Is It Just A Coincidence That The Dow Has Hit 20,000 At The Same Time The National Debt Is Reaching $20 Trillion?

Dow Fueled By DebtThe Dow Jones Industrial Average provides us with some pretty strong evidence that our “stock market boom” has been fueled by debt.  On Wednesday, the Dow crossed the 20,000 mark for the first time ever, and this comes at a time when the U.S. national debt is right on the verge of hitting 20 trillion dollars.  Is this just a coincidence?  As you will see, there has been a very close correlation between the national debt and the Dow Jones Industrial Average for a very long time.

For example, when Ronald Reagan took office in 1991, the U.S. national debt had just hit 994 billion dollars and the Dow was sitting at 951.  And as you can see from this chart by Matterhorn.gold via David Stockman, roughly that same ratio has held true throughout subsequent presidential administrations…

Dow Fueled By Debt

During the Clinton years the Dow raced out ahead of the national debt, but an “adjustment” during the Bush years brought things back into line.

The cold hard truth is that we have been living way above our means for decades.  Our “prosperity” has been fueled by the greatest debt binge in the history of the world, and we are greatly fooling ourselves if we think otherwise.

We would never have gotten to 20,000 on the Dow if Barack Obama and Congress had not gotten us into an extra 9.3 trillion dollars of debt over the past eight years.

Unfortunately, most people do not understand this, and the mainstream media is treating “Dow 20,000” as if it is some sort of great historical achievement

The average began tracking the most powerful corporate stocks in 1896, and has served as a broad measure of the market’s health through 22 presidents, 22 recessions, a Great Depression, at least two crashes and innumerable rallies, corrections, bull and bear markets. The blue chip reading finally cracked the 20,000 benchmark for the first time early Wednesday.

During the current bull market, the second longest in history, the Dow has more than tripled since March 2009.

Since Donald Trump’s surprise election victory, the Dow has now climbed by approximately 2150 points.

And it took just 64 calendar days for the Dow to go from 19,000 to 20,000.  That is an astounding pace, and financial markets around the rest of the planet are doing very well right now too.  In fact, global stocks rose to a 19 month high on Wednesday.

So where do we go from here?

Well, if Donald Trump wants to see Dow 30,000 during his presidency, then history tells us that he needs to take us to 30 trillion dollars in debt.

Of course that would be absolute insanity even if it was somehow possible.  Each additional dollar of debt destroys the future of our country just a little bit more, and at some point this colossal bubble is going to burst.

But you can’t tell most of the “financial experts” these things.  Most of them simply believe that the “market always goes higher over time”

The “market always goes higher over time,” Todd Morgan, chairman of Bel Air Investment Advisors. “The lesson here is that through wars, recessions, elections, impeachments, financial crises, and on and on, investing for the long term in high-quality stocks is the key to building wealth. … We are telling our clients that you can’t time the market. Think long term. Stay the course. We expect the market to see Dow 30,000 in my lifetime, and for my grandchildren to see Dow 50,000 in their lifetime.”

My hope is that the market will continue to go up.  But nobody can deny that valuations are already at absurdly high levels, and the only way that this party can keep going is to continue to fuel it with more and more debt.

But for the moment, there is a tremendous amount of optimism out there, and most experts expect the Dow to continue to set new highs.  In fact, CNBC says that whenever the Dow crosses a new threshold like this it usually means good things for investors…

CNBC looked at market data from the past 30 years and zeroed in on the times when the Dow has crossed levels like 2,000, 3,000, 4,000 … all the way up to the 19,000 level it hit in November. At those times, investors can typically expect traders to push it up even higher, according to data from Kensho. Not only does the Dow go up, but it outperforms the S&P 500 index along the way.

But as USA Today has explained, not all Americans are benefiting from this stock market rally…

The breakthrough came just four trading days into Trump’s presidency, a whirlwind in which the billionaire has reaffirmed his commitment to strengthen the U.S. economy and create more jobs and higher wages for workers. Still, nearly half of Americans have not benefited from the so-called “Trump Rally,” which has generated more than $2.2 trillion in paper gains for the Wilshire 5000 Total Stock Index since Election Day. The reason: only 52% of Americans polled by Gallup last April said they “have money invested in stocks” — the lowest stock ownership rate in the 19 years Gallup has tracked the data and down sharply from 65% in 2007 before the financial crisis.

Hopefully the good times will continue to roll for as long as possible.

But there is no possible way that they can keep going indefinitely.

For decades, our debt has been growing much faster than our GDP has.  By definition, this is an unsustainable situation.  At some point we will have accumulated so much debt that our financial system will no longer be able to hold up under the strain.

Many were convinced that we would reach that point before the U.S. national debt hit 20 trillion dollars, and yet here we are.

So how much higher can we go before the bubble bursts?

That is a very good question, and I don’t know if anyone has the right answer.

