: if the tax man isn’t as busy, can the U.S. economy really be expanding?

Are you starting to see a pattern here?

And let’s review what else we have learned over the past couple of weeks…

-U.S. GDP growth came in at an extremely disappointing 1.2 percent for the second quarter of 2016, and the first quarter was revised down to 0.8 percent.

-The rate of homeownership in the United States has fallen to the lowest level ever.

-The Wall Street Journal says that this is the weakest “economic recovery” since 1949.

-Barack Obama is on track to be the only president in U.S. history to never have a single year of 3 percent GDP growth.

Meanwhile, things continue to get worse around the rest of the planet as well.  For example, the economic depression in Brazil continues to deepen and it is being reported that the Brazilian economy has now been shrinking for five quarters in a row

Brazil’s economy, the world’s ninth largest, contracted by 0.3 percent in the first quarter, marking the fifth straight quarter it shrank. Last year, Brazil’s gross domestic product fell to its lowest level since 2009.

Inflation has also shot higher recently, rising 9 percent in 2015, from 6.3 percent in 2014, according to data from the World Bank. Energy as a percentage of exports, meanwhile, fell to 7 percent in 2015, from 9 percent in the previous year.

And of course Brazil is hosting the Olympics this summer, and that is turning out to be a major debacle.  Many of the international athletes will actually be rowing, sailing and swimming in open waters that are highly contaminated by raw sewage, and Brazilian police have been welcoming tourists to Rio with a big sign that says “Welcome To Hell“.  And let us not forget that right next door in Venezuela the economic collapse has gotten so bad that people are killing and eating zoo animals.

As the global economy continues to deteriorate, what should we do?

Legendary investor Bill Gross shared some of his thoughts on the matter in his latest Investment Outlook

“Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels,” Gross said in his latest Investment Outlook note published Wednesday.

“I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories.”

I tend to agree with Gross.  Bonds are in a tremendous bubble right now, and the stock market bubble has grown to ridiculous proportions.  In the end, the only wealth that you are going to be able to fully rely on is wealth that you can physically have in your possession.

As you have seen in this article, signs of economic decline are all around us.

And yet, many people out there are still convinced that good times are right around the corner.

What is it going to take to convince them that they are wrong?

The Price Of Oil Is Crashing Again, And That Is Very, Very Bad News For The U.S. Economy

Oil Price Crashing - Public DomainThis wasn’t supposed to happen.  The price of oil was supposed to start going back up, and this would have brought much needed relief to economically-depressed areas of North America that are heavily dependent on the energy industry.  Instead, the price of oil is crashing again, and that is really bad news for a U.S. economy that is already mired in the worst “recovery” since 1949.  On Monday, U.S. oil was down almost four percent, and for a brief time it actually fell below 40 dollars a barrel.  Overall, the price of oil has fallen a staggering 21 percent since June 8th.  In less than two months, the “oil rally” that so many were pinning their hopes on has been totally wiped out, and if the price of oil continues to stay this low it is going to have very seriously implications for our economy moving forward.

One of the big reasons why the price of oil has been declining is because the OPEC nations continue to pump oil at very high levels.  The following comes from CNBC

Production in July by the Organization of the Petroleum Exporting Countries likely rose to its highest in recent history, a Reuters survey found on Friday, as Iraq pumped more and Nigeria squeezed out additional crude exports despite militant attacks on oil installations.

Top OPEC exporter Saudi Arabia also kept output close to a record high, the survey found, as it met seasonally higher domestic demand and focused on maintaining market share instead of trimming supply to boost prices.

These countries don’t know if or when the price of oil will eventually rebound, but what they do know is that they desperately need cash in order to keep their sputtering economies going.  Many of these nations are already experiencing significant economic downturns, and substantially reducing oil revenues at this time would definitely not help things.

Here in North America, oil production costs tend to be higher, and so when the price of oil crashes we tend to see companies shut down rigs.  But when rigs get shut down, that means that good paying jobs are lost.

During the first four months of 2016, approximately 35,000 jobs were lost at Texas energy companies.  Globally, more than 290,000 energy jobs have been lost since the price of oil started falling back in 2014.

And even though there was hope that energy companies would add jobs as the price of oil started rebounding during the second quarter, it turned out that the job losses just kept on coming

Energy companies continued to cut thousands of jobs during the second quarter, even though many chief executives are now voicing optimism that the oil market crash is ending and a rebound in drilling is afoot.

