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Stock Market Update (Where's Eduardo?)

Did you think we were headed for economic collapse before the tarrifs? I think you did so in your view and what you posted earlier is the whole economy is going to fall off a cliff and I guess nothing is going to stop that.

Yes, I did. The tariffs are merely making us face reality -- that we can't go on as we were. Debt payments are now well over the military budget, and rising. Doing anything about this problem to avert a financial crisis comes with a price tag. The recent drop in equities is just a start. It is showing what will happen.

With the tariffs Trump is realizing that the bleeding of capital -- deficit spending essentially financed through a trade deficit -- cannot go on. He chose an approach that might incentivize business to relocate to this country. He hopes that foreign sources might bear some of the cost. (Actually, they already do, by financing our debt through buying treasuries.). In the end the American Consumer will probably pay a "tax" through higher prices on imported goods. The consumer is already getting taxed through inflation -- pressure driven up by deficit spending without private sector production growth.

Another way to have a tax increase would be to collect more through the IRS. This would have the effect of taking money out of the private sector economy and causing a recession/depression. It's the least inflationary solution, and one that I kind of expected a decade ago. In fact when I retired I got financial advice that suggested I should work down deferred-tax retirement accounts as quickly as possible, because taxes were sure to increase. Then we got Trump #1 -- a major kicking of the can down the road. More sugar for our drug addiction and a harder time coming clean. The advice made even more sense provided the money went into a Roth.

Then we had the Biden Administration / Pelosi Congress and all of the malfeasance that went into a massive increase in federal spending. Now we REALLY kicked the can, to the point that someone like me would say that we are past the point of return (without a very significant cost in living standards). Supporters of that side are applauding the sugar high.

It's now routine for each side to claim they are better because they kicked the can harder.

This is how I see it. It's why I know that the S&P is living on borrowed time. Maybe some can make money by timing the market and getting out before the crash. Good luck to them. The government has a way of kicking the can. They have delayed and delayed and now reasonable people see that it's an equation with no positive value solution.

PS: We should always look at stock index valuations on an inflation-adjusted basis. That is a little better at telling the true story. You can have the market be flat, as it was during the 70s, and yet lose your shirt. That is still a "crash."
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Stock Market Update (Where's Eduardo?)

again not being specific but some thoughts... for the first time in decades at least someone is actually trying to cut spending. So far the doge guys seem to have identified $150billion savings, and I assume these were recurring parts of the federal budget so that would be $150billion a year in budget savings (remember there's a major outcry over finding $880 billion over 10 years or $88Billion/year for the Medicaid). Additionally Trump wants to add work requirements to Medicaid and the CBO found 5% fraud out of a $631billion medicaid outlay so there's an additional $30billion a year. Plus, the feds NEED to reduce the matching formula for Medicaid. If the states want to expand the program, they should pay for it. Look at California. They have $3billion deficit in their Medicaid budget because they decided to open the program to illegal migrants. No reason for a taxpayer in Pennsylvania to pay for that.

We haven't even gotten into Medicare fraud. I'd bet that there's a lot of money to be found there. And this time people look to be really interested in finding it.

I have always believed that the objectives the leader sets out determine the mindset of everyone else. If the mindset is we need to cut $X billion out of the budget, people will find a way to do that. On the other hand just setting a goal of cutting funds is meaningless.

Now, if what DOGE is finding relative to our federal management systems is accurate - outdated computers, software, systems that don't "talk" to each other etc) than there are significant productivity enhancements that can be made reducing the need for manpower. It's clear to me that management programs are woefully inadequate...20 million people over 100 years old on social security roles, people collecting Medicaid in more than one state, 800 tax returns going to one address. It's crazy stuff, but real.

I guess it's fair to complain about the method that Trump is using, but so far the results are encouraging
  • $150 billion is a good start but I'm not sure how much of it will stick. There are lawsuits saying that we have to spend what congress approved. Even if these cuts stick I we need another $300 billion just to get our deficit down to $1.5 trillion.
  • The CBO has reported roughly $250 billion in improper payments. I'd be elated if we could cut that in half.
  • Beyond that I'm not too optimistic. Nobody has the courage to cut granny's payments by even a dime. Democrats want higher taxes on the rich but those only amounted to $50 billion when proposed. The political will to fix things simply doesn't exist.

BB Recruiting Penn State Men's Basketball Lands Transfer Wing Josh Reed

Well maybe he will come on strong in his final season given more minutes. Comes from a Big XII program and that is a strong bball league. The article indicated he played better in the Big XII tourney.
Big 12 is a better league than the Big. He's no stud by any means but could be a solid rotation piece.

Stock Market Update (Where's Eduardo?)

Edwardo incorrectly predicted the stock market would crash during the Biden presidency, so I just did the opposite of what he said every time and was rewarded significantly for it. I called it the "Edwardo Buy Signal." Every time he came here to complain about the stock indexes and claim Biden was going to cause a collapse, I knew it was time to go dip buying.

With the economic ingredients that Trump is mixing together for his next term, there surely will be turmoil in the markets. Don't expect trade wars to be good for your portfolios. And whatever you think about how illegal immigration is handled, just don't be surprised when grocery prices, construction, and trade services aren't what you hoped because the labor was all deported.

The only thing I feel pretty confident about the next four years is gold.
I'll just place this right here. It's what I said on page 1 of this thread back in December. So far--spot on. And a number of you posted laughing emoji's. Guess who's in the green in 2025?
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