The Q2 earnings season is upon us and the risks to the rally that started after the worst December on record at the close of last year is in serious jeopardy. We received a glimpse of this with some of the current companies that have reported. For example, to understand how dangerous this earnings reporting season can be, take a look at what one of the largest US multinational firms had to say recently after it reported earnings. The Minnesota-based Fastenal, which is the largest fastener distributor in North America, reported worse-than-expected second-quarter earnings and revenue. Shares of Fastenal promptly tanked more than 4%. But what the management said about the quarter was very interesting. The company said in its press release that its strategy to raise prices to offset tariffs placed to date on products sourced from China were not sufficient to also counter general inflation in the marketplace.
Presidential candidates Bernie Sanders and Elizabeth Warren are promising as much as $1.6 trillion in student debt forgiveness for millions of borrowers. Critics smell a cynical campaign ploy to try to buy the youth vote.
How is it either realistic or fair to declare an entire category of debt to be assumed by taxpayers?
Regardless, pie-in-the-sky proposals to cancel student debt shed light on a very down-to-earth problem for not only college students and recent graduates – but also for the economy and financial markets.
By John Rubino – Re-Blogged From Dollar Collapse
Are you sick of your gold just sitting there when it was supposed to have long since made you rich? Have you been fantasizing about a world in which your gold really does make you rich?
If so you’re in good – or at least numerous – company.
So let’s sketch out such a world.
Start by envisioning an America in which a handful of oligopolies have captured banking, media, healthcare and several other important industries, while a tiny group of super-rich neo-aristocrats control as much wealth as the 200 million least-rich citizens.
By Bloomberg – Re-Blogged From Newsmax
The 14 percent drop in the S&P 500 Index last quarter has big implications for state and local pension funds, which probably saw the value of their assets fall by about 7 percent. Investors with the benefit of a long-term horizon have the ability to ignore market dips, and pension funds are among the longest-term investors, but their problems are not long-term and further short-term declines could precipitate a crisis.
The table below shows pension fund assets and liabilities as compiled by Pew Charitable Trusts. There is a large and growing gap, but that’s not the primary problem. Although the value of those assets is known with reasonable accuracy, the liability figure is based on assumptions about the future. The actuarial and political assumptions are uncertain, but it is the investment assumptions – plans assume an average discount rate of 7 percent – that are the most problematic.
Sometimes we must consider the unthinkable.
Official US national debt is $21.6 trillion. Unfunded liabilities are five to ten times higher. Global debt is about $250 trillion. US national debt has doubled every eight to nine years for decades.
- National debt in 2018 – $21.6 trillion
- National debt in 2026? – $40+ trillion
- National debt in 2040? – $100+ trillion
- How much will prices rise when the dollar is devalued by an additional $80 trillion in new US government debt plus more private debt?
- What interest rate will be needed to sell that debt? 5%, 10%, 15% or higher?
- Annual interest payments on current debt run about $500 billion. Both rates and debt are rising. One $ trillion per year in interest payments is coming soon. Six percent interest on $40 trillion requires $2.4 trillion per year, a large smoking hole in the federal budget!
- The government can never pay the debt with dollars of current value. Soon the interest will be difficult to pay.
It’s become fairly common knowledge that public pensions are on the verge of either radical overhaul or extinction.
By Nick Hubble – Re-Blogged From Silver Phoenix
We’re edging ever closer to the financial crisis I’ve been investigating since 2012. I moved to four different cities in Australia to conduct my research, interviewing mortgage brokers and former bankers over four years.
Over the last few months, a Royal Commission has exposed what my research did back then. But the campaigner who first exposed the issue going back to the early 2000s continues to discover even more extraordinary facts.