Although the heads of Halliburton Co. , Schlumberger Ltd. and other major firms forecast higher crude prices and a return to U.S. shale fields when discussing earnings this week, those companies and others disclosed another 15,000 industry layoffs.

Personally, I have quite a few members of my own extended family that live in areas that are heavily dependent on the energy industry, and three of them have lost their jobs so far this year.

And these are precisely the sort of good paying middle class jobs that we cannot afford to lose.  In order to having a thriving middle class, you need lots of middle class jobs.  Unfortunately, those kinds of jobs are going away, and the middle class in the United States is systematically dying.

If the price of oil keeps going lower, that will mean even more jobs losses for the energy industry, and that will be very bad news for the U.S. economy.

In addition, many of these energy companies are getting into very serious debt problems.  Delinquency rates on corporate debt are already the highest that they have been since the last recession as firms struggle to pay their bills.  Of course some of them have already gone belly up, and this has pushed default rates on corporate debt to the highest level since the last financial crisis.

At a price of 40 dollars a barrel, most oil companies in the United States are not profitable in the long-term.  The longer the price of oil stays down in this neighborhood, the more energy companies we will see go bankrupt.  At this point it is just a waiting game.

Also, it is important to keep in mind that Wall Street is very heavily exposed to the energy industry.  Just as subprime mortgages brought down quite a few financial institutions back in 2008, so this time around it is inevitable that the oil crash will claim a fair number of victims as well.

As the global economy has slowed down, the demand for oil has decreased.  And at this point, even the U.S. economy appears to be seriously slowing down.  U.S. GDP only grew at about a one percent rate for the first half of 2016, and the rate of homeownership in this country just hit the lowest level ever recorded.

In the mainstream financial media, there is a lot of hopeful talk about a potential turnaround for the energy industry, but most of that talk appears to be just wishful thinking.

To me, about the only thing that could push the price of oil back to where U.S. oil companies need it to be in the short-term would be a major war in the Middle East.  And of course that is definitely always a possibility considering who is running things in Washington.  But absent that, it is hard to see the price of oil getting back to 70 or 80 dollars a barrel any time soon.

So that means that we are likely to see more job losses, more debt delinquencies and debt defaults, and more financial institutions getting into trouble due to their reckless exposure to the energy industry.

Barack Obama Is On Track To Be The Only President In History To Never Have A Year Of 3% GDP Growth

Barack Obama Giving A Speech - Public DomainWe just got another extremely disappointing GDP number.  It was being projected that U.S. GDP would grow by 2.5 percent during the second quarter of 2016, but instead it only grew by just 1.2 percent.  In addition, the Census Bureau announced that GDP growth for the first quarter of 2016 had been revised down from 1.1 percent to 0.8 percent.  What this means is that the U.S. economy is just barely hanging on by its fingernails from falling into a recession.   As Zero Hedge has pointed out, the “average annual growth rate during the current business cycle remains the weakest of any expansion since at least 1949″.  This is not what a recovery looks like.

In addition, Barack Obama remains solidly on track to be the only president in all of U.S. history to never have a single year when the economy grew by at least 3 percent.  Every other president in American history, even the really bad ones, had at least one year when U.S. GDP grew by at least 3 percent.  But this has not happened under Obama even though he has had two terms in the White House.

The following are the yearly GDP growth numbers under Obama.  They come directly from the official website of the World Bank

2009: -2.8 percent

2010: 2.5 percent

2011: 1.6 percent

2012: 2.2 percent

2013: 1.5 percent

2014: 2.4 percent

2015: 2.4 percent

Does that look like a “recovery” to you?

Of course not.

And many are anticipating that this latest extremely disappointing GDP number will discourage the Federal Reserve from raising interest rates any time in the near future

The disappointing report could keep the Federal Reserve on hold longer as it considers another interest rate hike. The Fed lifted its key rate in December for the first time in nine years but has held it steady since.

According to the pundits in the mainstream media, this was supposed to be the year when the U.S. economy finally returned to “normal”, but that has not happened at all.  In fact, in recent days we have gotten a spate of bad news about the economy.  We just learned that the homeownership rate in the United States has hit the lowest level ever, and Gallup’s U.S. economic confidence index has fallen to the lowest level so far this year.

