Sunday, October 20th, 2019 MST

National debt rises at annualized rate of $2.5 trillion 4th quarter

Not seen in the news, but the national debt rose $621 billion in the 4th quarter.  That’s at an annualized rate of nearly $2.5 trillion.

There was a time when a $621 billion ANNUAL DEBT ALONE would send investors scrambling to buy gold and silver, but not today.  Nowadays, investors are content to see the Fed print still more money, which flows to Wall Street and results in higher stock prices.

Will that continue forever?  Not hardly.

When the bad investments made with all that freshly printed money start showing up, such as WeWorks and the poorly received IPOs like Uber, Lyft, and Peloton, investors will see that this bull market in stocks is over.  Then they will run for gold and silver.

Some signs of weaknesses in the economy are hidden.  Consider the dire straits of Ford, General Electric, and AT&T —  companies whose names are synonymous with the America’s dominance in the business world.

Ford, despite have the best-selling US vehicle in its F-150 truck, is facing challenges and is set to discontinue its line of passenger cars to concentrate on the Mustang, Fusion, SUVs, and F-150s.  Evidence of Ford’s woes: It has lost half its market cap over the last five years.  Rumors abound of a merger with General Motors.  More accurately, GM absorbing Ford.

In 2011, GE was ranked by as the 14th-most profitable company in the U.S.; however,  a purchase of GE stock only three years ago would have resulted in a 75%  loss today.  GE’s problems are so many that it was removed from the Dow Jones Industrials Index, after more than a 100-year presence.

While AT&T’s chart is not as dismal as Ford’s and GE’s, AT&T pays a dividend of 5.5%, which in this low-yield market, is enormous.  So, why do I include AT&T in this troubled class?  The company has $171 billion dollars of debt and lots of competition, not to mention its misguided acquisition of DirecTV.  That’s why it is selling at a price that yields a 5.5% dividend in this low yield market.

The US economy is facing numerous headwinds, including the aforementioned increases in the national debt, which is projected to double over the next ten years.  Add in the trade wars, possible hot wars, and an economic expansion that is not only the longest on record but also the weakest.

In my younger days as a stock broker, I remember a fellow broker approaching me and asking, “What happened to Penn Central?”  He was shocked.  Penn Central was a conglomeration of northeastern railroads, and in 1970 the company filed for what was at the time the largest bankruptcy in U.S. history.  Prior to that, Penn Central had been a “widows and orphans” stock.

When Penn Central “shocks” appear, they often foretell economic  troubles.  The early 1970s suffered a stock market decline that sent me to the gold and silver business, where I’ve been for 45 years.

The economy is tenuous at best.  Yes, I know that Fed chair Powell recently said that he sees no problems ahead, but persons high in government have never warned against economic woes.  To them — at least for public consumption —  things always look rosy.

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