Debt Ceiling Debate

QUOTE OF THE WEEK

“Character is the real foundation of all worthwhile success.” – John Hays Hammond

TECH CORNER

There’s not much new to report on the economic front. The data is still pointing down. Our investment partner Omega Squared is saying we are still in the Eminent Recession period. They think the recession is getting closer and based on the record inversion of the yield curve, the recession looks like it will be a deep one.

The calculation of the yield curve is derived by subtracting the yield on the two year Treasury from the yield on the 10 year Treasury. The current yield on the 10 year is 3.54% as of today and the yield on the 2 year is 4.08% as if today, thus the yield is negative 0.54%. A negative yield curve is one of the most accurate predictors of a coming recession. Think of it this way. Assume you were a bank and using just the Treasury yields, you would have to pay depositors 4.08% and you would be loaning out money at 3.50%. You would lose money on every loan. So, you wouldn’t make loans. As I stated in a prior letter, if the banks aren’t making loans, the economy will slow down.

The really big issue is the coming debt ceiling debate. We are the only country on the planet that has this stupid issue. This should be a non issue. The Congress has already approved the spending of the money, so just pay the bills.

It is hard to say what the ramifications would be if the President and Speaker of the House can’t come to an agreement. The talk of the U.S. defaulting on the U.S Government bond debt I am sure won’t happen. That would be a disaster of unbelievable consequences. The government has plenty of revenue to pay the interest on U.S. Bonds. Most likely the U.S. would stop paying its bills and some citizens wouldn’t get their Social Security checks or Veterans benefit checks.

Another option would be for the President to exercise a provision of the 14th Amendment which states “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection of rebellion, shall not be questioned”.

Were Biden to invoke the 14th Amendment to allow Treasury to borrow above the debt ceiling to pay the nation’s obligations, it would almost certainly prompt a constitutional crisis and swift legal action.

This debt ceiling crisis is an unforced error of our own making.

SOURCES; CNN, PBS. Hedgeye

If you have friends or family in need of financial life planning services,

It would be the honor of Laurence Lof Financial Advisors to assist them.

We value your referrals!

These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Laurence Lof Financial Advisors, LLC are not affiliated. Laurence Lof Financial Advisors 4757 E Camp Lowell Drive Tucson AZ 85712 info@lofadvisors.com

Recent Posts

Follow Us

Sign Up For Our Newsletter

Lof Advisors Logo
Client Login
Cambridge Statements Login
Wealthscape
Login
Pershing
Login
State Disclosure: Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SPIC. Investment advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Lof Laurence Lof Financial Advisors, LLC are not affiliated. Investment products and services available only to residents of: Arizona (AZ), California (CA), Colorado (CO), Florida (FL), Idaho (ID), Indiana (IN), Michigan (MI), Massachusetts (MA), Minnesota (MN), Montana (MT), North Carolina (NC), North Dakota (ND), New Mexico (NM), Oregon (OR), Ohio (OH), Pennsylvania (PA), Texas (TX), Virginia (VA), Wisconsin (Wl), Wyoming (WY). We are licensed to sell insurance products in the following states of: Arizona (AZ), California (CA), Colorado (CO), Florida (FL), Idaho (ID), Indiana (IN), Michigan (MI), Montana (MT), North Dakota (ND), New Mexico (NM), Oregon (OR), Pennsylvania (PA), Virginia (VA), Wisconsin (Wl).
State Disclosure: Due to various state regulations and registration requirements concerning the dissemination of information regarding investment products and services, we are currently required to limit access of the following pages to individuals residing in states where we are currently registered. By continuing to use this site, you acknowledge that you are a resident of one of the states listed. A broker/dealer, investment advisor, BD agent or IA rep may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if they are excluded or exempted from the states broker/dealer, investment adviser, or BD agent or IA rep requirements, as the case may be; and follow-up, individualized responses to consumers in a particular state by broker/dealer, investment adviser, BD agent or IA rep that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, shall not be made without first complying with the states broker/dealer, investment adviser, BD agent or IA rep requirements, or pursuant to an applicable state exemption or exclusion. Check the background of this investment professional on FINRA’s BrokerCheck.
Call Now Button