With the election coming up rapidly, this is the kind of news that Hillary Clinton definitely does not need.  She needs to be able to sell the American people on the idea that the Obama years have been very good for the U.S. economy.  If things take a sharp turn down in the coming months, that may be enough to cost her the election.

So far, Hillary Clinton’s economic agenda has not received that much scrutiny, but the truth is that she hopes to increase taxes in a whole bunch of ways which would be very harmful for the economy.  The following comes from an excellent piece by John Kartch and Alexander Hendrie

Hillary has endorsed several tax increases on middle income Americans, despite her pledge not to raise taxes on any American making less than $250,000. She has said she would be fine with a payroll tax hike on all Americans, she has endorsed a steep soda tax, endorsed a 25% national gun tax, and most recently, her campaign manager John Podesta said she would be open to a carbon tax. It’s no wonder that when asked by ABC’s George Stephanopoulos if her pledge was a “rock-solid” promise, she slipped and said the pledge was merely a “goal.” In other words, she’s going to raise taxes on middle income Americans.

Hillary’s formally proposed $1 trillion net tax increase consists of the following:

Income Tax Increase – $350 Billion: Clinton has proposed a $350 billion income tax hike in the form of a 28 percent cap on itemized deductions.

Business Tax Increase — $275 Billion: Clinton has called for a tax hike of at least $275 billion through undefined business tax reform, as described in a Clinton campaign document.

“Fairness” Tax Increase — $400 Billion: According to her published plan, Clinton has called for a tax increase of “between $400 and $500 billion” by “restoring basic fairness to our tax code.” These proposals include a “fair share surcharge,” the taxing of carried interest capital gains as ordinary income, and a hike in the Death Tax.

Taxes tend to be a pet peeve of mine, so looking at that list of proposed taxes definitely makes me cringe.

If Donald Trump wants to hit the Democrats really hard on the economy, all he has to do is point out the fact that Barack Obama is going to be the only president in American history to never see 3 percent economic growth for an entire year, and he had two entire terms in which to try to turn things in a positive direction.

Sadly, things are very likely going to be worse for the economy no matter who wins the election.  Under Obama, our national debt, our trade deficit, and most of our other long-term economic problems have gotten much, much worse, and so the table is set for a major economic disaster during the next presidential administration.

And if what I have to share about the future of America in my new book is correct, we are definitely moving into a “perfect storm” that will not just be economic in nature.  The things that are coming are going to shake this nation to the very core, and I believe that we will soon face the consequences for decades of exceedingly foolish decisions.

So in the end, we may look back and long for the days of 1.2 percent economic growth, because what is on the horizon is going to make that look like a Sunday picnic.

Donald Trump’s Convention Speech Highlighted The Truth About America’s Decline

American Dream - Public DomainAmerica is in decline.  There are some that still attempt to deny this, but the reason why Donald Trump’s campaign slogan has so strongly resonated with the American people is because deep inside most of us realize that America is not as great as it used to be.  Our economy is a mess, we are 19 trillion dollars in debt, our infrastructure is crumbling, crime is on the rise, moral decay is all around us, other countries don’t respect us as much anymore, and our nation is the most divided that it has been in decades.  Anyone that believes that America is better than it has ever been in 2016 is either completely delusional or simply has not been paying attention.

As I write this article, the prepared text of Trump’s speech has already been released to the press.  So the following remarks may differ slightly from how he actually delivered them, but the differences are not likely to be too great.  At one point during his speech, Trump highlighted the rising crime and violence in our cities, and the numbers that he had to share were more than just a little bit alarming…

Decades of progress made in bringing down crime are now being reversed by this Administration’s rollback of criminal enforcement. Homicides last year increased by 17% in America’s fifty largest cities. That’s the largest increase in 25 years. In our nation’s capital, killings have risen by 50 percent. They are up nearly 60% in nearby Baltimore.

In the President’s hometown of Chicago, more than 2,000 have been the victims of shootings this year alone. And more than 3,600 have been killed in the Chicago area since he took office.

The number of police officers killed in the line of duty has risen by almost 50% compared to this point last year. Nearly 180,000 illegal immigrants with criminal records, ordered deported from our country, are tonight roaming free to threaten peaceful citizens.

