A caller made the good point that government stimulus for jobs is a bad use of money, once the stimulus is gone, so is the job. The caller didn’t finish the point: after the stimulus and job are gone, the debt is still there.
In the darkness of our home this week I started to read When Giants Fall by Michael Panzner, I gave up on it after the introduction for being, in my opinion, over the top pessimistic. In there in talking about empires falling he mentioned Rome. Comparing the US in the 21st century to the fall of Rome loses it for me because one of the reasons the US is at the top. Many other countries contributed to putting the US on top and they contribute still to keeping us there. This is a dynamic that did not exist when the Roman empire was conquering the world.
This does not change my opinion in the least about the US being less attractive as an investment destination and my wanting to have continually less US exposure, a path embarked upon several years ago. And course the US staying at the top may be changing.
Back to the quote from Rolfe's post. Whatever you think about the effectiveness of what has been done so far and whatever might occur in the near future in the name of stimulus; afterward the debt will still be there. There will be growth that offsets some portion of the debt, this is always the case so debating whether there will be growth to bail out some of the debt is useless because there will be some. However how much growth offset we get is up for debate and for now I lean low, meaning I don't think any growth offset will be meaningful.
The willingness to borrow and spend, despite the extent to which borrowing and spending got us into this mess (this is a line of thought Jimmy Rogers had spoke of many times), seems limitless. There is something to the idea of being willing to go into debt to try to solve the problem but of course the debt was already massive.
I have no idea if I can figure this all out ahead of time but I wouldn't bet on it and more importantly I am not betting client money that I can. This means, repeat theme, slowly adding more foreign.
4 comments:
Roger. Does the relative strength of the dollar, or where you think the relative strength will be at some future point in time, enter into your calculation of foreign versus domestic holdings? If so, how? Thanks.
we have seen that USD can go on big runs up lasting for several months at any time. This possibility of course exists. That said, I cannot make a fundamental case for meaningful dollar strength, IMO there was no fundamental case when it rallied big during the decline (risk aversion is not a bullish case). Over this past decade the fundies have been better for other countries and the dollar has generally gone down several big dollar rallies notwithstanding.
Looking forward I suspect that while the dollar will go down slowly it will happen more quietly (that is slower and with less attention paid) than the last couple of years. Markets overly fixate on something for a while triggering bigger moves than normal and then something else comes along that is "more interesting."
Just how I see it.
There are reasons to be concerned about the public debt but those reasons are rarely under discussion. In part this is due to a declining fourth estate -- a news media that simply cannot get its facts straight or move beyond "she-said/he-said" stenography and "opinions on the shape of the world differ" commentary -- but it is also due to political hyperbole and faulty analogizing between individual or corporate debt and national debt.
Here is a blog post at http://tinyurl.com/b5v7z4 on "bogus arguments about the burden of the debt" by an economist who's expertise and integrity I have no reason to doubt. I recommend anyone who wishes to understand the public debt issue read it in full; even if you are not persuaded you will at least have the "he-said" part of the story straight.
Regarding $USD, I would like to see it a bit cheaper frankly but think the odds of intermediate-term strength are rising. If it moves up appreciably the carry trade must unwind and a lot of assets, commodities in particular, are going to get whacked.
Glad to hear the power's back on: Keeps the adventure from becoming tedious.
thank you RW
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