To The Moon

My Investing Muse (03Jun24)

Layoffs & Closure news

• Synapse’s problems have hurt and taken down a whole bunch of other startups and affected consumers all over the country. 100 fintechs could be in trouble, with funding prospects weakened for many more. - Techcrunch

Is America’s GDP funded by debt?

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From X user EJ Antoni - This morning's revised data show the gov't is basically "buying" GDP w/ debt, but getting only 50 cents on the dollar - worst deal ever.

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From X user The Kobeissi Letter:

NET interest expense on US Federal debt reached a MASSIVE $514 billion in the first 7 months of Fiscal Year 2024. This is higher than spending on National Defense ($498 billion), Medicare ($465 billion), and Medicaid ($355 billion). Interest has also surpassed money spent on veterans, transportation, and education COMBINED. To put this in perspective, in the first 7 months of Fiscal Year 2020 net interest expense was 33% lower, at $345 billion. Meanwhile, total government spending has reached $3.9 trillion so far this fiscal year. This is unsustainable.

The Committee for a Responsible Federal Budget (CRFB) reports that net spending on interest reached $514 billion in the first seven months of fiscal 2024 – more than what was spent on both national defence and Medicare.

My final thoughts

Not all base their outlook on statistics but on their living condition. If their purchasing power is in decline, their view of the economy would be likewise. Yet, such sentiments should not be discounted just because of strong GDP data.

A recent nonprobability survey conducted by LendingTree found that 78% of consumers now consider fast food to be a "luxury" purchase due to how expensive the meals have become. - Fox Business article

Debt is a constant component in all economies, at all times. Should there be an alarm raised at all? With USD being the global reserve currency, there will always be a demand for USD. To fund the deficits seen above in the federal government, the USA has to issue treasury assets with the current interest rate. With the current trajectory, there is limited confidence that America can pay off its debts.

Money printing will be the only option left for America at that juncture. America can continue to borrow money so long as people are willing to buy these assets. When money printing is activated, the impact is inflationary. The government needs to rein in their spending.

With $8.9 trillion worth of Treasury bills to be refinanced by the end of 2024 at the current interest rates, it does add to the challenge. (Source is from Apollo Academy article).

There is still time to take evasive action. This is why I have been hedging consistently over the last few months.

Let us research before investing, avoid leverage and invest with what we can afford (to lose). Invest safe.

@TigerStars

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