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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″.

Employment Boom: 10 Companies That Have Promised To Add Jobs In The United States Since Trump Was Elected

Hiring - Public DomainOne of the primary things that Trump’s presidency will be judged upon is his ability to encourage the creation of good paying jobs for American workers, and so far the results have been quite promising.  Since Trump’s surprise election victory in November, a whole bunch of companies have either promised to bring jobs back into the country or have pledged to create new ones.  Ultimately time will tell if those jobs actually materialize, but for the moment there is a tremendous amount of optimism in the air.  In fact, I don’t know if we have ever seen anything quite like this at the beginning of a new presidency.  The following are 10 companies that have promised to add jobs in the United States since the election of Donald Trump…

#1 Kroger says that it intends to fill 10,000 permanent positions in the United States this year.

#2 IBM has announced that it will be hiring an additional 25,000 workers in the United States over the next four years.

#3 Foxconn is considering setting up a 7 billion dollar plant in the United States that would create between 30,000 and 50,000 jobs.

#4 Amazon.com has pledged to add 100,000 full-time jobs in the United States by mid-2018.

#5 Wal-Mart has announced that it plans to add approximately 10,000 retail jobs in the United States in 2017.

#6 Sprint has announced that 5,000 jobs will be brought back to the United States instead of going overseas.

#7 After meeting with Trump, the CEO of SoftBank stated his intention to create 50,000 new jobs in the United States.

#8 After a phone call from Trump, industrial manufacturing giant Carrier promised to keep hundreds of jobs in the United States instead of moving them out of the country.

#9 Hyundai has promised to spend 3.1 billion dollars supporting their current factories in Georgia and Alabama, and they have said that they are now considering adding an additional factory in the United States as well.

#10 GM has pledged to invest a billion dollars in U.S. factories and to add or keep 7,000 jobs in the United States.

Unlike most politicians, so far Donald Trump seems determined to actually keep many of the promises that he made during the campaign.  And on Monday he kept a very important promise by pulling the U.S. out of the Trans-Pacific Partnership.  If you are not familiar with the Trans-Pacific Partnership, the following is a pretty good summary  from USA Today

The TPP is a comprehensive trade agreement among 12 Pacific Rim countries, not including China, that was signed last year by President Obama after seven years of negotiation. But the Senate had not yet ratified it. The 30-chapter pact, which also needed to be ratified by other countries before Trump’s order Monday, primarily aims to boost exports, remove tariffs and non-tariff  barriers, open access to more markets and usher in transparency in trade rules.

The 12 nations that were to be included in the Trans-Pacific Partnership collectively account for approximately 40 percent of global GDP.  So it was going to be a very big deal, and it is something that Barack Obama had been working on for many years.

But with one stroke of a pen it is over, and as I will explain below that is a very good thing.

Trump is also promising to keep his pledge to renegotiate NAFTA

On Nafta, Trump said Sunday that he’ll meet with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to begin discussing the deal, which he has routinely blamed for the loss of U.S. jobs although there was little change to employment in the U.S. in several years after it went into effect. Trump signaled that he’s willing to work with the U.S.’s closest neighbors.

“We’re going to start renegotiating on Nafta, on immigration, and on security at the border,” Trump said at the start of a swearing-in ceremony for top White House staff. “I think we’re going to have a very good result for Mexico, for the United States, for everybody involved. It’s really very important.”

Nobody is suggesting that we shouldn’t trade with the rest of the world, but what Donald Trump understands that so many other politicians do not is that many of these “free trade deals” have been extremely destructive to the U.S. economy.

For years, we have been buying far, far more from the rest of the world than they have been buying from us.  As a result of our massive trade deficits, there has been a continual flow of cash, jobs and businesses leaving the country.

Over the past several decades, formerly great manufacturing cities such as Detroit have been reduced to urban hellholes.  Meanwhile, China has become exceedingly wealthy and gleaming new factories have sprouted like mushrooms in their major cities.

This didn’t happen by accident.

Bad decisions lead to bad results.  And if we had kept on doing the same things, we would have continued to systematically impoverish our nation.

For more than seven years, I have been hammering home the message that our trade policies have been absolutely killing us.  So I am quite thankful that we finally have a president that understands these things.

Of course there is much more to fixing our economy than just addressing our trade deals.  As I discussed yesterday, our rapidly growing debt is becoming a major crisis, and that is going to present quite a challenge for Trump.

But for the moment, we should definitely celebrate the fact that Trump has gotten us out of the TPP and that he plans to renegotiate NAFTA.

Donald Trump understands business, and it is going to be fascinating to watch how a businessman handles the position of the presidency.  It has only been a few days, but already some of his former critics seem to be coming around a little bit.  For instance, just consider what Mark Cuban is saying

The Dallas Mavericks owner and entrepreneur is “playing it by ear” when it comes to the effect President Donald Trump’s policies will have on the stock market. But he thinks there’s possible upside.

“I think the discussed economic programs are potentially a big plus for public companies and the overall economy,” Mr. Cuban said in an e-mail Monday morning.

The potential policies Mr. Cuban is optimistic about: corporate tax cuts; getting rid of the “friction” for small businesses; and reducing and simplifying administrative activities.

