Weekly Market Update by Retirement Lifestyle Advocates

U.S. National Debt Now Exceeds $36 Trillion

         November 22, 2024, was the day that the official US government debt exceeded $36 trillion.

         On July 26, 2024, the official national debt crossed the $35 trillion mark.  So, in less than 4 months, the official debt rose by another trillion!  (Source:  https://wolfstreet.com/2024/11/22/us-national-debt-goes-over-36-trillion-2-trillion-in-2024-made-it-%f0%9f%a5%82%f0%9f%8d%be/)

         Despite economic growth as measured by Gross Domestic Product far exceeding the historical average for growth, the national debt has grown by more than $2 trillion this year.  That’s an important factor since, during periods of economic growth, tax receipts rise.

         Of the more than $36 trillion in US bonds that finance the debt, about $28.7 trillion in bonds are held by the public, meaning that these securities are held in brokerage accounts, by banks, by insurance companies, at financial centers, or by the Federal Reserve.

         These securities can be bought and sold in the market.

         A little math has us concluding that the other $7 trillion-plus in US Treasuries are held in government pension funds and the Social Security Trust fund.  These securities are not traded in the open market.

         So, the government has to find buyers for $28 trillion in debt or bonds.  Investors who invest in US Treasuries do so because of the perceived safety that they offer and because they are attracted to the bond yields.  If investing in US Government bonds is not appealing to investors at the current interest rate, then interest rates must be increased to attract investors.

         During the month of September, foreign investors purchased a combined total of $170 billion in US Treasury securities.  Half of those purchases were from Eurozone countries that have increased their holdings of US Treasury securities to a record $8.67 trillion.

         As China and Japan have been ridding themselves of US Treasuries, Eurozone buyers have stepped in and picked up the slack.

         The level of US Government bonds with maturities of one year or less now exceeds $6 trillion, meaning that most of these bond purchases are for shorter time periods.  This means that the US Government will be forced to sell even more debt as time passes, likely resulting in higher interest rates to continue to attract investors.

         That’s the rub.  Interest payments on the debt already consume more than 36% of tax receipts, an unsustainable number that is likely to increase.

Federal Reserve Survey Discovers US Government is Number One Concern

         A recent survey by the Federal Reserve that polled financial market contacts to determine their biggest concern found that at the top of the list was US Government debt sustainability.

         54% of survey respondents listed US Government debt sustainability as their top worry.  One year ago, only 40% of survey participants noted US Government debt as their number one concern.  (Source:  https://finance.yahoo.com/news/us-debt-sustainability-now-seen-210000205.html)

         The Fed survey also noted that household debt was a top concern as well as tensions in the Middle East.

Doug Casey on US Government Debt

         Doug Casey, economist and founder of Casey Research, recently commented on US Government debt in an interview with “International Man.”  (Source:  https://internationalman.com/articles/doug-casey-on-the-looming-debt-crisis-and-what-lies-ahead/)

         In the interview, Casey compares US Government debt to a 100-story building that is wobbly and is about to collapse on itself.  Faced with such a dilemma, there are two choices:  wait for the building to randomly fall or devise a controlled demolition.

         Casey suggests that when dealing with US Government debt, a controlled demolition might be the best outcome.  Casey suggests that a controlled demolition of US Government debt would be a default.  He states it would be immoral, almost criminal, to saddle our children and grandchildren with such an enormous debt load.

         As I noted above, the ‘go to’ axiom regarding US Government debt that ‘we owe the debt to ourselves’ is no longer true.  The outstanding debt held by the public is more than $28 trillion.  Casey suggests that the owners of US Government debt are politically wired individuals and entities that have enriched themselves at the expense of the average American citizen.

         Interesting perspective.  If the debt problem is so large that it can’t be paid, do we continue to create currency to paper over the problem until the 100-story building collapses, or should we consider a controlled demolition?

Jersey Mike’s Founder Cashes In

         Peter Cancro, the founder of the sandwich chain Jersey Mikes, got started making sandwiches back in 1971 at the age of 14 when he was too young to use the meat slicers legally.

         At the age of 17, Cancro bought the sandwich shop with a loan from his football coach and, with the full support of his mother, opted out of higher education and elected instead to work in the business.

         The initial investment for the business was $125,000, and Cancro changed the business name to Jersey Mike’s.

         Last week, Cancro revealed that he sold a majority stake in Jersey Mike’s to Blackstone for a cool $7 billion.  The deal with Blackstone valued the sandwich chain at $8 billion.

         Cancro is now a billionaire and among the 500 wealthiest people on the planet.  (Source:  https://www.zerohedge.com/markets/founder-jersey-mikes-worth-7-billion-after-selling-chain-blackstone)

         Jersey Mike’s does more than $3 billion in annual revenue and Blackstone intends to continue the expansion of the chain.

         Cancro has maintained a minority stake in the company and continues to personally slice meat and wrap sandwiches during his store visits. 

         This week’s RLA radio program features a ‘best of’ interview that I did with prolific libertarian author and commentator Mr. Jeffrey Tucker.

         The radio program is posted and available now by clicking on the "Podcast" tab at the top of this page.

“You know you’re getting old when you stoop to tie your shoelaces and wonder what else you could do while you’re down there.”

                                                      -George Burns