The Problem with Governments

Governments are great at promising everything but are incapable of managing anything.

The Underlying Reason Why the Democrats Should Maintain the White House in November 2016

 In 2013, the top 1% of Americans in income paid 38% of all income taxes. The bottom 50% of income earners, half the nation, paid only 3% of all income taxes.  In 1980, the top 1% of income earners paid 19%; while the bottom 50% paid 7%. Therefore, over the past 33 years, the top 1% earners had their tax burden increase by 100%; while the bottom 50% had their tax burden decrease by 57%.   

If one belongs to that third of the nation that pays no income taxes but receives copious benefits, why would you vote for a party that will cut taxes you don’t pay, but take away benefits you do receive?

Recession Dead Ahead???

The following chart illustrates what happens to Federal Tax Receipts when an economy substitutes energy/manufacturing jobs for Wal-Mart Greeters, Bartenders, and Waitresses. By the way, the percentage decline in federal receipts portends to an economic recession on the horizon.

Houston, We Have a Major Economic Problem on the Horizon!

Karl Denninger, who is the author of the Market-Ticker, had some very sobering words about the Federal Budget over the next ten years. (Please read his last paragraph.) 
 
“Last year Medicare and Medicaid had an unbridled explosion in expense, as I've documented previously and which is a continuing pattern, not a one-year or two-year aberration.  This year, thus far through May, it has continued with the two programs up 8.93% in spending against this time last year.  And no, it's not just about people getting older; Medicaid block grants are up 5.5% this year so far.

Let me remind you that federal receipts (income  to the government, which the rest of us call "taxes") this year are up only 1.68%.
That's a growth rate of spending on these two programs that is 5.3x that of tax receipts.
These two programs are 32.5% of the total expenditures of the government thus far this year; 1/3rd, almost exactly.  Social Security increased 3.2% over last year; and while that exceeds the tax revenue increases as well it is not Social Security that will blow up the government and the economy, it is the medical scam system.

Folks, at a nearly 9% rate of increase (last year's full-year increase was 9.25%, or statistically identical) within the next four to five years the federal budget will collapse.
It will collapse because Medicare and Medicaid will grow to require $1,830 billion ($1.8 trillion) or an increase of more than $500 billion annually within the next four years while tax receipts will only accelerate at present rates by less than half that amount. Social Security will consume a huge chunk of that revenue acceleration all on its own.  
This will blow a roughly $400 billion and exponentially accelerating deficit hole in the budget; a 10 year projection will show that hole to be not a $400 billion deficit hole but closer to $2 trillion annually.

That is, within 10 years Medicare and Medicaid will require more than $3 trillion annually out of $3.8 trillion in projected federal revenue.  Adding in Social Security will exceed all federal revenue.  There is no possible way to fiscally survive this event and within the next President's term it will be evident to everyone in the market for both government and private securities along with all business executives that this outcome is inevitable.”

Sacred Namer

Debt-to-EBITDA Ratios are Now the Highest in History

Every investor should pay very close attention to the above chart. Since "Debt to EBITDA" is at historical highs, what could possibly go wrong with one's current bullish position on the stock market? Oh, wait a minute! Do remember what happened in 2001 and 2008 to the stock market? But, I know that 2016/17 is completely different this time. Investors are so much smarter and wiser. Right? There is absolutely nothing to worry about going forward. I know what you are saying -- "FED" has by back covered.  Enjoy your weekend.

Waiter/Bartender vs. Manuafacturing Jobs

Who in their "right mind" believes the economy is on the right track after viewing the above chart? There is a world of difference between a $100,000 a year manufacturing job and a $10 per hour waiter/waitress job. Case in point, the U.S. has lost 195,000 excellent paying energy jobs since 2014. Ouch! That hurts the economy, since 70%+ of GDP is based on personal consumption. Let's not forget loss jobs mean less government tax revenues at all levels. The Wall Street Journal states that the current economy recovery is the weakness since 1949. In addition, the rate of home ownership has fallen to the lowest lever "ever!" President Obama is on track to be the "only President in U.S. history" to never have a single year of 3% GDP growth.

Bogus July Employment Numbers, Again!!

Unfortunately, the above chart underscores how the jobs recovery has been spearheaded by cheap labor since 2009, with job gains going disproportionately to the least educated and, of course the lowest-paid workers, many of whom have to work multiple jobs to simply make ends meet. And, you know those 255,000 jobs that were added in July. Guess what? 112,000 of those jobs were a guess by the Bureau of Labor Statistics (BLS), based on its Birth/ Death estimate of new jobs. That is, the BLS believes that of the 255,000 new July jobs that were created, 112,000 is believed created by new business startups versus businesses that have closed. In other words, 112,000 supposed new jobs are simply a fabrication by the BLS. Then again, who really cares. The majority of individuals (sheep) are simply too ignorant to do basic research, or call out the lies spurring from the BLS.