And it is really hard to argue with Trump about this.  We have all seen what just happened in Orlando, in Dallas and in Baton Rouge.  As I have said so many times before, a spirit of violence and civil unrest is rising in America.

Donald Trump thinks that he can fix this.  Unfortunately, I don’t think that any politician will be able to do that at this point.

Our long-term economic decline is another puzzle that our national leaders have been unable to solve.  Gallup’s U.S. economic confidence index just hit the lowest level so far this year, and poverty levels continue to rise all over the country.  The following is another excerpt from the text of Trump’s speech…

Nearly 4-in-10 African-American children are living in poverty, while 58% of African-American youth are not employed. Two million more Latinos are in poverty today than when the President took his oath of office less than eight years ago. Another 14 million people have left the workforce entirely.

Household incomes are down more than $4,000 since the year 2000. Our manufacturing trade deficit has reached an all-time high – nearly $800 billion in a single year.

The budget is no better. President Obama has doubled our national debt to more than $19 trillion, and growing.

Yet, what do we have to show for it? Our roads and bridges are falling apart, our airports are in Third World condition, and forty-three million Americans are on food stamps.

Even during Obama’s so-called “economic recovery”, the middle class has continued to shrink.  Right now, 62 percent of all Americans have less than $1,000 in savings, and millions upon millions of ordinary families find themselves desperately clawing and scratching as they try to survive from month to month.

One very frustrated mother recently shared her feelings about her family’s ongoing financial struggles on scarymommy.com

I’m tired of my stomach flipping inside when my son mentions he’d like to take a computer class after school. Or when my other son wants to enroll in swim lessons, take an art class, or buy a new bicycle. I’m tired of wondering where on earth we’ll come up with the cash for our children to pursue their interests.

I’m tired of never, ever going on vacations that don’t involve someone flying us out to see them or crashing at someone’s house for free.

I’m tired of wondering how on earth we’ll be able to send our kids to college.

I’m tired of renting, and the almost certain feeling I have that we’ll never be able to afford to buy a house.

I’m tired of having to pretend I’m not worried about it all.

I’m tired of my kids overhearing our worries, of knowing that money is a constant struggle for us.

Before I wrap up this article, I want to share one more stunning example of America’s decline.

Under Barack Obama, corruption and incompetence has spread throughout every part of our government.  Sadly, that even includes the Secret Service.

Secret Service agents are supposed to be “the best of the best”, and they are charged with protecting our most important national leaders.

But instead of doing their jobs with seriousness and professionalism, they have been acting like wild animals.  Documents that have just been made public reveal that the Secret Service has become an absolute disgrace in recent years…

They highlight incidents in which agents had sexual encounters with underage girls, married agents took part in ‘wheels up, rings off’ parties, and a manager who sexually harassed female subordinates dubbed the National Threat Assessment Center (NTAC) the ‘Nice **** and *** Club.’

The documents contain a report about “a male agent who had his gun stolen by a male prostitute he solicited using his government computer in Puerto Rico“, and they also detail the behavior of one agency manager in particular that deserves to be immediately fired

The report says the manager kept alcohol in his office and forced employees to drink ‘so he could trust them.’

‘He sexually harassed every female subordinate,’ the report says.

The manager would ‘publicly’ male employees: ‘Where are my little whores/*******? Have you slept with them yet?’

If this is what is happening in the Secret Service, can you imagine what is going on in other federal agencies behind closed doors?

America is a complete and total mess, and Donald Trump is completely correct when he talks about the need to make America great again.

But is that even possible, and if so, what would that look like?

Please feel free to tell us what you think by posting a comment below…

19.4 Trillion Dollars In Debt – We Have Added 1.1 Trillion Dollars A Year To The National Debt Under Obama

Debt Debt And More Debt - Public DomainIn 2006, U.S. Senator Barack Obama’s voice thundered across the Senate floor as he boldly declared that “increasing America’s debt weakens us domestically and internationally. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”  That was one of the truest things that he ever said, but just a couple of years later he won the 2008 election and he turned his back on those principles.  As I write this article, the U.S. national debt is sitting at a grand total of $19,402,361,890,929.46.  But when Barack Obama first entered the White House, our federal government was only 10.6 trillion dollars in debt.  That means that we have added an average of 1.1 trillion dollars a year to the national debt under Obama, and we still have about six more months to go.

