Published By Banyan Hill Publishing | | | | Published By Banyan Hill Publishing | | | | U.S. No Longer a "Risk-Free" Borrower By Charles Sizemore
Chief Editor, The Banyan Edge | Banyan Nation, What took them so long?
I posed this question in yesterday’s Market Edge — about Credit ratings agency Fitch downgrading the United States from an AAA to AA+ rating.
The U.S. is no longer a risk-free borrower (officially). But the truth is, it earned that rating a while ago.
You know, there was a time when large budget deficits would have been considered extreme and irresponsible.
I’m not suggesting that congressmen of old had more capacity to feel shame than our current motley crew. They’ve generally always been a rotten lot.
There just wasn’t a precedent in place that made it socially acceptable to borrow $32 trillion they had absolutely no intention of ever paying back.
Inflation also plays a role. The concept of trillion-dollar deficits would have been impossible to comprehend decades ago, when a dollar was worth considerably more than it is today.
But let’s take a look at the budget deficit as a percentage of GDP. This removes the skewing effects of inflation … and unfortunately, gives us a better view us just how badly run this place is. A History of Deficits  (Click here to view larger image.) In the 1950s and ‘60s, budget deficits weren’t uncommon. We ran deficits most years, but we also ran surpluses and broke even a good amount of the time. And it was rare for deficits to exceed 2.5% of GDP.
Deficits rose as a percentage of GDP in the 1970s, due in part to the cost of the Vietnam War. And then they continued to get bigger and bigger throughout the ‘80s.
Somehow, we managed to balance the budget in the late 1990s … and even run a few large surpluses for a while!
And then the tech bust sapped tax revenues, George W. Bush decided that “deficits don’t matter” and all responsibility went out the window. By the end of the Bush years (and beginning the Obama years), deficits had swelled to nearly 10% of GDP.
And then in the pits of the COVID-19 pandemic, they swelled again to nearly 15%. Today’s U.S. Outlook Today, we’re running deficits of over 5% of GDP, which is more than double what would have been considered extreme in the ‘50s, ‘60s or ‘70s.
And any attempt to bring us closer to a balanced budget will either involve raising taxes, to the point of causing a deep recession, or cutting spending — also to the point of causing a deep recession.
But what can we actually do about this problem?
Hedge fund maven Bill Ackman is shorting 30-year Treasurys. He’s betting that all of this fiscal insanity will force bond prices lower.
I’m not quite that bold, as I know full and well that the Federal Reserve has a bigger wallet than me. And if push comes to shove, I can’t fight the Fed and win.
My solution is simply to get my own house in order. I try to keep my debt to a minimum. I diversify into gold, bitcoin and other nondollar hedges.
And I try to focus on strong businesses with strong leadership, and a long history of surviving turmoil. I’ve also been looking into shorter-term strategies that allow me to get in and out of trades quickly, while still making sizable profits.
And I know my colleagues have a few ideas of their own this week.
Let’s take a look… | | | TradeSmith just launched a brand-new research service that uses AI to predict stock prices with remarkable accuracy.
Imagine what you could do with that kind of predictive power, if you knew next month’s stock prices today?
Well, now you can ... and at an incredibly low cost.
For a limited time, we’re offering access to our research service at a 70% discount.
And, when you sign up, you’ll receive four FREE special bonuses.
Learn how, here. | | | Weekly Recap:  - Top Investing Tools to Beat Human Error
Behavioral finance shows that people often make investing decisions based on emotion, rather than logic. We have internal biases that can stop us from making smart decisions — especially when we invest our money in the stock market.
And what is the cure to these human biases? Using trading systems that take your gut feelings out of the equation.
- Your #1 Edge in This Market
Nowadays, if you go to the trading floor of the stock exchange, you won’t see people.
Well, you might see news reporters and journalists. But trading has gone completely digital, with the help of data analytics and algorithmic software. As an investor, you always need to have some type of edge. And today, that edge comes from trading algorithms that can help you invest smarter, more efficiently and with better odds of success.
- FOMO Strikes Again
A handful of stocks are soaring higher based on momentum. Or to put it simply, they are buying them because they are going up. But here’s the truth: fear of missing out (FOMO) is nothing new. And it always ends poorly for investors following the herd without any understanding of what they’re buying, or what their strategy is.
- The #1 Reason Stocks are Undervalued
Most investors believe profits result from buying low and selling high. But “cheap” stocks can often get cheaper. Before buying, you should ask a very important question: Why is the stock undervalued? And why couldn’t it get even more undervalued?
There is a piece that investors miss. And it’s staring them right in the face.
- 10 Dividend Payers Have a Green Zone Edge Over Bonds
We want to help you on your quest to identifying rock-solid companies that pay bond-beating yields. Dividend yield is a great way to “get paid” as an investor. So here’s Adam O’Dell’s top 10 Dividend Hotlist — as rated by his Green Zone Power Ratings system.
Stay Tuned for the Monday Podcast! 🎧  With all the talk about inflation over the past year, the idea of “deflation” (or falling prices) might sound absurd. But prices in China are indeed decelerating, and we might see outright deflation in China within the next quarter.
But what does that mean in the real world? And for our investment portfolios?
Well, tune in to The Banyan Edge Podcast on Monday to find out! Ian King will be joining me to discuss the recent developments in China and what it all means.
Until then,
Charles Sizemore
Chief Editor, The Banyan Edge | | | During a recent special event, we launched our breakthrough, new AI algorithm called An-E ... and showed many of its past predictions and just how accurate they were (often precise to within a tenth of a percent).
Well, during the event we also showed what An-E's predictions were for three of the most talked about stocks on the market one-month into the future.
You can see what those predictions are by going here. | | | Get The Banyan Hill App And start experiencing that "total wealth" freedom for yourself. | | | (c) 2023 Banyan Hill Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Banyan Hill Publishing. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 866-584-4096) Legal Notice
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