THE ECONOMY Individuals and corporations are saving and paying down debt while the US Government is increasing the amount owed at an alarming pace. This dynamic – the transference of debt from the private to the public sector – has many implications for our economy and capital markets. We are drowning in red ink! The US deficit has risen to 10% of GDP while Government revenues last year fell by over $ 400 billion – the largest decline in 17 years. We are spending more as a nation than we are bringing in and the end result is a massive deficit with huge implications for our future. We will not solve the problem of too much debt by taking on more debt. Taxes have to increase and spending for benefits has to be reduced. If we don’t do something now the interest on our Government’s borrowings will be enormous, not[more…]
The stock market is officially in a correction. Volatility has spiked higher and fear is gripping markets around the globe. Many large US companies are down 10% or more as the fundamentals improve. Wow! Yesterday was remarkable on many levels! This dramatic one day market decline is not about individual stocks or fundamentals. The day began yesterday as a fairly typical down day. Then, about 2:30 Eastern time the markets collapsed into free fall. The Dow Jones industrial average lost 700 points in a matter of minutes. The initial fall was blamed on a trader who entered an order with too many zeros. This triggered program sales and then, so the story goes, computer errors caused stocks like Procter and Gamble to drop over $20.00 per share. It was a perfect storm and frightening to watch.