Arrested Development

Despite the best efforts of the bulls to make history happen, they’ve been unable to ‘git-r-done.’  At the time of this writing, the Dow is facing another bout of arrested development; it has yet to notch 20,000 for the very first time.

 

The venerable Industrial Average has finally bubbled its way close to 20,000. No-one know as yet from whence the transition from comedy & farce to total horror-show will occur, but the eventual denouement of the post-GFC echo bubble promises to be quite a riveting experience as well – perhaps even more so than last time – click to enlarge.

 

What a feat it will be when this remarkable, but trivial, event comes to pass.  After a near eight year run, the Dow will likely eclipse this exquisitely round numeric threshold in the very near future.  Shouldn’t such an achievement – and the associated wealth effect – have made us all rich?

Apparently not.  For on the other side of the ledger a distinct, yet somehow related milestone is imminently approaching.  The U.S. National Debt is at $19.9 trillion.  Soon it will surpass a round and rotund $20 trillion.

The reality, however, is that the national debt exceeded $20 trillion a long time ago.  In fact, it’s really over 600 percent higher.  Remember, unfunded liabilities, including Social Security and Medicare, currently total over $104.5 trillion.

Added together the national debt and current unfunded liabilities total $124.4 trillion.  Verily, this number is so large it’s nigh impossible to comprehend.  Thus, for simplicity and for the sake of numerological harmony, today’s reflections are limited in breadth and scope to Dow 20,000 and U.S. National Debt $20 trillion.

 

An Exercise in Numerology

Quite frankly, we don’t really know what the Dow and the national debt have to do with each other.  We can’t quite put a finger on it.  Nonetheless, we have a hunch both milestones are in some way emblematic of a great transformation that has taken place.

Is Dow 20,000 and U.S. National Debt $20 trillion merely a coincidence?  Or is there a correlation?  And if there is a correlation, does it imply causation?

No doubt, there are a variety of ways to explore these questions.  However, here we opt for the path of least resistance.  Hence, what follows is not a detailed desktop evaluation of the numbers; but, rather, one very simply deduced conclusion based on inference, guess work, and conjecture.

To begin, we peer back to the past in search of arbitrary data points that look as if they’re interrelated.  For example, in the autumn of 1982 the Dow surpassed 1,000.  This wasn’t the first time this happened.  But 1982 is the last time the Dow rose above 1,000 without then dipping back below.  Similarly, 1982 is when the U.S. National Debt topped the $1 trillion mark.

 

The federal public debt-berg of the UDSA (United Debt Slaves Association) in all its gory glory. Looking for growth? Look no further. It certainly looks like there will be enough of it to smother several generations in red ink up to their hairlines – click to enlarge.

 

From $1 trillion to $20 trillion, the U.S. National Debt generally followed an exponential growth curve.  There was a slight pause in the late 1990s.  But otherwise it has progressively concaved upward approaching a parabolic trajectory; particularly since 2009.

The Dow’s march from 1,000 toward 20,000, on the other hand, has been less direct.  There have even been several brief, yet significant, sell-offs along the way.  What to make of it?

 

Wreck the Halls

A statistician may run the numbers for the Dow and the U.S. National Debt and conclude that there’s a weak correlation, and certainly no causation.  They may even graph a scatter plot to make their case.

A numerologist may look at the divinely round numbers and infer something much different.  Maybe even that there’s a connection that can be projected into the future.  Who’s right?  Who’s wrong?

Along the road from Dow 1,000 to Dow 20,000 and from U.S. National Debt $1 trillion to U.S. National Debt $20 trillion one thing is quite clear.  There have been episodes of significant divergence.

For instance, in March of 2009 the Dow touched down at about 6,700 while the U.S. National Debt was over $10 trillion.  Perhaps we’re approaching another such divergence.

Namely, using a subjective combination of supposition, numerology, and crude statistics, it seems likely that we are entering a time where the U.S. National Debt continues its exponential trajectory while the Dow dives 8,000 points – or more – to below 12,000.

 

The DJIA again, only monthly. Is it ripe for another dive?  Note the 1997/1998 Asian/Russian crisis double dips. Although these were accompanied by a more serious backdrop, there are certain parallels with the 2015/2016 China/EM scare – click to enlarge.

 

You can take this shrewd little nugget of insight for what it’s worth and set it aside for another day.  It’s the Christmas season, after all.  Now is the time for joy, good cheer, and merriment.  Conversely, it’s not the time for party poopers, wet blankets, and killjoys.

Thus, like the stock market over the last eight years, now is the time to take the unique opportunity that’s been granted to you at this very moment, and overdo it.  The stars may not be so amiably aligned come this time next year.

So wreck the halls, if you’re so inclined.  Have another eggnog or peppermint bark.  Give the bell ringing Salvation Army lady a wink and a crisp Benjamin… before Larry Summers outlaws them.

Of course, whatever you do, always do it in a ‘safe and sane’ manner.  In short, sell bonds.

Merry Christmas!

 

Santa Claus admonished Congress, threatening a boycott of presents  – about 150 years ago. Evidently it was a good idea to preface “this will bring them to their senses” with “perhaps”.

Illustration by Thomas Nast

 

Charts by: StockCharts, St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Wreck the Halls”

  • FreemonSandlewould:

    Isn’t this 20,000 number sort of suspicious?