Considering our current trajectory and the immense amount of long-term damage that was done during the Obama years, it is hard to be optimistic about the future of the U.S. economy.

However, I am certainly willing to give Donald Trump a chance to show what he can do.

At least he is doing things differently than his predecessors did, and that is to be greatly applauded because the road that we were on clearly would have ended in economic oblivion.

We may very well end up there anyway, but there is certainly nothing wrong with being hopeful that Trump can somehow turn things around.

U.S. Economic Confidence Surges To The Highest Level That Gallup Has Ever Recorded

donald-trump-accepts-the-nomination-public-domainGallup’s U.S. Economic Confidence Index has never been higher than it is today.  The “Trumphoria” that has gripped the nation ever since Donald Trump’s miraculous victory on election night shows no signs of letting up.  Tens of millions of Americans that were deeply troubled by Barack Obama’s policies over the last eight years are feeling optimistic about the future for the first time in a very long time.  And it is hard to blame them, because what we have already seen happen since November 8th is nothing short of extraordinary.  The stock market keeps hitting record high after record high, the U.S. dollar is now the strongest that it has been in 14 years, and CEOs are personally promising Trump that they will bring jobs back to the United States.  These are things worth getting excited about, and so it makes perfect sense that Gallup’s U.S. Economic Confidence Index has now risen to the highest level that Gallup has ever seen

Americans’ confidence in the economy continues to gradually strengthen after last month’s post-election surge. Gallup’s U.S. Economic Confidence Index averaged +10 for the week ending Dec. 18, marking another new high in its nine-year trend.

The latest figure is up slightly from the index’s previous high of +8 recorded in both of the prior two weeks. The first positive double-digit index score since the inception of Gallup Daily tracking in 2008 reflects a stark change in Americans’ confidence in the U.S. economy from the negative views they expressed in most weeks over the past nine years.

And of course this booming level of confidence is not just reflected in Gallup’s numbers.  As I discussed in a previous article, the mammoth shift in the results of CNBC’s All-America Economic Survey after the election was nothing short of historic…

The CNBC All-America Economic Survey for the fourth quarter found that the percentage of Americans who believe the economy will get better in the next year jumped an unprecedented 17 points to 42 percent, compared with before the election. It’s the highest level since President Barack Obama was first elected in 2008.

The surge was powered by Republicans and independents reversing their outlooks. Republicans swung from deeply pessimistic, with just 15 percent saying the economy would improve in the next year, to strongly optimistic, with 74 percent believing in an economic upswing. Optimism among independents doubled but it fell by more than half for Democrats. Just 16 percent think the economy will improve.

On Tuesday, the Dow Jones Industrial Average closed at yet another all-time record high.

That was the 17th record close since election day, and overall the Dow is up a whopping 8 percent during that time span.

I don’t think that we have ever seen an extended post-election stock market rally quite like this one, and the U.S. dollar is rallying too.  On Tuesday, the U.S. dollar was the strongest that it has been in 14 years

The dollar hit a fresh 14-year high on Tuesday, boosted by upbeat comments from Federal Reserve Chair Janet Yellen that kept alive market expectations for swifter U.S. interest rate hikes next year than had been expected.

The greenback climbed broadly but its gains were strongest against the yen, which slid as much as 1 percent after the Bank of Japan kept monetary policy unchanged.

But of course not everything is rainbows and unicorns.  Signs of trouble continue to erupt all over the U.S. economy, and there are many that believe that Trump will be facing some very serious economic concerns very early in his presidency.

Just look at what is happening in the auto industry.  Unsold vehicles are piling up at an alarming pace at dealers all over the nation, and GM just announced that it is going to temporarily close five factories

GM has been reacting to its fabulously ballooning inventory glut by piling incentives on its vehicles. But that hasn’t worked all that well though it cost a lot of money. Now it’s time to get serious.

It will temporarily close five assembly plants in January and lay off over 10,000 employees, spokeswoman Dayna Hart said today.

And GM is definitely not alone.  Back in October, Ford made a similar announcement

In October, Ford announced that it would temporarily shut down production at one of its F-150 assembly plants (Kansas City), along with production at a plant that assembles the Escape and the Lincoln MKC (Louisville), plus two plants in Mexico. It would also lay off about 13,000 workers, 9,000 in the US and 4,000 in Mexico.

Another signal that the economy is slowing down is the tremendous difficulty that Uber is experiencing right now.  If you can believe it, they just announced that they lost a staggering 800 million dollars in the third quarter

Uber racked up pro-forma losses of more than $800m in the third quarter of this year as a price war with rival ride-hailing service Lyft in the US and heavy spending on new initiatives weighed on its figures, according to a person familiar with its recent financial performance, reports The Financial Times.

The third-quarter figures, first reported by tech news site The Information, show that Uber still faces steep losses even after pulling back from China.

I don’t understand how Uber could possibly lose 800 million dollars in three months.  Something is definitely very wrong over there.

Personally, I hope that things go as well as possible during the Trump administration.  If we truly are entering a new golden era of peace and prosperity, that would be more than okay with me.

