Daily Gains Letter

national debt

How the Debt Fiasco Will End for Long-Term Investors

By for Daily Gains Letter | Sep 24, 2013

Long-Term InvestorsThe financial crisis struck the U.S. economy five years ago. Those who remember the collapse of Lehman Brothers know how much uncertainty was actually there. It seemed the U.S. economy was going to halt and the financial system would collapse. Ripples across the global economy were felt. Nothing looked safe—it was a total bloodbath. Investors had many questions, including if they would be able to protect their nest eggs.

As a result of all this, to fight the uncertainty and handle the issues at hand, the U.S. government and the central bank jumped in and started to spend. They bailed out the big banks in the U.S. economy to make sure everything would continue to run smoothly. We passed through that successfully, and the worst didn’t come upon us.

Sadly, as all this happened, we saw troubling trends starting to form in the U.S. economy.

Look at the national debt.

As the government started to rev up its spending spree, it posted a budget deficit and eventually borrowed money. To give you some idea, in January of 2008, when the behemoth was starting to awaken, the national debt of the U.S. economy stood at $9.2 trillion. Fast-forwarding to now, it stands at $16.7 trillion. Simple math suggests this is an increase of more than 81%. (Source: “The Daily History of the Debt Results,” Treasury Direct web site, last accessed September 20, 2013.)

Unfortunately, it doesn’t end here. Not too long ago, Treasury secretary Jack Lew sent a letter to the U.S. government saying that if they don’t increase the national debt limit currently in place by October, the U.S. economy … Read More

New Data Out of Germany Threatening Shorts on Eurozone?

By for Daily Gains Letter | Jul 29, 2013

New Data Out of Germany Threatening Shorts on EurozoneThe economic slowdown in the eurozone has become the topic of discussion lately. The reason for this is mainly because it is sending ripple effects into the global economy, and the growth is being stalled. We have seen countries like Switzerland and China face scrutiny as the economic slowdown picked up in the eurozone. As the demand in the common currency region declined, exports from those nations to the eurozone also deteriorated.

This caused concerns that the major countries in the eurozone, like Germany and France, will see a downturn, which could possibly take the region into another downward spiral.

Surprisingly, those concerns have shown some weakness in the most recent economic news.

Germany, the biggest economic hub in the eurozone and one of the only few countries to weather the economic slowdown in the region, had concerns that business will slow down. Fortunately, the indicators suggest this hasn’t happened yet.

The business confidence in the country has been improving, increasing for a third month in a row in July. In June, the Ifo Institute’s Business Climate Index increased to 106.2 from 105.9; the index is based on a survey of 7,000 business executives. (Source: Randow, J., “German Business Confidence Rises for a Third Month,” Bloomberg, July 25, 2013.) Keep in mind that businesses are the first to see changes in economic conditions; if they are optimistic, it’s considered a good sign for the economy.

But that’s not all: manufacturing in the eurozone also showed signs of relief, improving for the first time since July of 2011. The Flash Eurozone Manufacturing Purchasing Managers’ Index (PMI), reported by Markit, registered at … Read More

How “Market Knowledge” Is Robbing Investors

By for Daily Gains Letter | Jun 21, 2013

How “Market Knowledge” Is Robbing InvestorsI have a friend who inherited a large amount of money just before the markets crashed. He bought a house and “Rolex” watch, retired, and decided to become a day trader. Unfortunately, he has no experience with the stock market, but it seemed easy enough to him.

Since then, despite the five-year bull market, he has managed to lose a fair bit of money. This does not prevent him from telling those around him how they should invest—after all, he has a Rolex watch and no debt. Even with a dwindling bank account and an embarrassing investment portfolio, he still fashions himself a stock market dandy.

Over the last number of years, he has been the markets’ biggest cheerleader. The markets are going up—the definition of a rebound. I, on the other hand, am an unrepentant bear. I’m not saying the markets aren’t bullish; I’m saying the markets are bullish because of the Fed’s quantitative easing policies, not a burgeoning U.S. economy.

When the financial crisis began in 2008, the U.S. national debt stood at $9.2 trillion; today, it is near $17.0 trillion. By the end of the decade, the White House says the national debt will touch $20.0 trillion.

Yes, the S&P 500 and Dow Jones have reached dizzying heights. But it’s important to remember that, even with quantitative easing, it’s taken five years just to get back to pre-crash levels. Five years after the government bailouts began, unemployment is still high; home values have not rebounded; wages aren’t just stagnant, they’ve actually declined; and the number of Americans relying on food stamps has soared 80% to 47.5 million…. Read More

Make Twice the Money with This ETF When Eurozone Stock Markets Fall

By for Daily Gains Letter | Feb 14, 2013

DL_Feb_14_2013_MoeThe eurozone has become one of the biggest concerns lately, and it’s sending ripples through countries in the global economy. In addition, the debt-infested nations, such as Greece, Spain, Portugal, and Italy, are dragging their peers down the path of economic misery—hurting their economic growth prospects.

Greece is in a depression, with increasing unemployment and its economic conditions quickly deteriorating. The International Monetary Fund (IMF) suggests Greece still needs more help from the other eurozone countries. The IMF believes that all the measures taken so far by the eurozone nations since the crisis began in Greece aren’t enough to bring Greece’s national debt to a sustainable level. The IMF predicts that Greece will need as much as 9.5 billion euros from 2015 to 2016, just to bring its national debt to a sustainable level. (Source: Rastello, S. and Petrakis, M., “IMF Says Greece Will Need More Money, Has Elevated Risks,” Bloomberg, January 18, 2013.)

Similarly, Spain is sinking further into recession. Spain’s economy contracted 0.7% in fourth quarter 2012. Mind you, this was the steepest decline in the country’s production since 2009. (Source: “Spanish Economic Contraction Accelerates,” Deutsche Welle, January 30, 2013.)

As a result of all this chaos, strong countries in the eurozone started to suffer, and the entire region entered another recession in the third quarter of 2012. The 17 nations of the eurozone contracted 0.1% in the third quarter, after seeing a decline in the region’s gross domestic product (GDP) of 0.2% in the first quarter. (Source: “Eurozone falls back into recession,” BBC News, November 15, 2012, last accessed February 13, 2013.)

Looking ahead, things appear to … Read More