    The Masters of the Universe – The private central bankers really don’t like Trump. I would posit there is a good chance the 20k number won’t be reached this go around because our lords and masters don’t want Trump getting the credit.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Sector: Positioning and Sentiment
      A Case of Botched Timing, But... When last we wrote about the gold sector in mid February, we discussed historical patterns in the HUI following breaches of its 200-day moving average from below. Given that we expected such a breach to occur relatively soon, the post turned out to be rather ill-timed. Luckily we always advise readers that we are not exactly Nostradamus (occasionally our timing is a bit better). Below is a chart of the HUI Index depicting the action since the January...
  • India: The next Pakistan?
      India’s Rapid Degradation This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India's currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society.   The Modimobile is making the rounds amid a flower shower. [PT] Photo credit: PTI Photo   Tribal cultures face...
  • The Long Run Economics of Debt Based Stimulus
      Onward vs. Upward Something both unwanted and unexpected has tormented western economies in the 21st century.  Gross domestic product (GDP) has moderated onward while government debt has spiked upward.  Orthodox economists continue to be flummoxed by what has transpired.   What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity.  Although the fat lady has so far only...
  • March to Default
      Style Over Substance “May you live in interesting times,” says the ancient Chinese curse.  No doubt about it, we live in interesting times.  Hardly a day goes by that we’re not aghast and astounded by a series of grotesque caricatures of the world as at devolves towards vulgarity. Just this week, for instance, U.S. Representative Maxine Waters tweeted, “Get ready for impeachment.”   Well, Maxine Waters is obviously right – impeaching the president is an urgent...
  • Welcome to Totalitarian America, President Trump!
      Trump vs. the Deep State If there had been any doubt that the land of the free and home of the brave is now a totalitarian society, the revelations that its Chief Executive Officer has been spied upon while campaigning for that office and during his brief tenure as president should now be allayed.   Image adapted from the cover of “Deep State #5” - depicting an assassin from the future   President Trump joins the very crowded list of opponents of the American...
  • Searching for Truth
      Heresy or Truth? RANCHO SANTANA, NICARAGUA – In the fifth century, Christian scholars counted 88 different heresies. Arianism. Eutychianism. Nestorianism. If there was a way to “offend” God, they had a name for it. One group of “heretics” argued that there was no such thing as “original sin.” Another denied the trinity. And another claimed Jesus was not divine. Which one had the truth?   Depiction of the first Council of Ephesus in 431 AD, convened by Emperor...
  • Why the 21st Century Sucks - Turtles All the Way Down
      A Truly Sucky Century BALTIMORE – What an awful century! Worst we’ve ever seen. Household incomes are down. Employment is down, with 7 million people in the U.S. of working age without jobs. Productivity growth is down. GDP growth is down – to only about 0.5% per capita last year. Even life expectancies are down. Drug overdoses are up. Suicides are up. One out of every eight children lives in a family getting food stamps. One of out every eight adults takes psychoactive drugs...
  • Gold and the Fed's Looming Rate Hike in March
      Long Term Technical Backdrop Constructive After a challenging Q4 in 2016 in the context of rising bond yields and a stronger US dollar, gold seems to be getting its shine back in Q1. The technical picture is beginning to look a little more constructive and the “reflation trade”, spurred on further by expectations of higher infrastructure spending and tax cuts in the US, has thus far also benefited gold. From a technical perspective, there are indications that the low at $1045.40,...
  • The Unstable Empire – A Campfire Tale
      Campfire Tale   Caesar: The Ides of March are come. Soothsayer: Ay, Caesar, but not gone. — Julius Caesar, Shakespeare   GRANADA, NICARAGUA – Today, we stop the horses and circle the wagons. For 19 years, we have been rolling along, exploring, discovering. We began with the assumption that we didn’t “know” anything - so we kept our eyes open. Now we know even less.   Famous people who knew nothing and were not shy to admit it: Sergeant Schultz...
  • Off the Beaten Path in Mesoamerica
      Greeted by Rooster There’s an endearing quality to a steadfast rooster call at the crack of dawn when overheard from a warm country farmhouse.  There’s a reassuring charm that comes with the committed gallinaceous greeting of daybreak that’s particularly suited to a rural ambiance.  The allure of a morning cock-a-doodle-doo somehow falls flat in all other settings.   Good morning everyone! Before meteorological forecasts were available on TV and smart phones, people...
  • Why Silver Went Down – Precious Metals Supply and Demand
      Rumor-Mongering vs. Data The question on the lips of everyone who plans to exchange his metal for dollars—widely thought to be money—is why did silver go down? The price of silver in dollar terms dropped from about 18 bucks to about 17, or about 5 percent.   Reportedly silver was already assassinated in the late 19th century... so last week they must have assassinated its corpse. [PT] Illustration taken from 'Coin's Financial School'   The facile answer is...
  • Systematic Trading - Unwrapping the Onion
      Lumpy but Robust   [ed note: this article has originally appeared at the Evil Speculator and was written by trader and ES contributor Scott. We provide a link to Scott's past articles below this post for readers who want to get more familiar with his ideas and/or any unusual terminology used in this article]   One continual theme in my trading is that every time I think I have it figured out, I get punched in the face by an unexpected problem. The tendency is to go more...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com