But we should not forget that our economic fundamentals have continued to deteriorate all throughout the Obama years, and our nation has been steadily accumulating the largest mountain of debt the world has ever seen.

Unless there is some sort of unprecedented miracle, there is no way that this giant bubble that we are in at the moment is going to end well.  So it is definitely good to be optimistic, but we also need to be realistic about where we are right now and about the great challenges that we will soon be facing.

Trumphoria: Americans Are More Optimistic About The Economy Than They Have Been Since Obama’s Win In 2008

donald-trump-accepts-the-nomination-public-domainOptimism about the future of the U.S. economy has not been this strong since Barack Obama’s first presidential election victory in 2008. Donald Trump promised us an economic resurgence, and what is not to like so far? As I discussed earlier this week, stocks are soaring, businesses are already announcing that they are bringing jobs back to the United States, and the U.S. dollar has been lifted to levels that we haven’t seen in many years. Many are referring to this post-election surge as “Trumphoria”, and I think that is quite appropriate. Personally, I couldn’t imagine financial markets behaving this way if Hillary Clinton had won the election. Right now tens of millions of Americans are feeling deeply optimistic about the future for the first time in a very long time, and this is clearly reflected in the results of the most recent CNBC All-America Economic Survey

The CNBC All-America Economic Survey for the fourth quarter found that the percentage of Americans who believe the economy will get better in the next year jumped an unprecedented 17 points to 42 percent, compared with before the election. It’s the highest level since President Barack Obama was first elected in 2008.

The surge was powered by Republicans and independents reversing their outlooks. Republicans swung from deeply pessimistic, with just 15 percent saying the economy would improve in the next year, to strongly optimistic, with 74 percent believing in an economic upswing. Optimism among independents doubled but it fell by more than half for Democrats. Just 16 percent think the economy will improve.

It is funny how our political perspectives so greatly shape our view of the future. Because Trump won, Democrats now have an extremely dismal opinion of where the economy is heading, while Republicans suddenly believe that happy days are here again.

Of course the truth is that the president has far less power to influence the economy than the Federal Reserve does, and so most Americans greatly overestimate what a president can do to alter our economic trajectory.

But for now most Americans (excluding Democrats) are feeling really good about where things are headed. In fact, we just learned that the University of Michigan consumer confidence survey has soared to the highest level that we have seen since 2005.

And of course the financial markets continued to roll onward and upward on Friday. The Dow was up another 142 points, and it is now less than 250 points away from the magic number of 20,000.

I never thought that we would actually get to 20,000, but thanks to “Trumphoria” we may actually get there before the wheels start coming off.

This post-election run has really been unprecedented. The following comes from CNBC

All major indexes have been hitting record highs since the election. In fact, the Dow has notched 14 record closes since then and gains in 20 of the past 24 sessions.

The Dow, S&P 500, and Nasdaq also did something they haven’t done in more than five years: all three rose each day of this trading week. The last time all three rose every day during the same trading week was September 2011.

Wouldn’t it be great if every month during Trump’s presidency was like the last 30 days?

Trump promised that we would start winning so much that we would actually start getting tired of winning, and so far we are off to a tremendous start.

As I discussed yesterday, some of the biggest winners from “Trumphoria” have been the big banks

The shares of Wells Fargo, the most hated bank in America these days, soared 28% over the past 30 days, Citigroup 25%, JP Morgan 26%, Goldman Sachs, which is successfully placing its people inside the Trump administration, 37%.

But is this momentum in the financial markets sustainable?

Of course not.

There are signs of emerging economic trouble all around us. For instance, Sears just announced that it lost 748 million dollars last quarter and that it plans to liquidate even more stores.

How in the world do you lose three-quarters of a billion dollars in a single quarter? If you had employees in every store literally flushing dollar bills down the toilet all day I don’t think you could lose money that quickly.

And the moment that Trump takes office, he may immediately be faced with a major financial crisis in Europe which has been sparked by the meltdown of large Italian banks. The following comes from a Forbes article entitled “Italy’s Banking Crisis Is Nearly Upon Us“…

There is a high degree of probability (approaching 90%, I’d say) that Italy will experience a severe banking crisis in the next few quarters. Perhaps they can stave off the problem for a year, but something will have to be done about the banks.

Unfortunately, it looks like things are about to get very real for Italian banking giant Monte dei Paschi di Siena. According to Reuters, the European Central Bank has turned down their request for more time to raise needed capital…

The European Central Bank has rejected a request by Italy’s Monte dei Paschi di Siena (BMPS.MI) for more time to raise capital, a source said on Friday, a decision that piles pressure on the Rome government to bail out the lender.

Italy’s third-largest bank, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euro ($5.3 billion) rescue plan in the face of fresh political uncertainty.

The ECB’s supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.

But most Americans have no idea what is unfolding in Europe right now.

As Americans, we tend to be largely oblivious to what is going on in the rest of the world, and at this moment “Trumphoria” has gripped our nation.

It is certainly not wrong to celebrate the fact that we are getting Donald Trump instead of Hillary Clinton, but let us also not lose sight of the fact that we are likely to be facing some tremendous challenges very early in 2017.

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