“Spend each day trying to be a little wiser than you were when you woke up.”
– Charlie Munger
DON’T MISS our last Call of the Year!
TRUVESTMENTS’ Year End Zoom Meeting
We will briefly review 2020 – Lord knows we have reviewed that enough LOL.
More important, we will set our thoughts onto 2021 and Beyond. Great things ahead – but patience, as always – will remain a critical friend along the way. Join us below – and feel free to pass the link along to anyone you feel could benefit from this process. All are welcome.
Time: Dec 17, 2020 5:00 PM Eastern Time
Join Zoom Meeting by clicking the link below:
There is a great deal of good news in the latest Fed data release from DEC 10. You will want to gaze over this data and let it sink in. I say “let it sink” in because the real financial data – unblemished by MSM hype and negativity – well, has never been more positive.
As much as the media seems to really want to see us fail as a nation – we ought to all give ourselves a round of applause and take a bow. This is not to suggest things are perfect – for sure they never are – and that is really good news. We always like to remind people that forward movement if driven by the need to solve problems.
The real problem will be the day we awake to no problems to solve, no needs to meet, no new services to render, no new ways to make life better for those around us. If we awake to that – well, run for the hills.
Ok, I jest – so let’s take in this data — I will get right to the important points – and there are three:
Starting with Household Net Worth…
America faced down that bat out of hell – and didn’t flinch. We stood tall in the storm and will continue to do so for as long as it takes. It’s what we do. It’s the business we are in. And business is good:
As always, the Calafia chart data delivers. On this first chart above, the snapshot shows the key components of the net worth structure of U.S. households and non-profit organizations (total assets minus total liabilities).
Most of the increase since the Great Recession has been healthy: financial assets have soared, while real estate and debt have increased moderately. Check the purple bar and note how it is basically even with 2007 – yet real assets have soared to new records since. Ignore the negative garbage from experts: this has not been a debt-fueled expansion like we saw in the levered entrance to 2008. Not even close.
The Per Capita data show that this wealth is widespread – and it is above trend…the same trend as has been in place since the 1950’s…rain or shine. Getting lost in the storms along the way is the largest cost factor.
With the airwaves filled with frightening, nation-ending debt levels, the data do not prove that out – even remotely so. Indeed, check Household Leverage above. And then follow those green dashes backwards – to 1982. Our GDP back then was less than $3 Trillion a year as a nation. Incredible.
Better news? You ain’t seen nuthin’ yet as my buddies in school told me often.
Yes friends – the Federal debt IS huge. That’s what happens when pandemics hit and global economies are forced closed by political pressure. But – and this is important – it is not as bad as you might think – and it almost never is actually. Why? We can thank extremely low levels in Treasury yields, across the entire curve.
The snapshot above tells us that the true burden of the federal debt (debt service costs as a percent of GDP, which is equivalent to the debt burden of your household, which is debt service payments as a percent of your annual income) is historically quite low.
Federal debt ratios have increased, but the debt burden has decreased; interest costs have fallen even as total debt has increased. Federal debt burdens could become problematical in the future, but only after years of rising interest rates and continued borrowings. Given that several other major developed economies are in negative rates world – that is an awfully long way away.
In case you were concerned about only the top guys getting rich – don’t. Yes, if you started a tech company, risked your life on it, bet the ranch on its success – and it worked….well, you got rich. Nothing unfair about that I suppose.
What might be getting missed here is that all household net worth continues to rise on trend. Both nominal and real net worth levels of the U.S. private sector is at the highest level ever.
As the chart above shows, real net worth has increased by about 3.5% annually, on average, over time. That is extraordinary.
Of course there have been huge setbacks along the way! But the message has always been the same for clients – in the end, things continue to improve. This chart also suggests that conditions today are not out of line with historical experience. They are clearly not as levered up on weak balance sheets as they were in the period just prior to the Great Recession of ’08 – ’09.
Last but surely not least – no batch of pretty charts would be complete without noting the record highs in global market wealth.
…read ’em and reap.
Not a lot of ways to explain this chart – except – “hmmmm…another record high.”
The last snapshot above shows us all the nominal value of global equities. Note that since 2004 they have increased by just about 8% per year. Collectively, we now stand at roughly $100 TRILLION – an all-time high – according to Bloomberg. (Please note that this calculation is based on actively traded primary securities, which means that ETFs and ADRs are excluded in order to avoid double-counting.)
Tune in for The Zoom
Make sure you join us on the Zoom call above. Feel free to pass that link along to friends you feel will benefit. Our very best compliment is a referral from a satisfied client of course – but no stress.
In the call, we will cover the footprints for 2021 and beyond.
Make no mistake.
This will end.
This cloud bank will clear.
The bat out of hell will be defeated.
America will conquer as it always does – and We The People will work together to make sure we stay ahead. Again friends – it’s what we do best – even when we screw it up at times. At those times, we come back even stronger, better, more efficient and proud of our ability to overcome.
More storms are coming – that we can count on. Storms along the way are required. Fighting that fact is a losing battle – period.
Record highs in all this data should be our key focus.
The world is changing – fast.
√ Give Thanks my friends...we will get through this because that is what America does.
√ The sun’s rays are just over the horizon.
√ While many will let fear and worry take them off their rightful rewarding pathway ahead, over the long haul, we can be confident that what is headed our way are our best decades.
The Holiday Season is here. We always wish you and yours the best of the Season.
Don’t fret as 2021 ebbs ever closer. You can bet there will be more than enough monsters to keep us all busy as the New Year dawns. Like all the other ones before, we will vanquish them together.
This rocket-ship ride is just getting fueled up for the trip – even now in the midst of all of this…we are set for collective good years together like none in history – no matter the politics of it all.
Long-term investors have learned that when all of the above ingredients are baked into the pie, the road ahead has been marked by a clear and resounding message:
…surprises to the upside.
It is our job to withstand the assured storms ahead and be disciplined in our planning for clients’ goals.
Sure, more choppy waters are likely as the future unfolds.
The media will do their best to knock you off your focus, grabbing at your fears, stabbing at the ghosts in the back of one’s mind and working to take you off your pathway.
Focus your mind on rising above this tension and angst instead – as we all succeed together…
It is set in stone with The Barbell Economy®…whether one buys into it – or not.
Pull your seatbelt tighter and hold on to your popcorn.
Our best years are just ahead.
Enjoy Your Entire Holiday Season!!!
Please Stay Safe & Healthy
We are here to help always, even if just to talk.
Until we see you again, may your journey be grand – and your legacy significant.