On March 1, 2019, today, the U.S. hits the Debt Ceiling. That means that Treasury Secretary Steven Mnuchin must use “extraordinary means” to pay the bills of the United States, including Social Security, Veteran’s benefits and interest on our colossal debt. The Debt Ceiling must be raised in order to pay bills. As the Congressional Budget Office pointed out in their February 2019 report, “If the Debt Limit remains unchanged… the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on debt obligations, or both.” That would result in a credit downgrade by Fitch Ratings.
The last credit downgrade that occurred was on August 5, 2011, when Standard and Poor’s downgraded the U.S. credit from AAA to AA+. Gold soared to an all-time high of $1895/ounce. Stocks sank. Of course, since then, stocks have been on a tear, and gold has retreated to its current price of $1307/ounce.
The SPDR Gold Trust (symbol: GLD), in green
compared to the Dow Jones Industrial Average, in orange
January 1, 2011 - January 1, 2012
Most of us won’t hear much about the Debt Limit until we get close to the “X Date,” when Secretary Mnuchin gets dangerously close to missing a payment. April tax revenue should float us through September 30, 2019, according to the CBO. Some analysts are saying that the tax cuts have reduced revenue, putting the X date earlier – in mid-August. If the White House cuts a deal with the Democrats, like it did during the last Debt Ceiling debacle, then it will be presented as a win to the American public. That’s the best scenario, and clearly the current Administration is aware of this.
However, the Debt Ceiling is not the only headwind in today’s economy. On February 28, 2019, the Bureau of Economic Analysis revealed that 2018 GDP growth had come in at 2.9%. While Larry Kudlow went on CNBC claiming 3% GDP growth would continue in 2019, 2020 and beyond, the Federal Reserve projects a slowing down to 2.3% growth this year, 2.0% in 2020 and 1.8% thereafter. 2/3rds of economists surveyed by Bloomberg a few months ago predicted that 2020 will host a recession, with a minority believing the recession will start this year.
The last time the U.S. hit the Debt Ceiling, in 2018, Secretary Mnuchin said it felt like running the government like a piggy bank. The current circus of Congressional bipartisanship and across-the-aisle fighting feels like a zoo. The hope is that our Congressional leaders don’t make monkeys of us all by defaulting on our debt. There needs to be a strategy for dealing with the ballooning $22 trillion public debt. Over two trillion has been added to the debt since the current President took office.
Hope isn’t a good strategy. As John F. Kennedy said, “The time to fix the roof is while the sun is shining.” While the future of our country lies in the hands of our elected officials, each one of us has a lot more control over our personal future and wealth than we might realize. Most people are riding the Wall Street Rollercoaster, losing more than half of their wealth every 8-10 years. Are you sure you’re safe? Blind faith, anxiety and fear, which would have you trusting your future to someone else, who might not have the same interests or incentives you have, and might even have a conflict of interest, is not a good strategy. Wisdom is the cure. It’s time to be the boss of your money and your future.
Make sure that your financial house is secure enough to withstand the economic storms that are on the horizon. Call 310-430-2397 to learn easy, time-proven strategies that earned gains in the last two recessions and have outperformed the bull markets in between.Join No. 1 stock picker Natalie Pace at a 3-day Investor Educational Retreat. Register for the Colorado Retreat in April 2019 now.
Other Blogs of Interest
How Bad Will the GDP Report Be?
2019 Investor IQ Test
The State of the Union
CBD Oil for Sale.
The High Cost of Free Advice.
Apple's Real Problem in China: Huawei.
2019 Crystal Ball.
2018 is the Worst December Ever.
Will the Feds Raise Interest Rates? Should They? Learn what you're not being told in the MSM.
Why FANG, Banks and Your Value Funds Are in Trouble.
When the Santa Rally is a Loser, the Next Year is a Bigger Loser.
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production.
Trade Deficit Hits an All-Time High. Wall Street Plunges 800 Points. How to Protect Yourself.
Rebalance and Get Safe in December. Here's Why.
The Best Investment Decision I Ever Made.
Thanksgiving 2018 Stocks Losses.
Black Friday Sales. Get a 2nd Opinion on Your Current Investing Strategy.
What's Safe for Your Cash? FDIC? SIPC? Money Markets? Under the Mattress?
The Real Reason Stocks Fell 602 Points on Veterans Day 2018.
Will Ford Bonds Be Downgraded to Junk?
6 Risky Investments. 12 Red Flags. 1 Easy Way to Know Whom to Trust With Your Money.
Whom Can You Trust? Trust Results.
October Wipes Out 2018 Gains.
Will There Be a Santa Rally in 2018?
The Dow Dropped 832 Points. What Happened?
Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020.
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong.
Should I Invest in Ford and General Electric?
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.