But for President Trump, this is going to present him with quite a dilemma.

Either he can keep the debt party going for as long as possible, or he can try to get us to take some tough financial medicine right now.

If an attempt is made to deal with our debt problems now, we will experience severe economic pain almost immediately.

But if the can keeps being kicked down the road, our long-term prognosis is just going to keep getting worse and worse.

And if we try to delay the inevitable indefinitely, at some point the laws of economics are going to make our hard choices for us.

So let us celebrate “Dow 20,000”, but let us also understand that it is far more likely that we will see “Dow 10,000” again before we ever see “Dow 30,000”.

Do You Believe In Miracles?

president-trump-public-domainWe have never seen anything like this in the history of American politics.  Donald Trump’s shocking victory on election night is nothing short of a modern day miracle.  Several weeks ago I told my readers that it would take the biggest political miracle ever in order for Trump to win, and I had been strongly urging them to vote, but even early on election night I was skeptical that Trump could actually pull it off.  Initially the results coming out of Florida, North Carolina and Ohio looked rather ominous, and a lot of Trump supporters were freaking out.  But those initial numbers strongly reflected early voting results, and those results typically favor Democrats.  Once the Election Day numbers started rolling in, it was clear that there was a massive unanticipated wave of momentum for Trump.

Once I saw that Virginia was going to be much more tightly contested than anticipated and that Trump had jumped out to a lead in Michigan, I realized that Trump had a really good shot at winning the whole thing.  Over Skype I told a stunned audience that the numbers were looking really good for Trump, but it was still so early in the evening that I don’t know if a lot of people believed me.  And I certainly didn’t blame them, because I could hardly believe it myself.

Once Trump took the lead for good in Pennsylvania, I knew that it was all over.  My wife and I looked at each other in disbelief, and we are still trying to come to grips with a future that we didn’t think was possible.

Watching Donald Trump speak to the American people after he had been declared the winner was a surreal experience.  At this moment, it still doesn’t seem real to me that he could become the next president of the United States a little more than two months from now.  But at this point it looks like that is precisely what is going to happen.

After it was all over, I kind of stumbled around my home lost in my thoughts.  I was happy, confused, hopeful, stunned and pensive all at the same time.  Like so many others, what I thought I knew about politics turned out to be wrong.  But in other ways, the election of Donald Trump has confirmed so much of what I know to be right about America.

Ultimately, it was the American people that decided this election, because the elite were doing their best to absolutely bury him.

Never before has the mainstream media been so openly biased against a major party presidential candidate.  For months on end they dumped sewage on Trump, but it didn’t work.

Never before has a major party presidential candidate faced a civil war in his own party on the eve of the election.  A whole host of big names in the Republican Party publicly announced that they would not vote for Trump, but it didn’t work.

Never before have we seen a bigger October surprise than the lewd tape from 11 year ago that came out and shocked the world.  That would have instantly killed the campaign of any normal politician, but it didn’t kill Trump’s campaign.

From the very beginning it seemed like Trump was at war with almost everyone, and somehow he came out on top in the end.

He beat the Bushes and the Clintons.

He beat the Republicans and the Democrats.

He beat Hollywood and the mainstream media.

He beat the pollsters and the pundits.

He beat the never-Trumpers and the billionaire donors.

He beat Miley Cyrus, Katy Perry, Lady Gaga, Jay Z, Beyonce, George Clooney, Matt Damon and Lebron James.

He beat the forces of globalism, elitism and political correctness.

He beat CNN, Fox News, MSNBC and Barack Obama.

He beat them all.

Of course Donald Trump is not perfect and he is not going to be a perfect president.

But this is about as perfect a moment as you are going to get in American politics.

Donald Trump took on the entire American political universe and he won.

We have never seen anything like it before, and I doubt we will ever see anything like it again.

And I want to apologize for being so skeptical to those that kept trying to tell me that Trump was going to win.  As a former attorney, I was trained to be skeptical and to look at the cold, hard numbers.  And the cold, hard numbers kept telling me that a Trump victory was nearly impossible.

I kept strongly urging people to vote, particularly because the prospect of a Hillary Clinton presidency was absolutely horrifying for me personally, but I was not optimistic.

In hindsight, perhaps we all should have recognized that the signs were there.  For example, it seems a very strange “coincidence” that Donald Trump will be 70 years, 7 months and 7 days old on his first full day as president of the United States.  This is a man that appears to have had a date with destiny, and we shall see what happens in the months to come.

Yes, there will be great challenges ahead, but those discussions are for another day.

Today I am just happy.

I am happy that the American people have elected a man that I will be proud to call president.

And I am happy that we are not going to have to endure four years under the most wicked, vile and corrupt politician that the United States has ever seen.

Against all odds, Donald Trump won.

At this point I am not exactly sure what comes next for America, but things are definitely looking a lot brighter today than they did yesterday.

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