Even though Barack Obama is on track to be the first president in all of U.S. history to not have a single year when the U.S. economy grew by 3 percent or better, many have still been mystified by the fact that the economy has been relatively stable in recent years.

But the explanation is rather simple, actually.  Anyone can live like a millionaire if the credit card companies will lend them enough money.  You could even do it yourself.  Just go out and apply for as many credit cards as possible and then spend money like there is no tomorrow.  In no time at all, you will be living the high life.

Of course many of you would immediately object that a day of reckoning would come eventually, and you would be right.  Just like for those that abuse credit cards, a financial day of reckoning is coming for America too.

In the United States today, our standard of living is being massively inflated by taking trillions of dollars of future consumption and moving it into the present.  The politicians love to do this because it makes them look good and they can take credit for an “economic recovery”, but what we are doing to our children and our grandchildren is beyond criminal.

On average, we are stealing more than 100 million dollars from future generations of Americans every single hour of every single day.  We are complete and utter pigs, and yet most Americans don’t see anything wrong with what we are doing.

At this point, our national debt is more than 30 times larger than it was just 40 years ago, and many (including myself) have argued that it is now mathematically impossible for the U.S. government to ever pay off all of this debt.

The only thing that we can do now is to keep the party going for as long as possible until the day of reckoning inevitably comes.

Under Obama, our national debt will come close to doubling.  What that means is that during Obama’s eight years we will accumulate almost as much debt as we did under all of the other presidents in U.S. history combined.

Right now, the U.S. government is responsible for about a third of all the government debt in the entire world.  Fortunately the financial world continues to lend us gigantic mountains of money at ridiculously low interest rates, but if that were to ever change we would be in an enormous amount of trouble very rapidly.

For instance, if the average rate of interest on U.S. government debt simply returns to the long-term average, we would very quickly find ourselves spending more than a trillion dollars a year just in interest on the national debt.

And as the Baby Boomers age, our “unfunded liabilities” threaten to absolutely swamp us.  By the year 2025, it is being projected that “mandatory” federal spending on “unfunded liabilities” such as Social Security, Medicaid and Medicare plus interest on the national debt will exceed total federal revenue.  What that means is that we will spend every penny we bring in before a single dollar is spent on the military, homeland security, paying federal workers, building roads and bridges, etc.

In recent years the Federal Reserve has also had a “buy now, pay later” mentality.

While Obama has been in the White House, the size of the Fed balance sheet has grown by about two and a half trillion dollars.  The goal has been to artificially pump up the economy, but when the Federal Reserve creates money out of thin air it is actually a tax on all of us.  The purchasing power of every dollar that we will spend in the future has been diminished thanks to the Fed, but most Americans don’t understand this.

What most Americans want is for someone to “fix things” in the short-term, and not much consideration is ever given to the long-term damage that is being done.

I know that the phrase “trillion dollars” is thrown around a lot these days, and to a lot of people it doesn’t have a whole lot of meaning anymore.  But the truth is that it is an absolutely enormous amount of money.  In fact, if you went out right this moment and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

A final example of our “buy now, pay later” mentality can be seen in our ridiculously bloated trade deficit.  We consume far more than we produce as a nation, and we buy far more from the rest of the world than they buy from us.  As a result, tens of thousands of businesses and millions of good paying jobs have gone overseas, and many of our formerly great manufacturing cities are now vast industrial wastelands.  Our economic infrastructure has been gutted at a pace that is staggering, and yet most Americans still don’t understand what has been done to them.

If you visit your typical “big box” retail store today, where is most of the stuff made?  Instinctively, most of you would answer “China”, and that is not too far from the truth.

We buy far, far more stuff from China then they buy from us.  This makes them steadily wealthier, and it makes us steadily poorer.  Unfortunately, our trade deficit with China has gotten much, much worse while Barack Obama has been in the White House.

At the end of Barack Obama’s first year in office, our yearly trade deficit with China was 226 billion dollars.  Last year, it was more than 367 billion dollars.

Are you starting to see a trend?

Our long-term economic and financial problems have greatly accelerated under Barack Obama, but our leaders feverishly work to make things look okay in the short-term and so most Americans don’t notice what is happening.

Unfortunately, this Ponzi scheme cannot go on forever and a day of reckoning is coming.  And when it arrives, the pain that it is going to cause for ordinary Americans is going to be far greater than most of us would dare to imagine.

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