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U.S. National Debt Clock

Up to the minute statistics you can use

 Here is an excerpt from John Mauldin's "Thoughts From the Frontline" blog entitled Negative Rates Nail Savers:

The next 10 years will see an explosion of government debt and an implosion of the ability of governments to fulfill their promises. Any economic or investment model based on past performance under previous economic conditions will be worthless. As in, just as worthless as the Federal Reserve’s models. We are truly going to have to go outside of the box if we are going to figure out how to get our portfolios from where we are today to the other side of the coming crisis. There is truly no way to predict what our investment portfolios should look like six months or one year or two years or six years from now.

 If (big "if", You're On Your Own ) that turns out to be true, what should the small investor do to avoid disaster and have a chance to profit from drastic changes in economic conditions?

The investment conundrum is that discharging debt by currency debasement (inflation) means "Cash is Trash" while discharging debt by default (causing recession) means "Cash is King". Without getting into arcane definitions, for the average small investor the question is, "Will we have inflation or deflation"? Or, stated differently, "Will my money buy more or less of the things I need and want in the future"?

Both inflation and deflation can certainly happen, but not at the same time. Therefore, the sequence of events is extremely important to the investor, maybe more important than the timing of events. The investment choice is whether to spend cash now to buy assets or hold cash to by cheaper assets in the future. It is impossible to do both; the choice is binary.

Thoughts - A Summary

Sense and Nonsense has published articles defining this investment conundrum since its' inception in the late 1990s. The basic problem was outlined in 2001 in an article entitled "The Problem Defined". I believe it is still valid today. The recent election pivoted on the subject of citizenship, immigration and entitlements - the same problems we had at the turn of the century.


From an investment viewpoint, the first seven years of the 21st Century were quite similar to the last 20 years of the 20th century - identify profitable companies based on fundamental analysis and hold them until something changes. Something changed in 2007 when it became apparent that the US financial industry was in deep trouble.

Stock market performance decoupled from profitability and previously sound companies began to substitute borrowing for earnings. This subtle, gradual change led me to believe that the old rules of successful investing were no longer valid; the old tried and true correlations between earnings and stock price became statistically meaningless. I withdrew from the financial markets to wait and see what would develop next.

It took a surprisingly long time to overcome denial and understand what the crash and bailout really meant for the investor and the nation.  In March of 2010 Sense and Nonsense published "Mad Dash to Disaster" in an attempt to make sense of the astonishing events of 2008 and 2009. Following up on the theme of that article, Sense & Nonsense published three articles in 2010 examining the ramifications of the mad dash to disaster: Investment Options, Money Is Intangible in The Information Age, Who Will Eat the Losses?, and National Resource Allocation.

 Three articles published in August of 2013 explore alternative investment choices possible outside the financial industry: Bring It Home, Thoughts on Human Capital, and Human Capital Priorities. All of these "Investment Alternatives" would require a significant change in lifestyle for most Americans and come close to falling into the doom and gloom category.

But preparing for radical changes does not have to be an all or nothing proposition. In fact, preparing for a disaster that never happens can be a disaster in itself. Here are two articles written at the height of the prepper mania in 2011: Reasonable Preparedness and Prepare for ...What?.

This summary is useless background unless we can use it to interpret the latest astonishing event - Donald Trump's election as President of the USA. It may be that the investment climate will change radically once again. Future articles will explore that possibility.

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