trials and tribulations | pursue alpha

“I sincerely believe that banking institutions are more dangerous than standing armies, and that the principle of spending money on posterity in the name of funds is nothing but a fraud on the future on a large scale.”

– Thomas Jefferson

Our country is in a really difficult situation. It’s rarely mentioned in the media, but it exists nonetheless. Bank of America projects that U.S. debt will reach $34 trillion by the end of the year. This is the largest debt in our history.

Bank of America also estimates that every 100 days, $1 trillion more in debt will be accumulated. According to the Treasury, last year we spent $429 billion on interest payments alone. To put that number into perspective, that’s 240% of what the government spends on transport, commerce and housing.

According to the U.S. Bureau of Economic Analysis (BEA), as of the end of 2023, the U.S. gross domestic product (GDP) income was $27.96 trillion. This means that our debt is $6.04 trillion more than our economy produces. It’s not sustainable.

In fact, the U.S. sold $22 trillion in debt last year and the Federal Reserve raised interest rates to stem inflation. In doing so, the Federal Reserve has increased borrowing costs, which have skyrocketed due to credit card debt, HELOCs and corporate borrowings, which are now over 22%, and I think our 10-year Treasury yield is over 5%. It is clearly visible.

Federal Reserve data shows that America’s national debt has grown 86% over the past decade, while GDP has grown 63%. This is not sustainable.

Our Treasury Department predicts that U.S. borrowing will reach $385 billion in May alone. We are entering a sinkhole where we will have to either cut spending or raise taxes, and in my view both of these choices have serious consequences. We are now in a trial, and there is no tribulation yet in sight.

Bloomberg currently has the U.S. Treasury index pegged at 4.81%, the investment grade corporate index is now up 5.71%, the high yield index is up 8.27% and the municipal bond index is up 3.70%.

We see our federal government in a quagmire as not only will it pay higher interest costs, but so will our citizens, businesses, states and municipalities.

There is no doubt that the Fed is fighting inflation, but there is also no doubt that it is raising interest rates and borrowing costs on everything in sight.

“We must choose between economy and freedom, or chaos and servitude…If we incur such debts, we must pay taxes on what we eat and drink, on necessities and comforts, on labor and entertainment… . “If the government can stop wasting labor under the guise of caring for the people, the people will be happy.”

– Thomas Jefferson

There are a lot of people at the Fed who listen to my comments. Today I ask you to take a moment to consider the collateral damage they cause by keeping our interest payments at such high levels. I ask politely, but I think inflation is just one part of the conditions that govern our economy. I think we need a broader perspective!

To offset the higher costs, it may be a good idea for now to invest in some closed-end funds and some REITs that pay dividends monthly and yield 10% or more. I am following about 70 of these securities and you can contact me here if you need any help.

Remember, if you reinvest the money that earns compound interest each month so that the dividends at the end of the year are actually higher than the stated rate of return, that’s because compound interest continues to add to the principal value. Liquidation value.

Original Source: Author

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